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diff --git a/27698-tei/27698-tei.tei b/27698-tei/27698-tei.tei new file mode 100644 index 0000000..6ba629d --- /dev/null +++ b/27698-tei/27698-tei.tei @@ -0,0 +1,21526 @@ +<?xml version="1.0" encoding="utf-8" ?> + +<!DOCTYPE TEI.2 SYSTEM "http://www.gutenberg.org/tei/marcello/0.4/dtd/pgtei.dtd" [ + +<!ENTITY u5 "http://www.tei-c.org/Lite/"> + +]> + +<TEI.2 lang="en"> +<teiHeader> + <fileDesc> + <titleStmt> + <title>Principles Of Political Economy</title> + <author><name reg="Roscher, William">William Roscher</name></author> + </titleStmt> + <editionStmt> + <edition n="1">Edition 1</edition> + </editionStmt> + <publicationStmt> + <publisher>Project Gutenberg</publisher> + <date>January 4, 2009</date> + <idno type="etext-no">27698</idno> + <availability> + <p>This eBook is for the use of anyone anywhere at no cost and + with almost no restrictions whatsoever. You may copy it, give it + away or re-use it under the terms of the Project Gutenberg + License online at www.gutenberg.org/license</p> + </availability> + </publicationStmt> + <sourceDesc> + <bibl> + Created electronically. + </bibl> + </sourceDesc> + </fileDesc> + <encodingDesc> + </encodingDesc> + <profileDesc> + <langUsage> + <language id="en"></language> + <language id="la"></language> + <language id="de"></language> + <language id="fr"></language> + <language id="it"></language> + </langUsage> + </profileDesc> + <revisionDesc> + <change> + <date value="2009-01-04">January 4, 2009</date> + <respStmt> + <name> + Produced by Frank van Drogen, David King, and the Online + Distributed Proofreading Team at <http://www.pgdp.net/>. + </name> + </respStmt> + <item>Project Gutenberg TEI edition 1</item> + </change> + </revisionDesc> +</teiHeader> + +<pgExtensions> + <pgStyleSheet> + .boxed { x-class: boxed } + .shaded { x-class: shaded } + .rules { x-class: rules; rules: all } + .indent { margin-left: 2 } + .bold { font-weight: bold } + .italic { font-style: italic } + .smallcaps { font-variant: small-caps } + </pgStyleSheet> + + <pgCharMap formats="txt.iso-8859-1"> + <char id="U0x2014"> + <charName>mdash</charName> + <desc>EM DASH</desc> + <mapping>--</mapping> + </char> + <char id="U0x2003"> + <charName>emsp</charName> + <desc>EM SPACE</desc> + <mapping> </mapping> + </char> + <char id="U0x2026"> + <charName>hellip</charName> + <desc>HORIZONTAL ELLIPSIS</desc> + <mapping>...</mapping> + </char> + </pgCharMap> +</pgExtensions> + +<text lang="en"> + <front> + <div> + <divGen type="pgheader" /> + </div> + <div> + <divGen type="encodingDesc" /> + </div> + + <div rend="page-break-before: always"> + <p rend="font-size: xx-large; text-align: center">Principles Of Political Economy</p> + <p rend="font-size: large; text-align: center">By</p> + <p rend="font-size: xx-large; text-align: center">William Roscher,</p> + <p rend="text-align: center">Professor of Political Economy at the University of Leipzig,</p> + <p rend="text-align: center">Corresponding Member of the Institute of France,</p> + <p rend="text-align: center">Privy Counsellor To His Majesty,</p> + <p rend="text-align: center">The King Of Saxony.</p> + <p rend="font-size: large; text-align: center">From the Thirteenth (1877) German Edition.</p> + <p rend="font-size: large; text-align: center">With Additional Chapters Furnished By The Author,</p> + <p rend="font-size: large; text-align: center">For This First English And American Edition,</p> + <p rend="font-size: large; text-align: center">On Paper Money, International Trade,</p> + <p rend="font-size: large; text-align: center">And The Protective System;</p> + <p rend="text-align: center">And A Preliminary Essay</p> + <p rend="font-size: large; text-align: center">On The Historical Method In Political Economy</p> + <p rend="text-align: center">(From the French)</p> + <p rend="font-size: large; text-align: center">By</p> + <p rend="font-size: large; text-align: center">L. Wolowski</p> + <p rend="text-align: center">The Whole Translated By</p> + <p rend="font-size: x-large; text-align: center">John J. Lalor, A. M.</p> + <p rend="font-size: large; text-align: center">Vol. I.</p> + <p rend="text-align: center">New York:</p> + <p rend="text-align: center">Henry Holt & Co.</p> + <p rend="text-align: center">1878</p> + </div> + <div rend="page-break-before: always"> + <head>Contents</head> + <divGen type="toc" /> + </div> + + </front> +<body> + +<pb n='iii'/><anchor id='Pgiii'/> + +<div rend='page-break-before: always'> +<head>Dedication.</head> + +<p> +TO<lb/> +<lb/> +WILLIAM H. GAYLORD, <hi rend='smallcaps'>Esq</hi>.,<lb/> +<lb/> +<hi rend='italic'>COUNSELLOR AT LAW</hi>,<lb/> +<lb/> +OF CLEVELAND, OHIO,<lb/> +<lb/> +TO WHOSE BROTHERLY CARE IT IS LARGELY DUE THAT I LIVED TO<lb/> +TRANSLATE THEM,<lb/> +<lb/> +THESE VOLUMES<lb/> +<lb/> +ARE AFFECTIONATELY INSCRIBED. +</p> + +</div> + +<pb n='v'/><anchor id='Pgv'/> + +<div rend='page-break-before: always'> +<index index='toc'/> +<index index='pdf'/> +<head>Translator's Preface.</head> + +<p> +Our literature is rich enough in works on the principles of +Political Economy. So far as the translator is informed, +however, it possesses none in which the science is treated in +accordance with the historical method. We may therefore +venture to express the hope that this translation will fill a +place hitherto unoccupied in the literatures of England and +America, and fill it all the more efficiently and acceptably, +as Professor <hi rend='smallcaps'>Roscher</hi> is the founder and still the leader of +the historical school of Political Economy. Were this the +only recommendation of our undertaking, it would not be a +useless one. But a glance at Professor <hi rend='smallcaps'>Roscher's</hi> book will +convince even the most hasty reader that its pages fascinate +by their interest and are rich in treasures of erudition which +should not remain inaccessible to the English student from +being locked up in a foreign tongue. +</p> + +<p> +The present translation has received, throughout, the revision +of the author, and should any imperfections remain in the +rendering of his thought into English, the blame is certainly +not his, for his revision has been most minute. +</p> + +<p> +The three appendices have been supplied by Professor +<hi rend='smallcaps'>Roscher</hi> expressly for this edition. As they are intended to +form a part of the work on the Political Economy of Industry +and Commerce, on which he is now engaged, he authorizes +<pb n='vi'/><anchor id='Pgvi'/> +their publication in English, only by the publishers of this +edition of his principles; and only for the purpose of being +added to the present translation. He desires especially that +their appearance in their present shape should not in any way +interfere with any of his rights in his forthcoming volume, +and that they should not be translated into any language nor +translated back into German. +</p> + +<p> +The essay of Mr. <hi rend='smallcaps'>Wolowski</hi>, on the historical method in +Political Economy constitutes no part of Professor <hi rend='smallcaps'>Roscher's</hi> +book, and neither he nor its author, but only the translator, is +responsible for its appearance here. In it the reader will find +a short sketch of the life of Professor <hi rend='smallcaps'>Roscher</hi>, brought +down to the date at which the essay was written. The translator +has little to add to that sketch, all the information he +possesses in addition to what it contains being embraced in +the following lines from a letter received by him from the +author in answer to a request that he would supply the biographical +data not to be found in <hi rend='smallcaps'>Wolowski's</hi> essay: <q>You +might perhaps say ... that I have repeatedly declined calls +to the Universities of Munich, Vienna and Berlin, but that +I have never regretted remaining in Leipzig.</q> +</p> + +<p> +The acknowledgments of the translator are due, in the +first place, to the eminent author himself, for the revision of +the plate-proof of the entire work, and then to Professor +<hi rend='smallcaps'>William F. Allen</hi>, of the University of Wisconsin, for his +interest in the progress of the enterprise, and for many valuable +suggestions; also to Professor <hi rend='smallcaps'>W. G. Sumner</hi>, of +Yale College, for some excellent hints as to the best translation +of certain words in the Appendix on Paper Money. +</p> + +</div> + +<pb n='vii'/><anchor id='Pgvii'/> + +<div rend='page-break-before: always'> +<index index='toc'/> +<index index='pdf'/> +<head>Author's Preface. (1st Edition.)</head> + +<p> +My <foreign lang='de' rend='font-style: italic'>System der Volkswirthschaft</foreign> +shall, <foreign lang='la' rend='font-style: italic'>Deo volente</foreign>, be completed +in four parts. The second shall contain the national economy +of agriculture and the related branches of natural production; +the third, the national economy of industry and commerce; +the fourth, of the economy of the state and of the commune +(<foreign lang='de' rend='font-style: italic'>Gemeindehaushalt</foreign>). +While the entire work shall constitute +one systematic whole, each part shall have its own appropriate +title, constitute an independent treatise, and be sold separately. +</p> + +<p> +Of the peculiar method which I have followed in this work, +and which will produce still better fruits in the succeeding +volumes, I have given a sufficient explanation in +§§ <ref target="Section_26">26</ref> ff., and +all I desire now is to say a few words on the relation the notes +bear to the text. The careful reader will soon be convinced +that of the many citations in this work, not one has been made +from a vain desire of the display of erudition. Part of them +serves as the necessary proof of surprising facts adduced, but +which are little known. Another part of them is intended to +incite the reader to the study of certain questions nearly related +to those treated in the text, but which are still different +from them. The object of the greater number is to supply +information concerning the history of economic principles. As +far as the sources at my command permitted, I have endeavored +to point out the first germs, the chief stages of development, +the contrasts, and, finally, what has been thus far attained +in economic science. This sometimes required some +little victory over self, inasmuch as I was conscious of having +<pb n='viii'/><anchor id='Pgviii'/> +independently discovered certain facts, when I afterwards +found that some old and long-forgotten writer had made similar +observations. Thus, this work may serve both as a handbook +and as a history of the literature of Political Economy. +Students of the science know how little has thus far been +done by writers in this direction. And hence I shall be very +grateful to those who labor in the same field, if they will, either +by writing to me personally, or through the medium of the +press, inform me when I have erred in ascribing a truth, or a +scientifically important error, to its earliest author. +</p> + +<p> +I have already said in the title that this work is intended +not for the learned only, but for all educated men, for men of +a serious turn of mind, who desire truth and science for their +own sake. Like that ancient historian, whom I honor above +all others as my teacher, I desire that my work should be +useful to those, ὅσοι βουλήσοντοι τῶν τε γενομένων τὸ σαφὲς +σκοπεῖν καὶ τῶν μελλόντων ποτὲ αὖθις κατὰ τὸ ἀνθρώπειον τοιούτων +καὶ παραπλησίων ἔσεσθαι. (<hi rend='italic'>Thucydides</hi> I, 22.) +</p> + +<p> +<hi rend='smallcaps'>University of Leipzig</hi>,<lb/> +<lb/> +<hi rend='italic'>End of May, 1854.</hi> +</p> + +</div> + +<pb n='ix'/><anchor id='Pgix'/> + +<div rend='page-break-before: always'> +<index index='toc'/> +<index index='pdf'/> +<head>From The Author's Prefaces. (2d to 11th Edition.)</head> + +<p> +The preface to the second edition is dated October, 1856; +that to the third, April, 1858; that to the fourth, April, 1861; +that to the fifth, November, 1863; that to the sixth, November, +1865; that to the seventh, November, 1868; that to the +eighth, August, 1869; that to the ninth, March, 1871; that to +the tenth, May, 1873; that to the eleventh (unaltered), December, +1873. Each successive edition, nearly, has been announced +as an improved and enlarged one; and the tenth +edition contains one hundred and fifty-six pages more than +the first, although in places, a large number of abbreviations +had been made from previous editions. There are many +things in some of the previous editions which criticism induced +me, long since, to change. I have considered it my duty to +the public, who gave my work so warm and friendly a reception, +to take into consideration, in each successive edition, not +only my own new investigations, but those also of all others +with which I became acquainted, and, whenever possible, to +correct statistical illustrations from the latest sources. I have +especially, in each following edition, enriched a number of +paragraphs with here and there historical, ethnographic and +statistical features. Plutarch is certainly right, spite of the +fact that pedants may abuse him for it, when he says, that +trifling acts, a word and even a jest, are often more important, +as characterizing the life of a people or an age, than great +battles which cost the lives of tens of thousands of men. +</p> + +<p> +I have changed the titles <q>Ricardo's Law of Rent,</q> and +<q>The Malthusian Law of the Increase of Population,</q> which +<pb n='x'/><anchor id='Pgx'/> +I formerly used, for others. But I would not be misunderstood +here. I hold it to be a duty of reverence in the +learned—as it has long been practiced in the case of the natural +sciences—in the sciences of the human mind to call the +natural laws, methods etc., in acquainting us with which, some +one particular investigator has won very distinguished merit, +by the name of that investigator. In the case of the law of +rent, the application of this rule would as unquestionably entitle +Ricardo to this honor as it would Malthus in that of +the increase of population, spite of the fact that Ricardo may +not have succeeded in finding the best possible form of the +abstraction, and although Malthus even, in a one-sided reaction +against a former still greater one-sidedness, was not +always able to steer clear of positive and negative errors. +Recent science has endeavored, and successfully, to examine +the facts which contradict the Ricardoan and Malthusian formulations +of the laws in question, and to extend the formulas +accordingly. I have myself contributed hereto to the extent +of my ability. But, in the interval, it is not hard to comprehend +that, while this process of elucidation is going on, +most scholars, those especially possessed more of a dogmatic +than of a historical turn of mind, should estimate these two +leaders more in accordance with their few defects than with +the great merits of their discoveries. If, therefore, I now +drop the title <q>Malthusian law,</q> it is to guard hasty readers +from the illusion that §§ 242 seq. +teach what the great crowd understand by Malthusianism; when they might, perhaps, +omit that portion entirely. For my own part, I have no doubt +that, when the process of elucidation above referred to shall +have been thoroughly finished, the future will accord both to +Ricardo and Malthus their full meed of honor as political +economists and discoverers of the first rank.<note place='foot'>The +author's preface to the twelfth edition is confined to pointing out the +improvements etc., made in the eleventh. There is no new preface to the +thirteenth edition of the original, which appeared in +1877.—<hi rend='smallcaps'>Translator</hi>.</note> +</p> + +</div> + +<pb n='001'/><anchor id='Pg001'/> + +<div rend='page-break-before: always'> +<index index='toc'/> +<index index='pdf'/> +<head>Preliminary Essay.</head> + +<p rend='text-align: center'>Preliminary Essay On The Application Of The Historical +Method To The Study Of Political Economy,<lb/> +<lb/> +By M. Wolowski,<lb/> +<lb/> +Member Of The Institute Of France. +</p> + +<quote rend='display'> +<q><foreign lang='la' rend='font-style: italic'>Nunquam bene percipiemus usu +necessarium nisi et noverimus jus illud usu +non necessarium. Nexum est et colligatum alterum alteri. Nulli sunt servi +nobis, cur quæstiones de servis vexamus? Digna imperito +vox.</foreign></q>—<hi rend='italic'>Cuj.</hi>, vii, in +titul. Dig. De Justitia et Jure.<note place='foot'><q>We shall never +thoroughly understand the reason of customary law unless +we also have a knowledge of that which is not customary. The one is +connected and bound to the other. We have no slaves; why vex ourselves +with questions about slaves?—Words worthy of a novice.</q></note> +</quote> + +<quote rend='display'> +<q><foreign lang='la' rend='font-style: italic'>Homo sum, humani nihil +a me alienum +puto.</foreign></q>—<hi rend='italic'>Terence.</hi><note place='foot'><q>I +am a man; I think nothing foreign to me that pertains to man.</q></note> +</quote> + +<quote rend='display'> +<q><foreign lang='la' rend='font-style: italic'>Ista præpotens, ac gloriosa +philosophia.</foreign></q>—<hi rend='italic'>Cicero</hi>, De Or., I, +43.<note place='foot'><q>That excellent and glorious philosophy.</q></note> +</quote> + +<div> +<head>I.</head> + +<p> +It is no foolish desire to make a vain display of citations, that +induces us, at the beginning of this essay, intended to point out +the results of the application of a new method to the study of +Political Economy, to invoke the authority of a poet and moralist, +of a jurisconsult and of a philosopher. The writer finds in +the words just quoted the loftiest expression of the thought +<pb n='002'/><anchor id='Pg002'/> +which dictates these lines, viz.: that the impartial researches +of history, a profound feeling of man's moral and material wants, +and the light of philosophy, should govern in the teaching of +a science, the object of which is to show us how those things +which are intended to satisfy our wants are produced and distributed +among the several classes or individuals of a nation; +how they are exchanged one against another, and how they +are consumed. +</p> + +<p> +The nineteenth century affords us something more than the +admirable spectacle of the rapid and fertile development of +mechanical power and natural forces. This is but one of the +aspects, we might even say but one of the results, of the general +progress of the human mind. The renovation of moral +and intellectual studies has served as a starting point for the +application to facts of the conquests of thought. Science has +preceded art. +</p> + +<p> +In the foremost rank of the studies just referred to is +<hi rend='italic'>philosophy</hi>, which initiates us into the knowledge of human nature, +the basis of right, and which translates its legitimate aspirations +into a language which we can understand; <hi rend='italic'>history</hi>, that +<hi rend='italic'>prophetess</hi> of the truth, as one of the ancients called it, which +places before us the faithful picture of times past, not by +simply putting together a skeleton of facts, but by following +the living progress of events and the organic development of +institutions. Such, at least, has been the work of those noble +minds who have consecrated their energies to the resuscitation +of ages past, in their true shape, and such is the service for +which we are indebted to them for the successful accomplishment +of the reformation of historical studies, which they +attempted with such rare devotion and such marvelous sagacity. +</p> + +<p> +This renovation of history has exerted the most fertile influence +in the region of philosophy, in that of law, and we +believe that it will prove no less useful in that of Political Economy. +It has served to put us on our guard against being +easily misled by <foreign lang='la' rend='font-style: italic'>a priori</foreign> notions. +</p> + +<pb n='003'/><anchor id='Pg003'/> + +<p> +By exhibiting to us the results of the life and of the experience +of centuries, by teaching us by what steps the human +mind has risen to its present eminence, and what the education +given it in the past has been, it has enabled us to ascend from +phenomena to the principles which preside over them; from +facts to the law; and it has substituted for arbitrary assumptions +and purely ideal systems, the slow but progressive work +of the genius of nations. Not that it turns a deaf ear to the +exalted lessons of philosophy, nor that it denies the <emph>eternal relations +resulting from the nature of things</emph>. Far from it. On +the contrary, it supplies a solid basis to intellectual investigations, +and, so to speak, an answer for all the moral sciences, to +this saying of Rœderer: <q>Politics is a field which has been +traversed thus far only in a balloon; it is time to put foot on +solid ground.</q> +</p> + +<p> +Neither does history, as thus understood, confine itself to +mere description; it also assumes the office of judge. While +it pulls down much that passion and inaccuracy have reared, and +thus restores respect for the past, it does not turn that past into +a fetish. It looks it boldly in the face and questions it, instead +of prostrating itself before it and worshipping it with downcast +eyes. Thus, by plainly showing us the many bonds which tie +us to it, it escapes at once both the rashness of impatience and +the wearisomeness of routine. +</p> + +<p> +The impartiality it inculcates is not indifference; and there +is no danger that the justice it metes out to past ages shall degenerate +into a vain scepticism or a convenient optimism. +</p> + +<p> +The study of history, thus understood, has another advantage; +it accustoms us to those patient and disinterested investigations, +to those lengthy labors, the positive result of which at first +escapes us for a time, only to burst on our eyes, with so much +more brilliancy, when rigorous research has succeeded in discovering +it. It frees us from the deadly constraint of immediate +utility. +</p> + +<p> +There is nothing more fatal to science than the feverish impatience +for results which obtains only too much in our own +<pb n='004'/><anchor id='Pg004'/> +days, and which induces people to run after him who is in the +greatest hurry, and which leads to hasty conclusions. +</p> + +<p> +<q>Research undertaken from a disinterested love of science,</q> +says the learned Hugo, one of the masters of the historical school +of law in Germany,<note place='foot'>Introduction to +the Civilistisches Magazin.</note> <q>that research which at first promises no +other advantage but truth and the culture of the mind, is precisely +that which brings us the richest rewards. Would we +not be behind, in all the sciences, if we had clung only to those +principles, the utility of which in practice was already known? +Do we not, to-day, from many a discovery, reap advantages of +which its author never dreamed?</q> +</p> + +<p> +Doubtless this tendency, unless restrained by other demands, +is not exempt from danger. We may be carried away by the +attraction peculiar to these noble studies, withdraw into antiquity +and fall into a species of historical mysticism which ends +in the affirmation, that whatever has been is true, absolutely, +and which, instead of confining itself to the explanation of +transitory phenomena, invests them with all the dignity of principles. +We shall endeavor to avoid the peril pointed out by +Mallebranche. <q>Learned men study rather to acquire a +chimerical greatness in the imagination of other men, than to +acquire greater breadth and strength of mind themselves. +They make their heads a kind of store-room, into which they +gather, without order or discrimination, everything which has +a look of erudition,—I mean to say everything which may +seem rare or extraordinary and excite the wonder of other +people. They glory in getting together, in this archæological +museum, antiques with nothing that is rich or solid about them, +and the price of which depends on nothing but fancy, chance +or passion.</q> +</p> + +<p> +A display of erudition may obscure the truth, and bury it under +its weight, instead of bringing it out into relief. By concentrating +the mind on the material vestiges of the past, it +may withdraw it from the intellectual movement of the present, +and give us a race of scholars, of great merit, doubtless, +<pb n='005'/><anchor id='Pg005'/> +but who move about like strangers among their contemporaries. +</p> + +<p> +Without a sense for the practical, and without ideas of an +elevated nature, a person may, indeed, be a man of erudition—he +cannot be a historian. As the proverb says, the forest cannot +be seen, for the trees. That this noble study may bear its +best and most useful fruit; that is, that it should preserve us +against ambitious <hi rend='italic'>formulas</hi> and destructive chimeras, we +must pursue another way. +</p> + +<p> +<q>The world,</q> says Montaigne, <q>is incapable of curing itself. +It is so impatient of what burthens it, that it thinks only +of how it shall rid itself of it, without inquiring at what price. +A thousand examples show us that it cures itself ordinarily at +its own cost. The getting rid of the present evil is not cure, +unless there be a general amendment of condition. Good does +not immediately succeed evil. One evil, and a worse, may +follow another, like Cæsar's assassins, who brought the +republic to such a pass, that they had reason to repent the +meddling with it.</q> Such, too frequently, is the lot of those +who, abandoning themselves to their imagination, and without +consulting the past, mix together promises of liberty and +the despotism of Utopias which they would impose on nations +under pretext of enfranchising them. Despising the work of +the ages, they think they can build upon a soil shaken by destruction +and crumbled, until it may be likened to moving sand. +</p> + +<p> +Contempt for the past is associated with a passion for +reform. Men think of destroying that which should only +be transformed. They condemn everything that has been, +unconditionally, and launch out towards a new future. The +suffering which has been gone through irritates and troubles +the mind. The work of pulling down is so easy, it is supposed +that the work of building up is equally so. Hence systems +rise, as if the world were to begin anew. The pride of +liberty and of human action becomes the principle of science; +and, like all new principles, it pretends to exclusive and absolute +dominion. Rationalism governs; abstract philosophy +<pb n='006'/><anchor id='Pg006'/> +ignores the traditions and the requirements of the life of nations; +and finds now in it, as in geometry, nothing but principles and +deductions. The memory of recent oppression causes us +to act as Tarquin did, and to level down the higher classes instead +of elevating the inferior. Liberty and equality then govern +by their negative side, instead of exercising the positive and +beneficent influence they should have, to develop all forces to +their utmost, to ennoble the mind, to give more elasticity to +the soul and greater vigor to thought, to give birth to those +varied forms and to that moral energy, which should bring us +nearer to final equality in the bosom of +God.<note place='foot'><hi rend='italic'>Dunoyer</hi>, De la Liberté du Travail.</note> +</p> + +<p> +We forget that no one is born <emph>free</emph>, and that every one +ought to endeavor to become so, +</p> + +<quote rend='display'> +<lg> +<l>Feindlich ist des Mannes Streben</l> +<l>Mit zermalmender Gewalt</l> +<l>Geht der Wilde durch des Leben</l> +<l>Ohne Rast und Aufenthalt,</l> +</lg> +<lg> +<l>—<hi rend='italic'>Schiller</hi>.</l> +</lg> +</quote> + +<p> +and make himself worthy of liberty, by the exercise of manly +virtue! Because the form has been changed, we believe that +we have changed human nature. +</p> + +<p> +It is easy to understand, why, where these ideas prevail, the +study of the past should be neglected and despised. Efforts +are made to avoid it. Why, it is asked, revive memories of +oppression and misery? The old world is wrecked. It is +annihilated. Peace to its ashes! Or else, after it has been +destroyed, it is sought for again; and, under pretext of eradicating +the evils existing in it, an attack is made on the eternal +basis on which human society rests, on the laws not made by +man, and which it is not given to man to change. The world +becomes one vast laboratory, in which the rashest experiments +are multiplied in number, in which mankind is but clay in the +hands of the potter which every pretended <q>thinker</q> may +mould at will, by giving him the false appearances of independence +and of an emancipated being. +</p> + +<pb n='007'/><anchor id='Pg007'/> + +<p> +And, indeed, if the will of man be all-powerful, if states are +to be distinguished from one another only by their boundaries, +if everything may be changed like the scenery in a play by a +flourish of the magic wand of a system, if man may arbitrarily +make the right, if nations can be put through evolutions like a +regiment of troops; what a field would the world present for +attempts at the realization of the wildest dreams, and what a +temptation would be offered to take possession, by main force, +of the government of human affairs, to destroy the rights of +property and the rights of capital, to gratify ardent longings +without trouble, and provide the much coveted means of enjoyment. +The Titans have tried to scale the heavens, and +have fallen into the most degrading materialism. Purely +speculative dogmatism sinks into materialism. +</p> + +<p> +All is changed, both men and things. Yet we hear the +same old style of declamation. There are those who wish to +plough up the soil which the harrow of the revolution went +over yesterday; and they believe they are marching in the +way of progress. They do not see that they have mistaken +their age, and that the bold attempts of the past have now +come to possess a directly opposite meaning. Without stopping +to inquire to what side the new world inclines, they repeat +the same words, and swear <foreign lang='la' rend='font-style: italic'>in +verba magistri</foreign>, and go the +road of destruction, believing themselves to be creating the +world anew! +</p> + +<p> +Nothing is more natural than that these excesses should +produce other excesses, in a contrary direction. Moved by +hatred or fear of revolutionary absolutism, nations seek an +asylum in governmental absolutism, or they retrograde towards +the middle ages, and consider the mutual bond of protection +and dependence of that period as the ideal and the +realization of true liberty. History is no longer the organic +development of social life, and man, like a soldier that +thoughtlessly and capriciously has gone beyond his place of +supplies, is obliged to retrace his steps. The reaction is +clearly defined. The past is opposed to the present, not as a +<pb n='008'/><anchor id='Pg008'/> +lesson to be turned to advantage, but as a model which must +be hastily accepted; and men become revolutionary in a backward +direction. +</p> + +<p> +However, history, rigorously studied, knows neither these +complaisances nor these weaknesses. It does not descend to +the apotheosis of a past which cannot return again. The real +historical spirit consists in rightly discerning what belongs to +each epoch. Its object is, by no means, to call back the dead +to life, but to explain why and how they lived. In harmony +with a healthy philosophy, it assigns a limit to the vagaries of +arbitrary will, beyond which the latter cannot go. It unceasingly +calls us back, from the heights of abstraction, to positive +facts and things. +</p> + +<p> +In the creation of systems, only one thing was wont to be +forgotten, men, who were treated, in them, like so many +ciphers; for intellectual despotism has this in common with all +despotic authority. History teaches us that we can reach +nothing great or lasting, but by addressing ourselves to the +soul. If the soul decays, there can be no longer great thoughts +or great actions. Society lives by the spirit which inhabits it. +It may, for an instant, submit to the empire of force, but, in the +long run, it hearkens only to the voice of justice. It was thus +that the greatest revolution which history records, that of +Christianity, was accomplished. It addressed itself only to +the soul; but by changing the hearts of men, it transformed +society entirely. +</p> + +<p> +The violent struggle between an imperious dogmatism and +an unintelligent and mistaken attempt at a retrogressive movement +is resolved into a higher view, which permits the union +of conservatism and progress. Violent attempts and rash endeavors +made, threatened to bring contempt on the noblest +teachings of philosophy, and to make them repulsive to man; +and, on the other hand, a blind respect for the institutions consecrated +by history threatened to stifle all examination and all +freedom of judgment. +</p> + +<p> +But a healthier doctrine has permitted us to understand, that +<pb n='009'/><anchor id='Pg009'/> +we are continuing the work of preceding generations; that we +are developing the germs which they successively sowed; +that we are perfecting that which they had only sketched, and +that we are letting drop that which has no support in the +social condition of man. Every thing is connected; each +thing is linked to every other; nothing is repeated. The +hopes of sudden and total renovation, based on absolute formulas, +vanish before the touch of this solid study. This shows +us how firm and unshaken are those reforms which have begun +by taking hold of the minds of men, the precise spirit of +which had penetrated into the souls of whole nations before +they had manifested themselves in facts. +</p> + +<p> +Law and Economy constitute a part of the life of nations in +the same way that language and customs do. The power of +history in no way contradicts the supremacy of reason. +</p> + +</div> + +<div> +<head>II.</head> + +<p> +These two tendencies, the rationalistic and the historical, are +everywhere found face to face. They carry on an eternal +warfare, which is renewed in every age, under new names +and new forms. Accomplished facts and renovating thought +divide the world between them. They at one time moderate +its speed, and at others, spur it on its way. But these two +forces, instead of compromising the destinies of humanity by +their opposing action, maintain and balance them, as the contrary +impulses given by the hand of the Great Architect has +peopled the universe with worlds which gravitate in space. +</p> + +<p> +Victor Cousin, a very competent authority on the subject, +has said that the history of philosophy is the torch of philosophy +itself. The remarkable works which have enriched it in +this direction are well known. History, on its side, is enlightened +by philosophy. Thus, it teaches us not to despise +facts, but at the same time not to be slaves to precedent. It +does equal justice to the incredulous and to the fanatic, to too +supple practitioners and to intractable theorizers. +</p> + +<pb n='010'/><anchor id='Pg010'/> + +<p> +We may doubtless say with Henri Klimrath, who, in connection +with a few others, had undertaken the work of the +restoration of historical study in its application to French law, +that there is an absolute, true, beautiful, good and just, the +<foreign lang='la' rend='font-style: italic'>ratio recta summi +Jovis</foreign>,<note place='foot'><hi rend='italic'>Cicero</hi>, De +Leg., I.</note> the supreme reason founded in the +nature of things.<note place='foot'>Discours Préliminaire du +Code Civil.</note> The eternal truths taught by philosophy +constitute the higher law, a law which dates not from the day +on which it was reduced to writing, but from the day of its +birth; and it was born with the divine intelligence itself. <q><foreign +lang='la' rend='font-style: italic'>Qui non tum denique incipit +lex esse, cum scripta est, sed tum cum orta est. Orta autem simul est +cum mente divina.</foreign></q><note place='foot'><hi rend='italic'>Cicero</hi>, +De Leg., II, 4. <q>Legem neque hominum ingeniis excogitatam, +nec scitum aliquod esse populorum, sed æternum quiddam quod universum mundum regeret, +imperandi, prohibendique sapientia.</q> <hi rend='italic'>Ibid.</hi></note> And +Troplong rightly adds: <q>There are rules anterior to all positive +laws. I cannot grant that the action of conscience and +the idea of right are the work of the legislator. It is not law +that made the family, property, liberty, equality, the idea of +good and evil. It may, indeed, give organization to all these +things, but in doing so, it is only working on the foundation +which nature has laid, and it is perfect in proportion as it +comes nearer to the eternal, immutable laws which the Creator +has engraved on our hearts. What changes is not the eternal +law, the revelation of which comes to man incessantly and by +a necessary action, but the form in which humanity clothes it, +the institutions which man builds on its immutable +foundation.</q><note place='foot'>Revue de Législ. et de Jurispr. (1841, +XIII, p. 39.) <hi rend='italic'>Montesquieu</hi> says: +<q>The relations of justice and equity are anterior to all positive laws.</q></note> +</p> + +<p> +We therefore believe in the law of nature, and regret that our +opinion is not shared by Mr. Roscher, at least that he does +not explicitly enough express his faith in it, nor apply it broadly +enough in the beautiful work which we are happy to render +accessible to the French public.<note place='foot'>Mr. Wolowski +translated the second edition of Roscher's Principles into +French, and prefixed the present essay thereto as a preface. Since Wolowski's +translation appeared, the original work has gone through eleven editions, +been largely increased in size, and enriched with new notes, the result +of nearly twenty additional years of research and thought. The thirteenth +German edition, from which the present translation is made, is larger +than the first by one hundred and seventy pages.—<hi rend='italic'>Translator's +note.</hi></note> We believe in it in its +<pb n='011'/><anchor id='Pg011'/> +philosophical sense, and not simply in the juridical sense attached +to it by Ulpian. <q>Let us not,</q> observes Portalis, +<q>confound the physical order of nature, common to all animated +beings, with the natural law which is peculiar to man. +We call <hi rend='italic'>natural law</hi>, the principles which govern man considered +as a moral being, that is, as an intelligent and free being, +intended to live in the society of other beings, intelligent and +free like himself.</q><note place='foot'><p>And he adds: <q>Animals +which yield only to an impulse or blind instinct, +come together only fortuitously or periodically and in a manner destitute +of all morality. But in the case of men, reason is mixed up more or less +with every act of their lives. Sentiment is found side by side with desire, +and right succeeds instinct. I discover a real contract in the union of the +two sexes.</q> +</p> +<p> +It would be impossible to present a more complete or eloquent refutation +of the definition of the Roman jurisconsults which debases marriage to the +level of the promiscuous coming together of animals, and which limits the +natural law to the law common to man and beast. <q>Jus naturale est quod +natura omnia animalia docuit; nam jus istud non humani generis proprium, +sed omnium animalium quæ in terra, quæ in mare nascuntur, avium quoque +commune est. Hinc descendit maris atque feminæ conjunctio, quam nos +matrimonium appellamus, hinc liberorum procreatio, hinc educatio; videmus +etenim cætera quoque animalia, feras etiam, istius juris peritia censeri.</q> D. L. +I. De Just. et Jure.</p></note> Ulpian's famous tripartite division, of natural +law, the law of nations, and the civil law, is proof, from +the meaning he attaches to them, either of a misunderstanding +or of the imperfect idea which the Stoics had conceived +of the essence of natural law. In vain Cujas exhausted all +the resources of his noble intellect to explain it.<note place='foot'>Comment. +in tit. Dig., De Just. et Jure, VII, 11th Naples edition. The ingenious +argument of the great jurisconsult falls to the ground under the beautiful +words of Cicero: <q>Ut justitia, ita jus sine ratione non consistit; soli ratione +utentes jure ac lege vivunt.</q> De Natura Deorum, II, 62. <q>Virtus ratione +constat, brutæ ratione non utuntur, cujus sunt expertia, ergo jure non vivunt, +et ut rationis, sic jures sunt expertia.</q> Besides, Cujas himself recognizes +how faulty and incomplete was the definition he was defending: <q>At ne jus +quidem naturale, de quo agimus, est commune omnium animalium quatenus +rationale, est, sed quatenus sensible est, sensui congruit. Tullius participare +hominem cum brutis eo quod sentit, sed ratione ab eo differre. Et alio loco: +jus naturale esse commune omnium Quiritium, veluti ut se velint tueri: sed +hoc distare hominem a bellua, quod bellua sensu moveatur, homo etiam ratione.</q></note> +</p> + +<pb n='012'/><anchor id='Pg012'/> + +<p> +It is necessary to draw a distinction between physical law +and the law (<hi rend='italic'>droit</hi>) of intelligent beings. Doubtless the existence +of men as well as that of animals is limited by time. +They both live and die; but the soul escapes the necessities +of material nature. +</p> + +<p> +The moment there is question of <hi rend='italic'>right</hi>, intelligence governs, +reason comes into play, and the science of right and wrong is +appealed to as a guide. Hence the <hi rend='italic'>natural</hi> law of the human +species is not the physical law which all creatures obey. +</p> + +<p> +It was necessary for us to insist upon these principles. It +was necessary for us to show that there is a law independent +of positive and local law, a law which is not the expression of +an arbitrary will, but an emanation from the nature of +things.<note place='foot'><hi rend='italic'>Rossi.</hi></note> +</p> + +<p> +Hence come the features in common which we meet with +everywhere, and the variable forms which develop law in harmony +with the special conditions of each civil society. +</p> + +<p> +We must descend into the very depths of human nature to +discover these eternal and permanent laws; and if the mere +effort of the mind should not reach them directly, they might +be discovered in the phenomena of the life of nations. History +affords us the counter-proof and confirmation of the philosophical +doctrine. +</p> + +<p> +The development of society does not afford a mathematical +expression of these higher truths. It gives them a form +which is unceasingly modified in the written law. The person +who discovers in them nothing but an absolute rule, looks +upon the changes as evidences of caprice and error. He alone +understands the revolutions of things who knows their cause +and the necessity which produces them. +</p> + +<pb n='013'/><anchor id='Pg013'/> + +<p> +Solon was right when he gave the Athenians not the most +perfect laws, but the best which they could bear. +</p> + +<p> +It is not in the attempts contemporary with the infancy of +society, or nearly so, that we are to look for the complete realization +of the precepts of the natural law; for principles obey +the rule laid down by Aristotle. <q>The nature of each thing +is precisely that which constitutes its end; and when each being +has attained its entire development, we say that that is its +own proper nature.</q><note place='foot'>Politics, I, ch. I, II.</note> +</p> + +<p> +The ideas of natural law are purified in proportion as society +grows enlightened and free; but the truth appears only +successively in the phases it passes through. It allows us to +grasp one aspect of itself after another, but does not surrender +itself entirely, at any one moment, to the investigations of the +historian or the jurisconsult. +</p> + +<p> +History and philosophy interpenetrate and complement one +another. +</p> + +</div> + +<div> +<head>III.</head> + +<p> +The two schools, that of philosophy and that of history +have met in our day, in the field of law. Who is there that +does not remember the great and noble contest carried on, +about the beginning of this century, between two descendants +of Frenchmen who had sought a refuge in Germany, +and who united in their own persons, and in so marvelous a +manner, the different aptitudes of the country they owed their +origin to, and of the land that gave them birth,—between Thibaut +and Savigny? +</p> + +<p> +It would be difficult to find a scientific question of a higher +character, debated by champions more worthy to throw light +upon it. +</p> + +<p> +The <foreign lang='fr' rend='font-style: italic'>Code Napoléon</foreign> +had appeared. It had, to use Rossi's +happy expression, transferred into law the social revolution +<pb n='014'/><anchor id='Pg014'/> +produced by the destruction of privilege. It was the practical +formula expressive of the conquests which had been made. +</p> + +<p> +The philosophy of the eighteenth century had previously +inspired the Prussian Code. And yet, it was on the question of +codification that this memorable controversy was carried on. +The two principal combatants, while manfully battling, the one +against the other, continued to hold each other in high esteem, +and the profound study of law was developed in the midst of +the <hi rend='italic'>melée</hi>. +</p> + +<p> +We cannot delay long on this subject, nor analyze the arguments +advanced by Thibaut<note place='foot'>Ueber die Nothwendigkeit +eines Allgemeinen burgerlichen Rechts fur Deutschland.</note> +and Savigny.<note place='foot'>Vom Beruf unserer Zeit +für Gesetzgebung etc.</note> What interests +us at present is not so much the question debated, as the +intellectual movement to which it gave birth. Savigny sustained +the ancient law, Thibaut attacked it. Numerous and +distinguished jurisconsults ranged themselves on the one side +and the other. A new school grew up which, with the most +brilliant success, made law throw light on history and history +on law. +</p> + +<p> +The application of the historical method to the study of law +was productive of the most happy results. +</p> + +<p> +Without acknowledging it to themselves, the chiefs of the +contending parties were each obeying a political impulse. +Savigny was by his birth and his tastes carried into the camp +of conservatism; Thibaut, led by his convictions, into the liberal +ranks. Nevertheless, the natural elevation of their genius +preserved them from all exaggeration. The glorious defender +of tradition preserved a liberal spirit, and the ardent advocate +of reform desired no upheaval. +</p> + +<p> +In what more nearly concerns the question with which we +are now occupied, Savigny—while he maintained that law was +something contingent, human, national; and while he brought +out into relief the practical and exalted character of its successive +developments which introduced reform and guarded +<pb n='015'/><anchor id='Pg015'/> +against revolution—developments which, not confiding in the +letter of the written law, unceasingly feed the living and +created law, that law called in the energetic language of a +great jurisconsult, a law <foreign lang='fr' rend='font-style: italic'>écrit +es coeurs des citoyens</foreign>—is +far from denying the importance of a high and healthy philosophy +which directs man in the uninterrupted labor to which he is +called, in the sphere of jurisprudence. +</p> + +<p> +Men can no more renounce law than language, the forms of +which last they have gradually modified in order to better +translate their thoughts into words. The legislator's task is +the successive elaboration of obligatory provisions. He will +sometimes oppose and sometimes second the natural progress +of law; but, in doing so, it will ever be necessary for him to +ascend to the nature of things, and grasp their relations, if he +would not go astray in practice, or lose himself among the +successive and partial changes to which the illustrious Berlin +professor would confine the legitimate ambition of legislative +power. To go beyond this, in an age like ours, seemed to +him to be a work of destruction. However, far from denying +the influence of thought, and therefore of philosophy, acting +within its sphere, Savigny invokes its fertile aid. +</p> + +<p> +Thibaut, on the other hand, with more confidence in the +powers of the spirit of modern times, did not believe a good +codification to be impossible. His starting point had been a +cry for national independence. He well knew how much veneration +was due those institutions which were the slow and progressive +work of national genius, and what was the power they +possessed. He wished, therefore, to reform, not to abolish +them. He well understood that the greatness of the +<foreign lang='fr' rend='font-style: italic'>Code Napoléon</foreign> +itself, and the respect which it inspired were due to the +fact that its roots ran deep into the soil of the past, even while +the modern idea it contained shone like a bright light in the +world of things. Hence, without contesting the value of history, +he refused to acknowledge its right to exclusive reign.<note place='foot'><p>In +one of his latest productions (Ueber die sogennante historische und +nicht historische Rechtsschule, Archives du Droit Civil, Heidelberg, XXI +1838) the veteran of the philosophical school, resuming a debate begun a quarter +of a century before, energetically defends himself against the erroneous interpretations +which it was sought to give to his thoughts. <q>Does it follow,</q> +he inquires, <q rend='pre'>that because a man is desirous of reform, he must surrender +the study of the past? And if there be new laws to construe, how could his +evil genius deter him from the necessary knowledge of ancient laws? Is +there a single jurisconsult, who, in the hope of a better future, despises the +meaning and spirit of that which still exists? I do not know even one.... +And when I am accused of passing by the institutions of the past with coldness +and hatred in my heart, because I was one of the first to express the +hope of a better future, a charge is laid at my door which is perfectly +incomprehensible ... I am reproached with despising the history of law. It +is a slander on me. Although I have only laughed at these reports, one +man's mistake grieved me; for that man's name was Niebuhr.... When +he [Niebuhr] returned from Italy to devote himself entirely to science, in +his retreat at Bonn, he passed through Heidelberg, where he remained five +or six days. During a great part of that time we came frequently together. +He was at first a little cold; but Cicero made us friends. After a happy +word let drop concerning that writer, he asked me what I thought of him. +I answered laconically: <q>If they were burning all the Latin authors, and +I were permitted to grant a pardon to one of them, I should say, without +hesitation: Spare the works of Cicero.</q> He joyfully exclaimed: <q>I have +at last found a man who judges rightly of Cicero. I share your admiration +for him, and that is the reason I have given my boy the name of Marcus.</q> +The ice was now broken, and he frankly told me that he could not understand +how I could be an inveterate enemy of Roman law and of the history +of law. I gave him to understand that I had simply been slandered, and I +added, that, in order to live entirely with the classics, I had always refused +to give legal advice, or act as a counsellor, although I might have made a +fortune in that way. I told him that I owed my gayety and vigor, in great +part, to my love for the classics of all ages, even those outside the domain +of jurisprudence; but that I held, above all things, to the good qualities of +the German nation, and that I did not hesitate to say with Facciolatus: +<q>Expedit omnes gentes Romanis legibus operam dare, suis vivere.</q></q> +</p> +<p> +<q rend='pre'>When he heard those words of mine, he exclaimed with his usual energy +and vivacity: <q>Habes me consentientem, labes me consentientem.</q> From +that moment all coldness between us was at an end, and we approached, +without any embarrassment, a host of questions in one conversation in +which I endeavored, as I had before, to learn from him.</q> +</p> +<p> +<q>Thus I receive with sincere gratitude, all the works, both useful and profound, +which have appeared in our day on the history of law. It would be +folly in me to deny the impetus which the study of positive law has received. +New sources have been discovered. Their newness and importance +have excited the zeal of many scholars who have studied them profoundly; +a fact which made a review of the older sources, still by far the +most important, necessary. These two circumstances soon rendered it imperative +to proceed to the making of scrupulous dogmatic researches. Thus +there now is a new life among jurisconsults, and a great activity, which, it +is my hope, may continue long.</q></p></note> +</p> + +<pb n='016'/><anchor id='Pg016'/> + +<p> +The life and activity prevailing in the study of law, and the +brilliant successes that study has recently achieved, are due, in +great part, to the illustrious representatives of the historical +school. We may add, here, that the French historical school, +which has so worthily inherited the spirit of Montesquieu, has +not achieved less in this direction than the older German +school. It has reconciled the opposing but not mutually hostile, +<pb n='017'/><anchor id='Pg017'/> +tendencies of Savigny and Thibaut. It has conscientiously +scrutinized facts to show their concatenation, and to +allow their meaning and bearing to be clearly grasped. A +French jurisconsult, who is at the same time our highest authority +in the natural law, opened the way by his excellent essays +on the necessity of reforming the historical studies applicable +to law; on the influence of the legists on French civilization<note place='foot'>Revue +de Législ. et de Jurisprudence, 1834-35.</note> +etc.; and by his prefaces, equal in value to whole works, +on hypothecation, sales, loans, partnership, charter-parties etc. +He may truly be said to have renewed the ancient and prolific +alliance of history and law. +</p> + +<p> +Instead of pursuing a pure abstraction, this historical school +has confined itself to the knowledge of the life of man and the +evolution of society. It has applied to law, with what success +is well known, the principle which has regenerated the social +sciences, philosophy, letters, history, Political Economy,—sciences +which are, so to speak, different provinces of one intellectual +empire, which interpenetrate one another without being +confounded one with another, between which no jealous barrier +should be raised, and between which reciprocity of exchange +should be encouraged by the suppression of factitious +duties, which have existed only too long. +</p> + +</div> + +<pb n='018'/><anchor id='Pg018'/> + +<div> +<head>IV.</head> + +<p> +We need not dwell any longer on the character of the historical +method as applied to law, nor on the services it has +already rendered. On this point, there can be no two opinions. +And, if any one wonders that we should speak of it at all, in a +work on Political Economy, we can only say to him, that we +have done so to call his attention to an instructive precedent, +and for the further reason that the same method is peculiarly +well adapted to the study of Political Economy. Its advantages +are the same here, its tendencies the same, and the same motives +exist to induce us to use it here. In describing the successive +phases of the question in the case of law, we have +performed an important part of the task we had imposed upon +ourselves, of vindicating the employment of the historical +method, in the sphere of Political Economy. +</p> + +<p> +The study of history is the best and most powerful antidote +against social romances and ideal fancies. François Beaudouin +was right when he said: <q><foreign lang='fr' rend='font-style: italic'>Cæca +sine historia jurisprudentia</foreign>;</q> +and we are very sure that, without history as an +element in it, Political Economy runs a great risk of walking +blindfold. +</p> + +<p> +The human mind has need of being able to know where it +is at any moment, surrounded, as it is, by so many roads, running +in so many different directions. It ought to account to +itself for its progress, its deviations from the right path, and +for its mistakes.<note place='foot'><hi rend='italic'>Rossi.</hi></note> +History alone can throw any light on questions +which are not simply intellectual curiosities, but which, +rather, are most deeply concerned with the vital interests of +society. It confirms the noble teachings of philosophy, by +showing how our life is made up of one unchanging tissue of +relations, and how man, even if he may vary their colors, and +change their design, cannot renew their texture. +</p> + +<p> +It teaches us to admire nothing, and to despise nothing, beyond +<pb n='019'/><anchor id='Pg019'/> +measure. It enlightens us concerning questions of a +very complicated nature. Witnessing the evolutions of humanity, +following the development of social facts and theories, +we better discern principles, and grow wary in relation to the +alchemists of thought, who imagine that society may be made +to undergo a transformation between the rising and the setting +of the sun. +</p> + +<p> +As there is a natural law, so, too, there are certain principles +of Political Economy which emanate from philosophy, and +may be reduced to one supreme principle; that of liberty and +responsibility. The domain of Political Economy is the <emph>labor</emph> +of generations. But we reject with all our strength, the materialistic +doctrine which, inexplicably confusing matters, endeavors +to assimilate ideas so distinct as intelligence and +things; and which would descend so low as to employ the +dynamometer to measure the creative force of man and its results, +and which sees only figures where there is a living soul. +</p> + +<p> +Man is an intelligent being, served by organs,<note place='foot'><hi rend='italic'>M. +de Bonald.</hi></note> by <emph>personal</emph> +organs, with which the Creator has endowed him, by giving +him a body provided with marvellous aptitudes, by <emph>external</emph> +organs which he finds in nature subjected to his power. Man +was created in the image of God, say the Scriptures, and +these words contain a deep meaning. He alone, of all terrestrial +beings, possesses a spark of divine intelligence. He alone +has been called to pursue the magnificent work of creation, by +giving a new face to a world to which he cannot add so much +as an atom. +</p> + +<p> +<hi rend='italic'>Labor</hi> is nothing but the action of spirit on itself and on +matter.<note place='foot'><hi rend='italic'>M. Cousin</hi> has brought this +out in an admirable manner in his lectures +on Adam Smith. Cours de Philosophie Moderne.</note> +Hence its dignity and grandeur. Hence, also, the +difficulties in the way of economic studies; since, to consider +them only as concerned with questions of material production, +is to forget that the products of industry are made for man, +not man for industrial products; to ignore the close relationship +<pb n='020'/><anchor id='Pg020'/> +between their fruitful investigations and the whole circle +of the moral sciences; to debase them and to mutilate them. +</p> + +<p> +From the moment that science concerns itself with man +only, and the action of the mind; from the moment that its end +becomes not simply material enjoyment, but moral elevation, +the questions it discusses become indeed more complex, but +the answer, when found, is more prolific in results. Wealth, +then, is treated only as one of the forces of civilization. Other +interests than purely material ones occupy the first place. +This matter-of-fact philosophy which, according to Bacon's +precept, seeks to improve the conditions of life, bears in mind, +that the most fruitful source of material development lies in +intellectual development. It humbly recognizes that it is not +the first-born of the family, and draws new strength from this +avowal. From the moment that it is the mind which <emph>produces</emph> +and which governs the world, intellectual and moral perfection +become the cause and effect of material progress. <q>But seek +ye first the kingdom of God and his righteousness, and all +these things shall be added unto you.</q> +</p> + +<p> +The increase of production, then, appears an instrument of +elevation in the moral order.<note place='foot'><hi rend='italic'>Channing.</hi></note> +It is energy of soul, intelligence +and manly virtue which constitute the chief source of the wealth +of nations; which create it, develop it, and preserve it. Wealth +increases, declines, and disappears with the increase, decline +and disappearance of these noble attributes of the soul. +</p> + +<p> +Labor is the child of thought. Nothing happens in the external +world which was not first conceived in the mind. The +hand is the servant of the intellect; and its work is successful, +beautiful or useful in proportion to the activity and development +of the intellect, and in proportion as the just, the beautiful +and the good exert their power over it. +</p> + +<p> +Production is, therefore, not a material, but a spiritual, work. +How, then, can acts and their morality be separated? How +not understand that the market of labor has its own distinct +<pb n='021'/><anchor id='Pg021'/> +laws, and that education, even from a material stand-point, becomes +the highest interest and the most important duty of +society, since on it depends the efficiency of labor? +</p> + +<p> +From the time that, after a long series of years, the doctrine +of Christianity had permeated the law of the civilized world; +from the time that the teaching of Paul, that all men are children +of one Father, took form and body, and that the principle +of the equality of all men before their Maker, was supplemented +by the doctrine and by the practice of that equality +before the laws, the thinking masses have endeavored to discover +the wherefore of their actions, and the why of their sufferings. +They have called the past to account, and inquired +why they have obtained so limited a share. +</p> + +<p> +The people, therefore, think; and it is, therefore, a matter of +importance that they should think aright. It is of importance, +that they should be guarded against fallacious Utopian promises. +Henceforth, there is no security for the stability of the +world but in the contentment of minds. There is no rest for +mankind, unless men will understand the conditions of their +destiny; unless, instead of running, +</p> + +<quote rend='display'> +<lg> +<l><q>Toujours insatiable et jamais assouvis,</q></l> +</lg> +</quote> + +<p> +after the intoxicating cup of material enjoyment—for wants +not governed by the intellect and the heart are infinite in number, +and the gratification of one gives birth to another—they +submit to the law of sacrifice, and give play to the noblest +faculty with which the Creator has endowed us, moral empire +over self. +</p> + +<p> +We shall meet on this road, hard of ascent, not only peace +of soul, but goods, more real and more numerous, than those +with which the allurements of error would dazzle our eyes. +The greatest obstacles to be overcome are not material ones, +but moral difficulties. As Franklin says, in substance, he that +tells you you can succeed, in any way but by labor and economy, +is a quack. +</p> + +<p> +But labor is more productive in proportion as it is more intelligent, +<pb n='022'/><anchor id='Pg022'/> +as hand and mind keep pace with each other, as +good moral habits generate order and voluntary discipline. +</p> + +<p> +Economy is sacrifice, binding the present to the future, +widening the horizon of thought, inspiring foresight, lengthening +the lever of human activity, by providing it with new instruments. +</p> + +<p> +Life ceases to be a worry about how the body shall be sustained, +and the material world becomes the shadow of the +spiritual. The former is made to serve the latter, and man's +free effort lifts him into a higher region of thought, and into a +larger field of action. The more mind there is put into a piece +of work, says Channing, the more it is worth. +</p> + +<p> +We, men of to-day, are lookers-on at a marvelous spectacle. +Steam furrows the earth. Industry has taken an immense +start. Mechanical force bends the most rebellious materials. +Chemistry, physics and the natural sciences are discovering a +new world. But whence all this? What is the principle of +this new life? We answer: intellectual and moral progress. +Mind has grown; the soul has been expanded. God has permitted +man to be free, and furnished him with the means to +be so. +</p> + +<p> +Thus man, as Mignet has said, becomes that mighty creature +to whom God has given the earth for the vast theater of his +action, the universe as the inexhaustible object of his knowledge, +the forces of nature for the growing service of his wants, +by allowing him, by ever increasing information, to obtain an +ever increasing amount of well-being. +</p> + +<p> +Man is free.—1789 put in action the sublime precept of the +gospel. He holds his destiny in his own hands. But the +rights which he enjoys impose new duties on him. If <emph>equality</emph> +be the sentiment which predominates in our day, we should +take care not to confound it with the leveling of Communism. +Nor is it externally to us, but within ourselves, that it should +be developed, by intellectual and moral culture. +</p> + +<p> +History preserves the student from being led astray by a too +servile adherence to any system. It exposes the folly of the +<pb n='023'/><anchor id='Pg023'/> +<q>social contract,</q> and of the idyllic dreams of the advantages +of savage life. It shows that nature, instead of being prodigal +of her treasures, distributes them with a niggardly hand, and +that it is necessary to conquer her by labor, intelligence and patience +before we can control her. +</p> + +<p> +It shows us human liberty growing stronger every day, +thanks to moral and intellectual progress, supported by the +two powerful props of property, the complement of man, the +material reflection of his spiritual power; and capital, the fruit +of abstinence, the symbol of moral power and the result of +enlightened activity. +</p> + +<p> +History walks with a firm step, because it feels secure in a +knowledge of the laws of human nature, and in its experience +of the successive manifestations of social life. Instead of the +vagueness of ideal conceptions, it allows us to grasp and to +appreciate what is real in life. It does not confine itself to the +study of man. It makes us acquainted with <emph>men</emph>, whose +wants extend and are ennobled in proportion to the perfection +of their faculties. The feelings and the intellect are simultaneously +developed in man. The savage is the most egotistical +of men. +</p> + +<p> +Hence, we believe that Political Economy cannot dispense +with the services of morals and philosophy, of history and +law; for these are branches of one common trunk, through +all of which the self-same sap circulates. +</p> + +</div> + +<div> +<head>V.</head> + +<p> +The isolation of the theory of Political Economy is peculiar +to our own day. In more remote times, we find this study +confounded with the other moral sciences, of which it was an +integral part. When the genius of Adam Smith gave it a +distinct character, he did not desire to separate it from those +branches of knowledge without which it could only remain a +bleached plant from the absence of the sunlight of ethics. +</p> + +<pb n='024'/><anchor id='Pg024'/> + +<p> +We must renounce the singular idea,<note place='foot'><hi rend='italic'>Knies.</hi> +Die politische Œkonomie vom Standpunkte der geschichtlichen +Methode, Braunschweig, 1853.</note> that thousands of +years could pass away without leaving any trace of what enlightened +men had thought and elaborated in the matter of +Political Economy, among so many nations, and that people +should never have thought of cultivating this rich intellectual +domain, while in every other direction, it is easy for us to ascend +by a road already cleared up to the most remote antiquity. +</p> + +<p> +It has already been acknowledged, that the <hi rend='italic'>classic domain</hi>, +fertilized by intellectual culture on a large scale and on a small +one, was exceedingly rich in valuable indications, although +they do not present themselves under the distinct form, which +later affected the different branches of public life. +</p> + +<p> +As to the pretended <hi rend='italic'>primitive simplicity</hi> of the middle ages, +which it is claimed, prevailed during that period, a species of +economic vegetation, those who maintain it forget the long +series of communistic theories which, at near intervals, found +expression in many a bloody struggle, and whose repression required +the combined efforts of Church and State. +</p> + +<p> +Doubtless, it is not in their modern forms that the elements +of politico-economical science are to be found, in the past. But +when we succeed in reuniting the scattered and broken parts; +when we have made our way into the customs, decrees, ordinances, +capitularies, laws and regulations of those times; when, +so to speak, we come, unaware, upon the life of nations, in the +most ingenuous and confidential documents which reflect it +most faithfully because most simply, we may well be astonished +at the results obtained. Where we expected, perhaps, to find +only erudition, we reap a rich harvest of lessons which are all +the more valuable for being disinterested. +</p> + +<p> +Legislative and administrative acts frequently develop real +economic doctrines. It is easy to discover in them the onward +course of a theory which plunges directly into practical applications. +</p> + +<p> +What results might we not expect from these efforts, if the +<pb n='025'/><anchor id='Pg025'/> +genius of investigation and of divination, which has so elevated +historical studies in our day, should have an observing +and penetrating eye in this direction! How limited was the +field on which Guérard erected the scientific monument which +he has left us in his <hi rend='italic'>Polyptique d'Irminon</hi>; and how precious +are the lessons he leaves us, since we have here to do, not +with the history of professed doctrines or unlooked-for events, +but with the historical development of economic society which +shows us the living march of principles. +</p> + +</div> + +<div> +<head>VI.</head> + +<p> +Political Economy is not, as we have just said, a new science. +It has been a distinct science only a short time. Until +the eighteenth century, it was confounded with philosophy, +morals, politics, law and history. But it does not follow, that, +because it has grown so in importance, as to deserve a place +of its own, its intimate relationship with the noble studies +which had until then absorbed it should cease. There is another +consequence also to be deduced from this. From the +moment that Political Economy ceases to be considered a new +science, it finds a long series of ancestors behind it, since it +is compelled to investigate a past to which so many bonds +unite it. This duty may increase its difficulties, but, at the same +time, it singularly adds to the attractions of a study which, instead +of presenting us only with the arid deductions of dogmatism, +comes to us with all the freshness and all the color of +life. +</p> + +<p> +We may allow those who make Political Economy simply a +piece of arithmetic to ignore these retrospective studies and +their importance; for mathematics has little to do with history. +But it is otherwise with the life of nations. These +would discover whence they come, in order to learn whither +they are tending. +</p> + +<p> +They are not obeying a vain interest of curiosity, as J. B. +Say supposed, when, in sketching a short history of the progress +<pb n='026'/><anchor id='Pg026'/> +of Political Economy, he said: <q>However, every kind +of history has a right to gratify curiosity.</q> It is a thing to be +regretted, that this eminent thinker could thus ignore one of +the essential elements of the science to which he rendered +such great and unquestioned services. A sense for the historical +was wanting in him. <q>The history of a science,</q> he +writes,<note place='foot'>Cours Complet d' Economie politique, II, +540, éd. Guillaumin.</note> <q>is not like the narration of things that have happened. +What would it profit us to make a collection of absurd opinions, +of decried doctrines which deserved to be decried? It +would be at once useless and fastidious to thus exhume them +in case we perfectly knew the public economy of social bodies. +It can be of little concern to us to learn what our predecessors +have dreamed about this subject, and to describe the +long series of mistakes in practice which have retarded man's +progress in the research after truth. Error is a thing to be +forgotten, not learned.</q> As if that which was once to be +found in time is not to-day to be found in space; as if there +ever was an institution that did not have its +<foreign lang='fr' rend='font-style: italic'>raison d' etre</foreign> and +had not constituted a resting place in the search after a higher +truth or of a more intelligent and salutary application of an old +one! There are a great many actual systems and a great +many present facts which can be understood only by the help +of history; and how frequently would not an acquaintance +with history serve to keep us from taking for marvelous inventions +the antiquated machinery of other ages, whose only +advantage and only merit are that they have remained unknown. +How much of the pretended daring of innovators has +been old trumpery which the wisdom of the times had cast +off as rubbish. Besides, as Bacon has said: <q>Verumtamen +sæpe necessarium est, quod non est optimum.</q> +</p> + +</div> + +<pb n='027'/><anchor id='Pg027'/> + +<div> +<head>VII.</head> + +<p> +It is not the result of mere chance that the greatest economists +have been both historians and philosophers. We need +only mention Adam Smith, Turgot, Malthus, Sismondi, Droz, +Rossi and Léon Faucher. It is too frequently forgotten that +the father of modern Political Economy, Adam Smith, looked +upon the science as only one part of the course of moral philosophy +which he taught at Glasgow, and which embraced +four divisions: +</p> + +<p> +1. <hi rend='italic'>Universal theology.</hi>—The existence and attributes of +God; principles or faculties of the human mind, the basis of +religion. +</p> + +<p> +2. <hi rend='italic'>Ethics.</hi>—Theory of the moral sentiments. +</p> + +<p> +3. <hi rend='italic'>Moral principles relating to justice.</hi>—In +this, as we learn from one of Adam Smith's pupils in a sketch preserved by +David Stewart, he followed a plan which seems to have been +suggested to him by Montesquieu. He endeavored to trace the +successive advances of jurisprudence from the most barbarous +times to the most polished. He carefully showed how the +arts which minister to subsistence, and to the accumulation of +property, act on laws and governments, and are productive +of advances and changes in them analogous to those they experience +themselves. +</p> + +<p> +In the first part of his course, as we learn from the same +authority, he examined the various political regulations not +founded on the principle of justice but in expediency, the +object of which is to increase the wealth, the power and the +prosperity of the state. From this point of view, he considered +the political institutions relating to commerce, finance, the +ecclesiastical and military establishments. His lectures on the +different subjects constitute the substance of the work he afterwards +published on the wealth of nations. A pupil of Hutcheson, +Adam Smith always applied the experimental method, +<q>which, instead of losing itself in magnificent and hazardous +<pb n='028'/><anchor id='Pg028'/> +speculations, attaches itself to certain and universal facts discovered +to us by our own consciousness, by language, literature, +history and society.</q><note place='foot'><hi rend='italic'>Cousin.</hi></note> +Before taking the professorship +of philosophy, Adam Smith had taught belleslettres and rhetoric +in Edinburgh, in 1748. He had written a work on the +origin and formation of languages; and it was because he had +profoundly studied the moral sciences that it was given to him +to inaugurate a new science and to become a great economist. +Mr. Cousin has laid great stress on Adam Smith's taste and +talent for history. <q>Whatever the subject he treats, he turns +his eyes backward over the road traversed before himself, and +he illuminates every object on his path by the aid of the torch +which reflection has placed in his hand. Thus, in Political +Economy, his principles not only prepare the future but renew +the past, and discover the reason, heretofore unknown, of +ancient facts which history had gathered together without understanding +them. It is not saying enough to remark that +Adam Smith possessed a great variety of historical information; +we must add that he possessed the real historical spirit.</q> +Thanks to this eminent faculty of his, the Glasgow philosopher +acquired great influence over minds. In 1810, when the +French empire had reached the zenith of its greatness, Marwitz +wrote: <q>There is a monarch as powerful as Napoleon: +Adam Smith.</q> We need not recall Turgot's historical researches. +</p> + +<p> +Malthus' chief title to distinction, his work on Population, +is as much a historical work as a politico-economical one; and +it is not sufficiently known that he was professor of history +and Political Economy in the college of the East India Company +at Aylesbury. +</p> + +<p> +We need say no more on this subject. The works of the +other writers whom we have mentioned are too well known +to permit any one to think that they excluded history and +moral science from the study of Political Economy. Hence +<pb n='029'/><anchor id='Pg029'/> +the school which has risen up in Germany,<note place='foot'>We here append an extract +from <hi rend='italic'>Heinrich Contzen's</hi> Geschichte, Literatur, +und Bedeutung der Nationalökonomie, Cassel und Leipzig, 1876, p. 7: +<q>Roscher ... is rightfully considered the real founder and the principal +representative of the historical school. This school is continually gaining in +extent, and has found, both in Germany and in France, the most distinguished +disciples—men who honor Roscher as their teacher and master, the +leader whose beacon light they follow. Roscher combines the richest positive +learning with rare clearness and plastic beauty in the presentation of +his thought. These are conceded to him on every hand; and it does not detract +from him, or alter the fact that he possesses them, that, here and there, an +ill-humored or maliciously snappish critic calls them in question.</q> It should +be borne in mind here that Wolowski wrote in 1857; Contzen, like Wolowski, +a politico-economical writer of mark, in 1876.—<hi rend='italic'>Translator's +note.</hi></note> and which is endeavoring +to do for Political Economy what Savigny, Eichhorn, +Schrader, Mommsen, Rudorff, and so many other illustrious +scholars have done for jurisprudence, cannot be rightly +accused of rashness. It has done nothing but unfurl the noble +banner borne by the most venerated masters of the science. +</p> + +</div> + +<div> +<head>VIII.</head> + +<p> +At the head of this school stands William Roscher, professor +of Political Economy at the University of Leipzig, whose +excellent work, The Principles of Political Economy, in which +he follows <emph>the historical method</emph>, we have just translated. +William Roscher is (1857) scarcely forty years of age. He +was born at Hanover, October 21, 1817. His laborious +and simple life is that of a worthy representative of the science. +<q>You ask me,</q> he wrote us recently, <q>to give you some information +concerning the incidents of my life. I have, thank +God, but very little to tell you. Lives whose history it is interesting +to relate are seldom happy lives.</q> He confined +himself to giving us a few dates which are, so to say, the +landmarks of a career full of usefulness. Roscher, from 1835 +to 1839, studied jurisprudence and philology at the universities +of Göttingen and Berlin. The learned teachers who exercised +<pb n='030'/><anchor id='Pg030'/> +the greatest influence on his intellectual development +were the historians Gervinus and Ranke, the philologist K. O. +Müller and the Germanist Albrecht. It is easy to see that he +went to a good school, and that he profited by it. He was +made doctor in 1838; admitted in 1840 as <hi rend='italic'>Privat-docent</hi> at +Göttingen; appointed in 1843 professor extraordinary at the +same university, and called in 1844 to fill the chair of titular +professor at Erlangen. Since 1848 he has acted in the same +capacity in the University of Leipzig, where he was for six +years member of the Poor Board, where he teaches also in the +agricultural college. His fame has grown rapidly. Many of +the German universities have emulated one another for the +honor of possessing him, but he has not been willing to leave +Leipzig. His first remarkable work was his doctor's thesis: +<foreign lang='la' rend='font-style: italic'>De historicæ doctrinæ +apud sophistas majores vestigiis</foreign>, written +in 1838. In 1842, he published his excellent work, which has +since become classical: <q>The Life, Labors and age of +Thucydides.</q><note place='foot'>Leben, Werk und Zeitalter des Thukydides.</note> +From that time, important works, all bearing the +stamp of varied and profound scientific acquirements, and of +an erudition remarkable for sagacity and elegance, have followed +one another without interruption. In 1843, he treated +the question of luxury<note place='foot'><hi rend='italic'>Rau's</hi> +Archiv., Heidelberg. This remarkable essay has since appeared in +Roscher's Ansichten der Volkswirthschalt vom geschichtlichen Standpunkte, +1861.—<hi rend='italic'>Translator's note.</hi></note> +with a master hand, and laid the foundation +of his great work—only the first part of which has +thus far appeared—at the same time tracing on a large scale +the programme of a course of Political Economy according +to the historical method.<note place='foot'>Grundriss zu +Vorlesungen über die Staatswirthschaft nach geschichtlichen +Methode.</note> In 1844, he published his historical +study on Socialism and Communism,<note place='foot'>Berliner +Zeitschrift für allgem Geschichte.</note> and in 1845 and 1846, +his ideas on the politics and the statistics of systems of agriculture. +He is, besides, author of an excellent work on the +<pb n='031'/><anchor id='Pg031'/> +corn-trade;<note place='foot'>Ueber Kornhandel und Theuerungspolitik, 3d ed., +1852.</note> of a remarkable book on the colonial +system;<note place='foot'>Untersuchungen über das Kolonialwesen.</note> +of a sketch on the three forms of the state;<note place='foot'>Umrisse zur +Naturlehre der drei Staatsformen (Berliner Zeitschrift, 1847-1848).</note> +of a memoir on the relations between Political Economy and classical +antiquity;<note place='foot'>Ueber das Verhältniss der Nationalökonomie +zum klassischen Alterthume (K. Sachs Akademie der Wissenschaft, 1849). +Also to be found in Roscher's Ansichten +etc.—<hi rend='italic'>Translator.</hi></note> of +a work of the greatest interest, on the history of economic +doctrines in England in the sixteenth and seventeenth centuries—a +work full of the most curious researches;<note place='foot'>Zur Geschichte +der englischen Volkswirthschaftslehre im 16 und 17 Jahrh.</note> of a book on +the economic principle of forest economy,<note place='foot'>Ein nationalökonom. +Princep der Forstwirthschaft.</note> and lastly, of the +great work, the first part of which we have translated, under the +title of The Principles of Political Economy, and which is to +be completed by the successive publication of three other volumes, +on the Political Economy of Agriculture, and the related +branches of primitive production, the Political Economy of +Industry and Commerce, and one on the Political Economy of +the State and the Commune. This work, when completed, +will be a real cyclopedia of the +science.<note place='foot'><p><hi rend='italic'>Roscher's</hi> +complete work he calls <q>A System of Political Economy.</q> It +embraces the four parts above referred to; but each of these parts constitutes +an independent work. The first part, or the Principles of Political Economy, +covers the ground generally covered by English treatises on Political Economy. +</p> +<p> +Besides the works above mentioned, <hi rend='italic'>Professor Roscher</hi> has +written Ansichten der Volkswirthschaft aus dem geschichtlichen Standpunkte, 2d ed., +Leipzig, 1861; Die deutche Nationalökonomik an der Grenzscheide des sechszehnten +und siebenzehnten Jahrhunderts, Leipzig, 1862; Gründungsgeschichte +des Zollvereins, Berlin, 1870; Betrachtungen über die geographische +Lage der grossen Städte, Leipzig, 1871; Bertrachtungen über die Währungsfrage +der deutschen Münzreform, Berlin, 1872; Geschichte der Nationalökonomik +in Deutschland, Munich, 1874; Nationalökonomik des Ackerbaues, +8th ed., Stuttgart, 1875.—<hi rend='italic'>Translator's note.</hi> +</p></note> +</p> + +<p> +Side by side with William Roscher, we must mention a +<pb n='032'/><anchor id='Pg032'/> +young economist, Knies, formerly professor at the University +of Marburg, but whom political persecution compelled to accept +a secondary position at the gymnasium of Schaffhausen, +for a time, and who fills, to-day, in the University of Freiburg, +in Breisgau, a position more worthy of his great talent. We +hope, in a work which we intend to publish, on Political +Economy in Germany, to make the public acquainted with the +works of this writer. They deserve to attract the most serious +attention. We know of few works which equal his Political +Economy, written on the historical method.<note place='foot'>Die +politische Œkonomie vom Standpunkte der geschichtlichen Methode.</note> We shall +also have something to say of another economist, formerly +professor at Marburg, a victim, also, of the power of the +elector of Hesse, Hildebrand, now professor at the University +of Zurich. His National-Œkonomie<note place='foot'>Die National +Œkonomie der Gegenwart und Zukunft.</note> is a book replete +with interest, and we have nowhere met with a better criticism +of Proudhon's system, than in its pages. If the new +school had produced but these three men, it would still have +left its impress on the history of the science. +</p> + +<p> +Other works, no less important, will claim our attention in +the book to which we have already devoted many years of +labor. If we carry out our intention, we shall review the +works of a great many scholars, of great merit, whose names +only are, unfortunately, known outside of Germany. The +works of Rau, of Hermann, of Robert Mohl, of Hannsen, +Helferich, Schütz, Kosegarten, Wirth etc., are a rich mine, +from which we hope to draw much valuable information. +Nor shall we neglect the original productions of J. Moser, the +Franklin of Germany, nor the quaint, but sometimes striking, +ideas of Adam Müller. Lastly, our learned friend, Professor +Stein of Vienna, will afford us an opportunity to show forth +the merit of important and extensive works, animated by the +philosophic spirit. For the present, we must confine ourselves +to a view of the application of the historical method to Political +Economy. +</p> + +<pb n='033'/><anchor id='Pg033'/> + +<p> +There is a rather widespread prejudice existing against this +order of works, a souvenir of the struggle carried on formerly, +between Thibaut and Savigny, which inclines people to suppose +that the historical school leans towards the political doctrines +of the past, and that it is hostile to the liberal spirit +of modern times. Nothing can be farther from the truth. +The names of Roscher, Knies and Hildebrand are sufficient to +remove this prejudice. Their works, inspired by an enlightened +love for progress, do not allow of such a misconstruction. +The historical point of view does not consist in the worship of +the past, any more than in the depreciation of the present. It +does not view the succession of phenomena as a fluctuation of +events without unity or purpose. On the contrary, the historical +method harmonizes wonderfully well with the wants of +genuine progress. The changes accomplished bear testimony +to the free and creative power of man, acting within the limit +permitted to it by the degrees of intelligence reached, of the +development of morals, and of individual liberty. The philosophy +of Political Economy, which is the result of this calm +teaching, free from the passions of party—for science acknowledges +no adherence to party—is like that of law, opposed +to the, more or less, ingenious or rash dreams, which +build the world over again in thought. In showing how, at +all times, humanity has understood and applied the principles +which govern the production of wealth, it may say, with the +Roman jurisconsult: <q>Justitiam namque colimus ... æquum +ab iniquo separantes ... veram nisi fallor philosophiam, non +simulatam affectantes.</q> <q>The human mind,</q> says Rossi, +<q>endeavoring to attain to a knowledge of itself, estimating its +strength, taking a method, and applying it with a consciousness +of its mode of procedure to the knowledge of all things; +such is philosophy. Without it, there is no science in any +branch of human knowledge.</q> Thus do we rise, with the aid +of a critical mind, by careful investigation and great sagacity, +to the truths founded on observations made. +</p> + +</div> + +<pb n='034'/><anchor id='Pg034'/> + +<div> +<head>IX.</head> + +<p> +There is another method, which, starting out from principles, +evident of themselves, develops science by way of +conclusions drawn, after the manner of the geometricians. +The apparent severity and simplicity of this method are very +seductive, and very dangerous, when we have to deal not with +figures, but with men; when the varied, complex and delicate +exigencies which accumulate when human nature comes into +play do not exactly square with the formula; and, when instead +of dealing with abstractions, we have to tackle realities. +One of our venerated teachers, the illustrious Rossi, thought +he might remove the difficulty by drawing a distinction between +<emph>pure</emph> Political Economy and <emph>applied</emph> Political Economy. +It is not without a certain amount of hesitation that we dare +differ with so high an authority; but confess we must, this distinction +is far from satisfying us. The doubt it has left in our +mind has been the principal cause which has inclined us to +the historical method. <q>Rational Political Economy,</q> says +Rossi, <q>is the science which investigates the nature, the causes +and the movement of wealth, by basing itself on the general +and constant facts of human nature, and of the external world. +In applied Political Economy, the science is taken as the mean. +Account is taken of external facts. Nationality, time and +place play an important part.</q> +</p> + +<p> +Let us for a moment accept these definitions; what is the +consequence? That there are two sciences, the one of which, +purely speculative, has more to do with philosophy than with +the permanent conflicts which agitate the world; the other of +which could not alone furnish us with rules in practice, nor +with a formulary for the measures to be taken in a given +case, since such a pretension would be both vain and ridiculous, +but which would inform the practical judgment of men +charged with the solution of the numberless difficult and complicated +questions which come up every day. If pure science +refuses to interfere in the affairs of this world; if, as the learned +<pb n='035'/><anchor id='Pg035'/> +originator of the doctrine we are just now considering gives +us to understand, it would compromise the solution of questions +by the intoxication of logic, and the ambition of perfect +system; if, consequently, it is to be worshipped like a motionless +and inactive divinity, how could this platonic satisfaction +suffice us? Would not the opponents of economic doctrines +be disposed to acknowledge all the principles, provided +the consequences to be drawn from them were left to themselves; +and would they not come to us, bristling with arguments +drawn from the circumstances of nationality, time and +space, to refute the possibility of applying pure science? +</p> + +<quote rend='display'> +<lg> +<l>On ne vaincra jamais les Romains que dans Rome.</l> +</lg> +</quote> + +<p> +This, therefore, is the ground we must explore. We must +develop applied Political Economy which takes cognizance of +external circumstances. To do this, no one will question that +the best and most decisive of methods is the historical, which +concerns itself with time, space and nationality, and which +leads to proper reformation where reformation is wanted. +</p> + +<p> +Moreover, principles will be no less firmly established by +historical induction than by dogmatic deduction, and, moreover, +science will be inseparable from art. We are not of +those who deny principles, or who challenge them. What +we desire is, that they should not be worshiped as fetiches, +but that they should enter into the very life-blood of nations. +</p> + +<p> +Further: the abstract deductions of pure science do not +leave us without disquietude, since they treat man much more +like a material than like a moral force. Under the vigorous +procedure of speculative mathematics, man becomes a constant +quantity for all times and all countries, whereas he is, in reality, +a variable quantity. All the elements put in play are +ideal entities, the reverse of which we find in poetry, where +</p> + +<quote rend='display'> +<lg> +<l>Tout prend un corps, une ame, un esprit, un visage!</l> +</lg> +</quote> + +<p> +and where everything loses the character of life, and is transformed +into inanimate units. Man is something different from +<pb n='036'/><anchor id='Pg036'/> +the sum of the services he may be made to render, and from +the sum of enjoyments which may be procured for him. We +must not run the risk of lowering him to the level of a living +tool; and from the moment that we are required to take his +moral destiny into account, what becomes of abstract calculation? +</p> + +</div> + +<div> +<head>X.</head> + +<p> +We have been wrong, says Rossi, in reproaching Quesnay +for his famous <foreign lang='fr' rend='font-style: italic'>laissez faire, +laissez passer</foreign>, which is pure science. +We, also, are of opinion that the reproach was ill +founded, for it proceeded from a wrong conception of the +principle itself. But it seems to us that, far from condemning +this doctrine in its serious application, the historical method +may serve to explain and to justify it. Employing less of +rigidity and dryness in form, it reaches consequences more in +harmony with social life. But it is not to be imagined that +we do not meet in this way with many ancient and glorious +precedents. The great principles of industrial liberty, as well +as those of commercial liberty, originated in France. Forbonnais +was right when he said: <q>We may congratulate +ourselves on being able to find, in our old books and ancient +ordinances, wherewith to vindicate for ourselves the right to +that light which we generally supposed to have been revealed +to the English and Dutch before us.</q> The further Forbonnais +carried his researches into our annals, the greater the number +of traces of opposition to the prejudices in favor of exclusion +and monopoly, so long made principles of administrative policy, +did he find.<note place='foot'>Recherches sur les Finances de France.</note> +</p> + +<p> +The famous axiom, <foreign lang='fr' rend='font-style: italic'>laissez +faire</foreign>, and <foreign lang='fr' rend='font-style: italic'>laissez +passer</foreign>, the subversive +tendencies of which people affect to condemn, was not +invented by Quesnay. He only gave a scientific bearing to +what was the inspiration of a merchant called Legendre. +The latter, consulted by Colbert on the best means of protecting +<pb n='037'/><anchor id='Pg037'/> +commerce, dropped these words which have since become +so celebrated. +</p> + +<p> +We must not lose sight of their real meaning, nor misunderstand +the intention which dictated them. What Quesnay +said was this: <q>Let everything alone which is injurious, +neither to good morals, nor to liberty, nor to property, nor to +personal security. Allow everything to be sold which has +been produced without crime.</q> And he added: <q>Only freedom +judges aright; only competition never sells too dear, and +always pays a reasonable and legitimate price.</q> Far from +being the absence of rule, liberty is the rule itself. To +<foreign lang='fr' rend='font-style: italic'>laisser faire</foreign> +the good is to prevent evil.<note place='foot'><hi rend='italic'>Frédéric +Passy</hi>, de la Contrainte et de la Liberté.</note> +</p> + +<p> +There is need of institutions to complete the exercise of the +independence acquired by labor, and of laws to regulate that +exercise. The <foreign lang='fr' rend='font-style: italic'>laisser faire</foreign> +and <foreign lang='fr' rend='font-style: italic'>laisser passer</foreign> of economists +is, in no way, like the absolute formula, which some have denounced +and others sought to utilize, as relieving authority of +all care and all intervention. +</p> + +<p> +To understand this maxim aright, we must go back to the +oppressive regime of ancient society. Quesnay's formula was, +first of all, a protest against the restraints which hampered the +free development of labor. But it did not tend to abrogate +the office of legislator, nor to deprive society or the individual +of the support of the public power which watches over the +fulfillment of our destiny. +</p> + +<p> +It may have seemed convenient to find in the gravity of a +politico-economical principle, an excuse for the sweets of legislative +and administrative <foreign lang='fr' rend='font-style: italic'>far niente</foreign>, +but it is generally conceded +that the role of authority has grown, rather than diminished, +under the regime of the liberty of labor. The task is, in our +days, a hard one, both for individuals and nations; for liberty +dispenses its favors only to the masculine virtues of a laborious +and an enlightened people. +</p> + +<p> +Liberty is not license. It refuses to bend under the yoke, +<pb n='038'/><anchor id='Pg038'/> +but it submits to rule. The mission of authority is not to constrain, +but to counsel; not to command, but to help accomplish; +not to absorb individual activity, but to develop it. It +does not pretend to raise a convenient indifference on the part +of government, nor the indolent withdrawal of all protective +influence to the dignity of a principle. To say, on the other +hand, that the <foreign lang='fr' rend='font-style: italic'>laisser +faire</foreign> and <foreign lang='fr' rend='font-style: italic'>laisser +passer</foreign> of the economists +means: Let robbery alone; let fraud alone etc., is to amuse +one's self playing upon words, and to argue in a manner unworthy +of any serious answer. Under pretext of painting a +picture of economic doctrine, we are given its caricature. +Such has never been the system, to the elaboration of which +the purest hearts and noblest intellects have devoted themselves. +A negation does not constitute the science of Political +Economy. +</p> + +<p> +It is very convenient to inclose humanity within a circle of +action, drawn with rigorous precision, and to govern movements +seen in advance. But such artificial conceptions mutilate +the activity of man. To guarantee man all liberty, and +prevent its abuse—such are the data of the problem. The +work is a great and difficult one. Far from yielding in point +of elevation to ideal systems, it is superior to them in extent +and variety of combinations. Those who ignore its bearing, +yield, it may be, to a certain indolence of intellect. Restrained +within its natural limits, the famous +<foreign lang='fr' rend='font-style: italic'>laisser faire</foreign> +and <foreign lang='fr' rend='font-style: italic'>laisser +passer</foreign> of the Physiocrates deserves even to-day our respect +and our confidence. It ought to be preserved in the grateful +memory of men, side by side with the maxim which Quesnay +succeeded in having printed at Versailles, by the hand of +Louis XV himself: <q>Pauvres paysans, pauvre royaume; +pauvre royaume, pauvre souverain.</q><note place='foot'>Poor +peasantry, poor kingdom; poor kingdom, poor sovereign.</note> +</p> + +</div> + +<pb n='039'/><anchor id='Pg039'/> + +<div> +<head>XI.</head> + +<p> +To return to the question of method. Rossi made use of +an ingenious example to explain his thought:<note place='foot'>Cours +d' Econ. polit., 2e., Leçon I, p. 33.</note> <q>Are,</q> he inquires, +<q>these deductions [of pure science] perfectly legitimate; +are these consequences always true? It is incontestably true +that a projectile, discharged at a certain angle, will describe a +certain curve; this is a mathematical truth. It is equally true, +that the resistance offered to the projectile by the medium +through which it moves modifies the speculative result in +practice, to some extent; this is a truth of observation. Is the +mathematical deduction false? By no means; but it supposes +a vacuum. I hasten to acknowledge it. Speculative economy +also neglects certain facts and leaves certain resistances out of +account.</q> Now, from the moment that we have to deal with +human interests, it is not possible to suppose a vacuum, to +neglect the most vulgar facts, and the most common instances +of resistance, nor to lose one's self in abstraction. The correctives +of applied Political Economy either may not wipe out this +original sin, or else they run great danger of covering up the +principles themselves. In ballistics, again, we may measure +the resistance which the medium in which we are obliged +to operate, makes the force of impulsion and the target both +obey the same law, and yield to the same process of calculation. +But is it thus when you touch upon man's innermost +and most sensitive part? Is there not danger that the hypotheses +may be deceitful, and that you may be accused of toiling +in a vacuum? We well know the solid reason that may be +opposed to sarcasm of this nature; but is it expedient to lay +one's self open to it? +</p> + +<p> +Moreover, the consequences are not great enough to warrant +us to expose ourselves to the danger. The principles of +pure science are very small in number. They might even, be +easily reduced to one, of which M. Cousin has been the eloquent +<pb n='040'/><anchor id='Pg040'/> +interpreter—human liberty. This liberty has no need +of Political Economy to shine with the luster of evidence; +nothing can prevail against it. We can prove that it is as +fecund as it is respectable; but if the science of wealth should +endeavor to demonstrate the contrary, the primordial bases +of society, liberty, property and the family would not be less +sacred nor less necessary, for they are the right of humanity. +They could not be put aside, even under pretext of any mechanism +which would claim to produce more.<note place='foot'>This would +be: Propter vitiam, vitæ perdere causas.</note> These sovereign +principles of economy flow from the moral law, and they have +no reason to dread the power of facts, for the prosperity of nations +depends on the respect with which they are surrounded +and the guarantees by which they are protected. +</p> + +<p> +We have spoken of the moral law; and, indeed, in our opinion, +it is impossible to banish it from the domain of public +economy. Any other point of view seems to us too narrow. +And when we see eminent men go astray in the pursuit of an +ideal which fails to take the human soul into account, and +which finds nothing but equations where there are feelings and +ideas, we cannot help thinking that they are unfaithful to the +thought of the founder of the science, Adam Smith. Man is +not simply a piece of machinery. He does not blindly submit +to external impulse. Rather is he himself, the greatest of impulses. +But to govern things, he must first learn to conquer +himself. Personal interest is the powerful motive which he +obeys. Man does not live alone, in a state of isolation, in the +world. <hi rend='italic'>Væ soli!</hi> He lives in society and profits by the relations +which he forms with other beings, intelligent like himself, +and for whom he has a natural feeling of sympathy. +</p> + +<p> +The good that comes to them yields satisfaction to him, and +the evil that befalls them falls on him likewise. He cannot turn +back entirely upon his own personality. Besides his own interest, +he feels and shares another interest—the interest of all. +Personal interest is perfectly legitimate. The love of self cannot +<pb n='041'/><anchor id='Pg041'/> +be condemned. The Savior himself has enjoined us to love +our neighbor as ourselves. To love him more than ourselves +is a very high and beautiful virtue. It is the self-abnegation +which inspired Christian heroes. But heroism is rare, and cannot +be imposed, nor taken, as a rule. Personal interest is a +powerful stimulant, and the superior harmony of social relations +makes it contribute to the general good. +</p> + +<p> +What must be condemned is a fatal deviation of this sentiment +which destroys its effect and narrows its actions. What +we need to prevent is the degeneration of personal interest into +an egotism which parches, instead of fertilizing, and which +compromises the future by the exclusive search after present +advantage; for egotism is short-sighted. On the other hand, +the broader and more generous feeling which inclines us to +sympathize with our fellow beings in their sorrows, and to +unite our destiny to theirs; that is, the feeling of the general +interest, has a limit too. +</p> + +<p> +It would be falsified if it absorbed the individual; if it destroyed +the most powerful motive-force by drying up the abundant +source of activity; if it attacked moral energy by enervating +responsibility; if it extended the circle of results obtained +to such an extent that scarcely any one should feel the rebound. +</p> + +<p> +The evil produced by egotism, that sad travesty of personal +interest, appears under a form quite as formidable when the +general interest takes the form of communism. The coöperation +of personal interest and of the general interest is always +necessary, both for individual profit and social advantage. +There is as much danger in annihilating the individual as in +exalting him. History furnishes us with memorable examples +of this. It does not allow us to go astray in the narrow ways +of a peevish and jealous personality, nor to lose ourselves in +the vague labyrinth of a chimerical and false communism. +The latter would destroy what constitutes the power and dignity +of man. It would wipe out the most prominent features +of his noble nature, by destroying the support of energy and +activity and the food of moral force. +</p> + +</div> + +<pb n='042'/><anchor id='Pg042'/> + +<div> +<head>XII.</head> + +<p> +But, we are told, Political Economy is only the science of +selfishness; Adam Smith is the prophet of individualism; grow +rich <hi rend='italic'>per fas et nefas</hi> is its ultimate teaching. Such a judgment +is evidence of much levity and little enlightenment. +How could the man who conceived the study of human interests +on so large a scale, the philosopher who acknowledged +Hutcheson as his master and gave his ideas a still more expansive +character, be the apostle of egotism; and how can the +science which he founded be its gospel? There is here an +error of fact and a defect of appreciation. Hutcheson had +based moral philosophy on the feeling which, according to +him, engendered all the other virtues, on benevolence, which +is disinterested, busied with the welfare of others, with the +public weal and the general interest. Adam Smith went further, +and sought to base it on a still more energetic feeling, +on sympathy. +</p> + +<p> +The first sentence of his Theory of the Moral Sentiments, +which is a full resumé of his theory, is as follows: <q>How +selfish soever man may be supposed, there are evidently some +principles in his nature which interest him in the fortune of +others, and render their happiness necessary to him, though +he derives nothing from it, except the pleasure of seeing it.</q> +And this is no empty declaration on his part. It is the thought +which of all in his book is nearest to his heart; and hence he +energetically assails those philosophers who look upon self-love +and the refinements of self-love as the universal cause of +all our sentiments, and seek to explain sympathy by self-love. +</p> + +<p> +La Rochefoucauld, Mandeville and Helvetius never met +with a more determined or energetic adversary. Nowhere +have the sweet and amiable virtues, such as ingenuous condescension, +indulgent humanity, and the respectable and severe +virtues, such as disinterestedness and self-control which subject +our movements to the requirements of the dignity of our +<pb n='043'/><anchor id='Pg043'/> +nature, been better understood or interpreted. Adam Smith +is the philosopher of sympathy.<note place='foot'><hi rend='italic'>Cousin</hi>, +loc. cit., p. 276.</note> His theory triumphs over +the cowardly and shameful egotism which concentrates the +moral life of the individual in himself, and separates it from +the life of the human race of the +<foreign lang='fr' rend='font-style: italic'>outré</foreign> stoicism which refuses +the aid of sentiment to reason.<note place='foot'><hi rend='italic'>Ibid.</hi>, +274.</note> According to him, the law +of private morals is sympathy; the law of natural jurisprudence, +justice; the law of the production of wealth, free labor. +But while he defended this principle with energy, he did not +become guilty of a real recantation by worshiping the idol he +had just overthrown. He would have been culpable of the +strangest of all contradictions if he had made the vice which +he had just lacerated the very pivot of another part of his +teaching. +</p> + +<p> +We regret that this essay, which has already very much +exceeded the limits we assigned it in the beginning, will not +permit us to reproduce here Knies' beautiful demonstration, in +which he so learnedly and eloquently vindicates Adam Smith +from this strange imputation, thereby placing Political Economy +on its true basis, the basis of morals, by removing in a +decisive way, all pretext of error and all means of subterfuge. +This part is one of the best features in his most excellent work +on <q>Political Economy, from the historical Point of View.</q> +We shall return to this matter. +</p> + +</div> + +<div> +<head>XIII.</head> + +<p> +What is there that political economists have not been charged +with? They have been accused, above all, of a cold heartedness +and cruelty, and the sentence passed on them has been +resumed in these words: <q>Political Economy has no bowels!</q> +Indeed, the representative of the science, who has been most +attacked and who has been held up as a picture of impassible +insensibility; on whom have been heaped the most bloody outrages, +<pb n='044'/><anchor id='Pg044'/> +is Malthus. Let us hear him. He tells us in his work +on Political Economy, that if a country had no other means +to grow rich, except by seeking for success in the struggle +with other countries, at the cost of a reduction of the wages of +labor, he would unhesitatingly say: Away with such riches; +that it is much to be desired that the working classes should +be well remunerated, and this for a reason much more important +than all the considerations relating to wealth; that is, the +happiness of the great mass of society. And he goes on to +say, that he knows nothing more detestable than the idea of +knowingly condemning the laboring classes to cover themselves +with rags, to lodge in wretched huts, to enable us to +sell a few more stuffs and calicoes to foreign countries. Certain +it is, that no defender, however determined, of the laboring +classes, has said anything stronger or more deeply felt. The +reason is, that nothing was more foreign to Malthus' ideas +than the systematic rigidity of mathematical theories of wealth; +that, a minister of the Gospel, he had meditated on its high +precepts. His whole doctrine is based on the moral idea. +<q>He was profoundly convinced that there are principles in +Political Economy which are true only in as far as they are +restricted within certain limits. He saw the principal difficulty +of the science in the frequent combination of complicated +causes, in the action and reaction of causes on one another, +and in the necessity of setting limits or making exceptions to a +great number of important propositions.</q> Here we are ever +brought back to the undulating ground of living science, instead +of having to follow the rectilineal way traced out by the dead +letter. We are always driven back, whatever may be pretended +to the contrary, to the realities of which history alone +possesses the secret. The idea of wealth cannot absorb everything +when there is question of judging and enlightening men. +To do this, it is necessary to know the various phases of social +housekeeping, what nations have thought of economic interests +<pb n='045'/><anchor id='Pg045'/> +which have never ceased to interest them greatly, what they +have attempted and what they have attained. +</p> + +<p> +Hence, we must turn over the leaves of the book of the past, +and study its economic aspect, as we have studied its political +and literary aspect. We must follow living nations through +their divers periods of development, and fathom the causes of +the destruction of those that are dead. When we are dealing +with the comparative study of the economic destinies of nations, +our investigations are limited to a small number of individual +nations—a further reason not to omit any, and above +all, to scrutinize, as an anatomist would with his scalpel, the +principle of life of those which are no more. We may, by +accounting to ourselves for the immense variety of phenomena +which are brought to light by the <emph>application</emph> of principles to +facts, and in which nothing is absolute or permanent, in which, +on the contrary, everything is relative and successive, acquire +that sureness of touch and correctness of vision which are +among the most valuable conquests of science. +</p> + +<p> +It would be a mistake to suppose that theory simplifies practical +solutions. Far from providing us with a sort of formulary, +it teaches us to put our finger on a number of difficulties. +It brings to the surface the many aspects and fertile and varied +considerations, the examination of which is the mission of the +real statesman and legislator. In this way, the action of thought +and the power of the moral idea are revealed with most <hi rend='italic'>éclat</hi>. +Man ceases to be an inert element, and manifests himself as a +sensible being, and the sublime thought of Pascal: <q>Humanity +is like one man who lives and learns always,</q> is verified by +the result. The wish to violently abdicate the past, it would +be vain and rash to attempt to realize. The lessons it transmits +to us are as instructive as the picture it unrolls before our +eyes is attractive. We have no longer but to see and hear, to +be cured of the most generous impatience with what is, and to +retreat from the most perilous attempts. +</p> + +</div> + +<pb n='046'/><anchor id='Pg046'/> + +<div> +<head>XIV.</head> + +<p> +The unvarying testimony of ages affirms the continued and +gradual amelioration of man by individual energy and moral +thought.<note place='foot'><hi rend='italic'>Frédéric Passy</hi>: De +la Contrainte et de la Liberté.</note> Want and suffering have urged him forward. +Foresight, labor, sacrifice and virtue have in part redeemed +him. No right has been lessened or usurped, and every step +in civilization has been a step in the way of freedom. Instead +of making the latter responsible for a material and moral +wretchedness which it is called upon to cure, we may prove, +that, in proportion as real liberty and legal guarantees increase, +evil diminishes. +</p> + +<p> +We do not desire to yield to a convenient optimism, and deny +the sufferings which weigh only too heavily on the world. +We are far from having reached the end assigned to our efforts; +but let not the hope we entertain of further progress blind +us to that which has already been accomplished. This latter +shows us that we are on the right road, and that we have not +done unwisely in giving free rein to the human faculties. +Sudden changes are made only in theaters. In the real world, +the march of progress is slow and laborious. It may be accelerated +by a happy hit; but it would be vain to try to hurry it. +</p> + +<p> +Man still suffers. No one desires to deny the evil, but only +to estimate its extent. Yet it cannot be gainsaid that its fatal +empire is narrowing instead of enlarging. Especially is it the +progress accomplished in the higher regions of intellect and of +the feelings which here exerts its beneficent influence. On +our moral greatness depends our material power. The elevation +or debasement of character, the energy or debility of +the will—such is the first source of good or evil. The world, +a Chalmers rightly says, is so constituted that we should be +materially happy if we were morally good. +</p> + +<p> +Industrial progress helps, we have said, towards moral perfection. +It is not the source of that perfection, but its instrument; +<pb n='047'/><anchor id='Pg047'/> +for ignorance and misery, its habitual attendants, are +poor advisers. Political Economy shows how the goods of +this world are multiplied. It shows how modest comfort may +become more and more general, and thus an impetus be given +to all noble virtues without awakening a blind passion for riches. +It teaches moderation instead of exciting covetousness, nor +does it come in conflict with the sublime words of Saint Augustine: +<q>The family of men, living by faith, use the goods of the +earth as strangers here, not to be captivated by them or turned +away by them from the goal to which they tend, which is God, +but to find in them a support which, far from aggravating, +lightens the burthen of this perishable body which weighs +down the soul.</q> +</p> + +</div> + +<div> +<head>XV.</head> + +<p> +Looked at from below, all things diverge. Looked at from +above, all things run into one another and combine with one +another. It is one of the great merits of the historical method, +that it raises the point of observation and gives the observer +the support of tradition and good sense, that master of life; +that it prevents a divorce between different branches of knowledge +of the same order, which constitute but one intellectual +family, which there is no question of confounding, and which +it would be dangerous to isolate. +</p> + +<p> +Aristotle, that universal genius, had discovered Political +Economy, and it was the historical method which revealed it to +him. Be it added, that the great philosopher had seen but +one phase of the science, chrematistics, and that his ideas here +bear the impress of the age in which he lived. Aristotle, +however, distinguished this science from all others and from +domestic economy, which is so akin to it. Doubtless, he did +not found the modern study of Political Economy, but his +powerful intellect gave him a presentiment of it. +</p> + +<p> +The honor of producing at once, Adam Smith, Quesnay and +Turgot belongs to the eighteenth century. It was in the +<pb n='048'/><anchor id='Pg048'/> +course of philosophy at Glasgow that this study found a definite +place. The illustrious founder of the science of Political +Economy did not contemplate dissolving the ancient alliance +between it and the moral sciences, history, philosophy, jurisprudence, +belles-lettres—all of which he had explored and +studied profoundly. Let those whose ambition it is to walk, +even at a distance, in the footsteps of Adam Smith, not forget +what was the cradle of the noble study to which they have +devoted their intellects. +</p> + +<p> +L. WOLOWSKI. +</p> + +</div> + +</div> + +<pb n='051'/><anchor id='Pg051'/> + +<div rend='page-break-before: always'> +<index index='toc'/> +<index index='pdf'/> +<head>Introduction.</head> + +<div> +<index index='toc' level1='Chapter I. Fundamental Ideas.'/> +<index index='pdf' level1='Chapter I.'/> +<head type='sub'>Chapter I.</head> +<head>Fundamental Ideas.</head> + +<div> +<index index='toc' level1='Section I. Goods—Wants.'/> +<index index='pdf' level1='Section I.'/> +<anchor id="Section_1"/> +<head type='sub'>Section I.</head> +<head>Goods—Wants.</head> + +<p> +The starting point, as well as the object-point of our science +is Man.<note place='foot'><hi rend='italic'>Schäffle</hi>, Deutsche +Vierteljahrsschrift (1861), emphasizes this. <hi rend='italic'>Adam +Smith</hi>, Wealth of Nations (1776), very characteristically, begins with the +yearly labor of the nation; <hi rend='italic'>J. B. Say</hi> (Traité d'Economie +Politique, 1802), with <hi rend='italic'>richesses</hi>; +<hi rend='italic'>Ricardo</hi> (Principles of Political Economy and Taxation, 1817), +with the idea of value.</note> +</p> + +<p> +Every man has numberless wants, physical and intellectual.<note place='foot'>The +sum total of the wants (<foreign lang='de' rend='font-style: italic'>Bedarf</foreign>) +of the Bavarian people, for a whole year, is estimated by +<hi rend='italic'>Hermann</hi>, Staatswirthschaftliche Untersuchungen (2d +ed., 1870, p. 81), at 177,000,000 florins for food (77 millions for wheat and potatoes, +69 millions for meat, 15 millions for milk etc., 16 millions for eggs, +vegetables, salt and spices); 50 millions for clothing, 45 millions for shelter, +37.5 millions for fuel, 60 millions for beverages.</note><note place='foot'>The +original adds: <foreign lang='de' rend='font-style: italic'>deren Gesammtheit sein +Bedarf heisst</foreign>; the aggregate of which is called his [man's] Requisite +(<foreign lang='de' rend='font-style: italic'>Bedarf</foreign>). There being no exact +equivalent in English for the word +<foreign lang='de' rend='font-style: italic'>Bedarf</foreign> in this connection, +this note is appended.—<hi rend='italic'>Translator.</hi></note> +Wants are either necessaries, decencies +(<foreign lang='de' rend='font-style: italic'>Anstandsbedürfnisse</foreign>) +or luxuries. The non-satisfaction of necessary wants causes +disease or death; that of the wants of decency endangers one's +<pb n='052'/><anchor id='Pg052'/> +social position.<note place='foot'>According to <hi rend='italic'>Boisguillebert</hi> +(ob. 1714) Traité des Grains, I., c. 4, the wants +<foreign lang='fr' rend='font-style: italic'>nécessaire</foreign>, +<foreign lang='fr' rend='font-style: italic'>commode</foreign>, +<foreign lang='fr' rend='font-style: italic'>délicat</foreign>, +<foreign lang='fr' rend='font-style: italic'>superflu</foreign>, +<foreign lang='fr' rend='font-style: italic'>magnifique</foreign>, arise in +successive order with increasing welfare or prosperity, and are surrendered in a reverse +order, with increasing need. <hi rend='italic'>Tucker</hi> distinguishes necessaries, +comforts, and conveniences of the respective conditions, elegancies and refinements, +and lastly, <q>grand and magnificent.</q> (Two Sermons, 1774, 29 ff.); +<hi rend='italic'>F. B. W. Hermann</hi>, loc. cit, 1st, ed., 1832, 68; necessary +goods (Güter der Nothdurft), goods that contribute to pleasure and recuperation, +to culture and splendor.</note> The much greater number, and the longer +continuance of his wants are among the most striking differences +between man and the brute:<note place='foot'>Compare <hi rend='italic'>Tucker</hi>, +On the Naturalization Bill (1751 seq.), IV, note.</note> wants such as clothing, +fuel,<note place='foot'>No people without fire (Prometheus!); and it seems that +broiling was the earliest mode of preparing food; then followed baking in heated +cavities, and lastly came boiling in vessels. (<hi rend='italic'>Klemm</hi>, +Allgemeine Kulturgeschichte, I, 180, 343.)</note> tools, and those resulting +from his much longer period +of infancy; which last, together with other causes, has contributed +so largely to make marriage necessary and universal. +While the lower animals have no wants, but necessities, and +while their aggregate-want, even in the longest series of +generations, admits of no qualitative increase, the circle of +man's wants is susceptible of indefinite extension.<note place='foot'>There +is an interesting attempt by <hi rend='italic'>Faucher</hi>, in the Vierteljahrsschrift +für Volkswirthschaft und Kulturgeschichte, 1868, III, 148 ff., to determine the +relative place of our various wants according to their capacity for extension or +contraction.</note> And, +indeed, every advance in culture made by man finds expression +in an increase in the number and in the keenness of his +rational wants. No man who distinguishes himself in anything, +but feels spurred thereto by a peculiar want; and this +want is both the cause and the effect of the power which is +peculiar to him. No one but the poet feels the want of poetizing; +no one but the philosopher, of philosophizing. In +every particular, intellectual or physical, in which the man is +in advance of the child, he experiences new wants unknown +to the child. Our education consists, for the most part, in +awakening wants and providing for their satisfaction. +</p> + +<pb n='053'/><anchor id='Pg053'/> + +<p> +Goods are anything which can be used, whether directly or +indirectly, for the satisfaction of any true<note place='foot'>The +qualification <q>true,</q> excludes from the circle of goods, not only all +those things which might satisfy only irrational or immoral wants (compare +<hi rend='italic'>Mischler</hi>, Grundsätze der Nationalökonomie, 1856, I, 187), +but also vindicates the fundamental idea of the whole system of Political Economy, +as a subject of moral as well as of psychological investigation.</note> +or legitimate human want,<note place='foot'>Even <hi rend='italic'>Aristotle</hi> +(Eth. nicom. V, 8), considers that all things intended to +enter into commerce, should be susceptible of comparison with one another, +and that the measure of this comparison is <emph>want</emph>, which is the foundation +of all association among men.</note> and whose utility, for this purpose, is recognized. +Hence, the idea goods is an essentially relative one. Every +change in man's wants, or knowledge, is accompanied by a +rapid, corresponding change, either in the limits of the circle<note place='foot'>An +Arab helped pillage a caravan, and carried away, as his share of the +booty, a chest of pearls. He thought it a box of rice, and gave them to his wife +to cook, but finding they did not boil tender, he threw them away. +(<hi rend='italic'>Niebuhr</hi>, Beschreibung von Arabien, 383). See a similar +anecdote in <hi rend='italic'>Ammian. Marcell.</hi>, <hi rend='italic'>XXII</hi>. +Compare <hi rend='italic'>Strabo</hi>, <hi rend='italic'>VIII</hi>, 381.</note> +of goods, or in their relative importance. Thus, the tobacco plant +has, probably, existed thousands of years. It became goods, +however, only from the time that man recognized its use for +smoking, snuffing etc., and experienced the want of it for these +purposes. In a similar way, the limestone of the Solenhofen +quarries has become <emph>goods</emph>, of considerable importance, only +since the invention of lithography; decaying bones, only since +that of bone-dust manure; caoutchouc since about 1825, and +gutta-percha, only since 1844. On the other hand, charms,<note place='foot'>As +soon as the Persians renounce the superstition that the daily contemplation +of a turquoise is a talisman against the "evil eye" (<hi rend='italic'>K. Ritter</hi>, +Erdkunde, VIII, 327), that precious stone will lose much of its value. On the +other hand, the amulets of antiquity, although they have long lost the quality +of goods as objects of superstition, have now a real value for the archæologist.</note> +philters, and even relics, since the decay of faith in their efficacy, +have lost the quality of goods. If the aggregate income +of all mankind were, by some sudden revolution, to be +equally divided among all, diamonds, for instance, would +<pb n='054'/><anchor id='Pg054'/> +greatly decline in value, for the reason that it is dependent, in +great part, on the wants generated by vanity, or by the desire +of outshining others. Beer, tobacco etc., would rise in the +scale as goods, because the circle of those to whose wants +they minister would have been very greatly extended. On +the whole, advancement in civilization has uniformly the effect, +of itself, to increase the quantity and number of goods, the +wants and knowledge of men being thereby increased. We +should reach the ideal here, if all men experienced only true +or legitimate wants, but these completely; if they could see +their way, clearly, to the satisfaction of them, and find the +means of satisfying them with just the amount of effort most +conducive to their physico-intellectual development.<note place='foot'>Since +observation shows, that, as time runs on, matter tends more and +more to become <emph>goods</emph>, the blind forms of motion in nature to become useful +labor and useful sustenance, impersonal and objectless existence to be transformed +into personal property and personal culture, <hi rend='italic'>Schäffle</hi> inclines to +the belief that the whole mechanism of unconsciously governing nature is destined +ultimately to aid in the realization of moral good, which alone is really +valuable. Das gesellschaftliche System der menschlichen Wirthschaft, III, +Auff., 1873, I, 3.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section II. Goods.—Economic Goods.'/> +<index index='pdf' level1='Section II.'/> +<anchor id="Section_2"/> +<head type='sub'>Section II.</head> +<head>Goods.—Economic Goods.</head> + +<p> +By economy (<foreign lang='de' rend='font-style: italic'>Wirthschaft</foreign>=husbandry +or housekeeping), we mean the systematized activity of man, to satisfy his need +(<foreign lang='de' rend='font-style: italic'>Bedarf</foreign>=requisite) of external +goods.<note place='foot'><hi rend='italic'>Hermann</hi>, loc. cit, 1st ed., I, +calls internal goods whatever each of us finds in himself, the free gift of nature; also +that which we develop in ourselves by our own free action; and external, whatever we +create or obtain, through the external world, as a means of satisfying our wants. The +internal goods of one man may be external goods to another, as, for instance, when +the former conveys them directly to the latter to be enjoyed, by words, demeanor, +etc., or indirectly, in combination with other external goods.</note> +This treatise is concerned only with economic goods (ends or means of +economy).<note place='foot'>The exclusion of all else, has, indeed, been called +one-sidedness and materialism. But, as <hi rend='italic'>Senior</hi> says, no one blames +the writer on tactics, because he confines his attention to military subjects; nor is the +objection raised, that by so doing, he is encouraging eternal war. On the other hand, +<hi rend='italic'>J. B. Storch</hi> (1815) devoted a special division of his work to +the consideration of <q>internal goods</q> (health, knowledge, morality, security, +leisure,.etc.). See <hi rend='italic'>Rau's</hi> translation of his Manual, II, +337 ff. Compare <hi rend='italic'>Gioja</hi>, Nuovo Prospetto delle +Scienze economiche, 1815 ff. VIII.</note> +The greater the advance of civilization or human culture, +<pb n='055'/><anchor id='Pg055'/> +the less apt are men to pursue the satisfaction of their +wants, isolated from their fellows, or, in other words, to carry +on their economies or husbandries apart from one another. +The more numerous the wants of men, and the more different +in kind their faculties are, the more natural does exchange<note place='foot'>The +inclination to exchange is, according to <hi rend='italic'>Adam Smith</hi>, one of the +most important marks which distinguish man from the brute. (Wealth of Nations, +I, ch. 2). But see <hi rend='italic'>Büsch</hi>, Geldumlanf (1780), I, § 29, on +exchange among the lower animals.</note> become. +Since all goods derive their character as goods from +the fact that they are destined to satisfy human wants, the +very possibility of exchange must greatly increase the possibility +of things to become goods. Think of the machinist, +whose products are used only by the astronomer, while the +latter is never in a way to manufacture them for himself. +(<hi rend='italic'>Hufeland.</hi>) Commerce is the series of combinations, created +by the interchange of services: <q>a living net of relations, +which wants and services are ever weaving and unweaving.</q> +(<hi rend='italic'>Hermann.</hi>) As a rule, with an advance in civilization, there +is an increase in the number of goods, which become economic +goods, and in the number of economic goods which become +commercial goods (objects or means promotive of commerce).<note place='foot'>Observed +by <hi rend='italic'>Aristot.</hi> Polit. I, ch. 6.</note> +But this is to be considered a real advancement only to the +extent that that which is obtained is superior to that which +was possessed before, in consequence of the specialization of +callings or the greater division of labor (§ <ref target="Section_48">48</ref> ff.). +When a little street Arab exacts money from a stranger for pointing +out the way, we rightly censure him; but no one would find +<pb n='056'/><anchor id='Pg056'/> +it improper if he should first fit himself to play the part of a +guide, and then live by his calling.<note place='foot'>The efforts +of political economists to select from among the infinite number +of goods, those which should constitute the subject of their investigations, +have taken two directions in recent times. <hi rend='italic'>Bastiat</hi> here confines +himself too exclusively to commerce. The political economist should concern himself +only with wants and satisfactions, where the labor, which is the connecting +link between them, is undertaken by some other person for a consideration. +Thus the ordinary act of respiration lies outside the circle, that of the diver, +which is paid for, does not. (Harmonies économiques, 1850, 68 ff.) But +even Robinson Crusoe had his own system of economy. Are the products +which the farmer consumes in his own home, the work he does himself, any +the less matters of economic moment than the products he sells, or the labors +of his servants? <hi rend='italic'>Schäffle</hi> is right when he says that ordinary +respiration is no economic function, because it is an unconscious necessity of nature. +But his definition is too broad, inasmuch as he places the essence of the economic +character of goods or of an act, in the conscious adaptation of means to +human ends. (Tübinger Progr. z. 27 Sept. 1862, 9, 24 seq.) To take a +walk is no economic operation, although it may be the best means to a very +important end,—health. The same goods or the same act may have, frequently, +according to the end proposed, an economic or non-economic character. +The beauty of the human body, for instance, however systematically +made use of for purposes of vanity, is not economic <emph>goods</emph>. But it is an +economic speculation, base though it be, when a man relies on his handsome +figure to secure a wealthy wife, or, for purposes of gain, allows her to pose as +a model to artists or to take part in +<foreign lang='fr' rend='font-style: italic'>tableaux vivants</foreign>. According to +<hi rend='italic'>C. Menger</hi>, +Grundsätze der Volkswirthschaftslehre (1871) I, 51 ff., there are no economic +goods, but those the disposable supply of which is, at most, equal to +the quantity that is required. But is not the largest navigable stream, even +in the most thinly populated country, an economic good?</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section III. Goods.—The Three Classes Of Goods.'/> +<index index='pdf' level1='Section III.'/> +<anchor id="Section_3"/> +<head type='sub'>Section III.</head> +<head>Goods.—The Three Classes Of Goods.</head> + +<p> +All economic goods are divided into three classes: +</p> + +<p> +A. <hi rend='italic'>Persons or personal services.</hi> It is entirely repugnant to +the feeling of humanity to regard a man's person in its entirety +as an instrument intended to satisfy the wants of +another.<note place='foot'><hi rend='italic'>Hegel</hi>, Rechtsphilosophie, § 67. Even +the use of a corpse as manure, or for any mercantile purpose, is repugnant to our +feelings, <q>because of the dignity of personality.</q> (<hi rend='italic'>Schäffle</hi>, +National Œkonomie, 1860, 28.) In this respect, prostitution is a remnant of slavery. +<hi rend='italic'>Schäffle</hi> is right, when he says +that to repay personal services with material commodities which do not afford +as much food etc., as the former have cost in expenditure of vital energy, is a +slow and frequently a very cruel kind of cannibalism. (Kapitalismus und +Socialismus, 1870, 18).</note> +<pb n='057'/><anchor id='Pg057'/> +Yet this happens wherever slavery exists; in its coarsest form, +in cannibalism. Among civilized nations, we can speak, under +this head, only of individual services or capabilities of persons; +or, indeed, of the aggregate of the services rendered by them +during a time determined at pleasure, or a short +time.<note place='foot'><hi rend='italic'>Bornitz</hi>, De rerum Sufficientia in +Republica procuranda, 1625, gives in this +encyclopædia of political science, together with a dissertation on agriculture, +commerce and manufactures, a complete survey of the <hi rend='italic'>ministeria</hi>. +Several modern writers refuse to look upon personal services, or the ability +to render such services, as elements of wealth: compare <hi rend='italic'>Kaufmann</hi>, +Untersuchungen im Gebiete der politischen Œkonomie, 1830, II, Heft I. They +demonstrate, however, no more than this, that that class of goods has something +very peculiar. Thus <hi rend='italic'>Malthus</hi>, Principles of Political Economy +(1820), chap. I, sect. I, objects that they cannot be inventoried or taxed; but can +material goods be so completely? Can all the parts of the wealth of a nation +be so inventoried and taxed? <hi rend='italic'>Rau</hi>, Lehrbuch der pol. Œkonomie +(1826) I, § 46, remarks that the personal aptitude to perform services dies with the +person, and that personal services cannot be stored up (?), etc. I appeal +simply to the definition I have given above of economic goods, and which +applies equally to services of every kind which can be performed for other +people. Besides, those who oppose this view are unable to give a satisfactory +explanation of all the phenomena of commerce. Of course, the qualification +<q>recognized as useful</q> is of the utmost importance as a mark to determine +what is goods. But a prima donna, or a world-renowned physician, cast naked +by shipwreck on the shores of North America, is certainly, better off +than a blind beggar, his fellow sufferer. Compare <hi rend='italic'>Storch</hi>, +Handbuch II, 335 ff. and his Considérations sur la Nature du Revenu National.</note> +</p> + +<p> +B. <hi rend='italic'>Things</hi>, both moveable and +immovable.<note place='foot'><hi rend='italic'>Ad. Müller</hi> compares persons, +so far as they render any kind of service, to +things, and, so far as they are required to be preserved in their individuality, to +persons. The children in the <q>status</q> of a country gentleman, for instance, +are treated more as persons, and domestics, more like things; the land partakes +of a species of personality, but not the implements of labor. (Nothwendigkeit +einer theolog. Grundlage der Staatswissenschaft, 1819, 48.)</note> +</p> + +<p> +C. <hi rend='italic'>Relations</hi> to persons or things which may frequently be +estimated just as accurately as material goods. (The <hi rend='italic'>res +incorporales</hi> +<pb n='058'/><anchor id='Pg058'/> +of the Roman law.) I need only mention what is +called good-will, which freely, and to the advantage of customers +themselves, but still with a limited amount of certainty, +attaches to certain localities, and for which tavern-keepers, +sometimes, as in theaters, dépôts and clubs, pay so enormous +a rent.<note place='foot'>The privilege of selling refreshments in the garden of +the Palais Royal was formerly let for 38,000 francs a year.</note> +When a newspaper is sold, the purchaser frequently +buys nothing but the existing relations between his colaborers, +subscribers etc. No small part of the value of a good business +firm consists in the confidence with which it inspires all +who deal with it, thus sparing them a world of care and +trouble.<note place='foot'>See the cases cited by <hi rend='italic'>Hermann</hi>, +Staatswirtsch. Untersuchungen, 6 ff. and by <hi rend='italic'>Bernoulli</hi>, Schweiz. +Archiv. für Statistik und N. Œkon. II, 55. Think of the firm of J. M. Farina! +In Athens, good stands were leased at a very high rent, even where there was no +investment of the lessee's capital. (<hi rend='italic'>Demosthenes</hi>, +pro. Phorm., 948; adv. Steph. I, iiii.) There is, again, the sale of inventions, +while they are still <q>mere ideas.</q> According to <hi rend='italic'>Schäffle</hi>, +Theorie der ausschliessendnen Verhältnisse, 1857, II ff., the value in exchange of these +relations depends on the extra income which is assured in fact, or in law, +against diminution, by the exclusion of competition. He, therefore, recommends, +instead of the word <q>relations,</q> <q>custom,</q> or <q>publicum.</q> But these +words, by no means, exhaust the meaning expressed by <q>relation.</q> Thus, +the good administration of public affairs, although it has no value in exchange, +is one of the most valuable economic goods which a people can +possess.</note> A general may be of incalculable value to an army +which he has himself helped organize. In another, or in the +service of a country not his own, he might be entirely valueless, +incapable of accomplishing anything.<note place='foot'>The relation mentioned above +of a general to an army may even have great value in exchange. Instance, +the Italian condottieri in the fifteenth century!</note> With the progress +of civilization, as man becomes more social, the number of +valuable relations increases, while that of legalized monopolies +is wont to decrease. (<hi rend='italic'>Schäffle.</hi>)<note place='foot'>Relations +which take from one man, as much as they afford to their +possessor, are of value as components of a man's private fortune, but not of +the wealth of the nation. To this class belong debts due from persons or +from things, compulsory custom or good-will of every description; as for instance, +the seventy-two places of the <foreign lang='fr' rend='font-style: italic'>agents de +change</foreign> in Paris, each of which was worth more than a million of francs; or +the right of navigating the Elbe as far as Magdeburg, which, about the beginning of +this century, was worth in every instance about 10,000 thalers. +(<hi rend='italic'>Krug</hi>, Abriss. der St. Œkonomie, 62.)</note> +</p> + +</div> + +<pb n='059'/><anchor id='Pg059'/> + +<div> +<index index='toc' level1='Section IV. Of Value.—Value In Use.'/> +<index index='pdf' level1='Section IV.'/> +<head type='sub'>Section IV.</head> +<head>Of Value.—Value In Use.</head> + +<p> +The economic value of goods is the importance they possess +for the purposes of man, considered as engaged in economy +(housekeeping, husbandry.<note place='foot'><hi rend='italic'>Schäffle</hi>, +N. Œkonomie, 10. In the German language, this same word +is used to designate utility, and sometimes useful objects (so called values). +A clear distinction, however, should be made between utility and value in +use. Utility is a quality of things themselves, in relation, it is true, to human +wants. Value in use is a quality imputed to them, the result of man's +thought, or of his view of them. Thus, for instance, in a beleagured city, the +stores of food do not increase in utility, but their value in use does. Compare +<hi rend='italic'>Schäffle</hi>, System, III, I, 170.</note>) +</p> + +<p> +Looked at from the point of view of the person who wishes +to employ them in his use directly, doubtless the oldest point of +view, value appears first as value in use; and here, according +to the difference of subjective purposes it is intended to subserve, +we may speak of production value or enjoyment-value; +and of this last, in turn, as utilization-value, or consumption-value. +The value in use of goods, is greater in proportion as +the number of wants they are calculated to satisfy are more general +and more urgent, and in proportion as they are gratified +by them more fully, surely, durably, easily and +pleasantly.<note place='foot'><hi rend='italic'>Genovesi</hi>, Economia civile +(1869), II, I, 7. <hi rend='italic'>L. Say</hi>, De la Richesse individuelle +et de la Richesse publique (1827), 29, estimates the value of goods +according to the degree of discomfort attendant on the privation of them.</note> +Hence, it is seldom possible to find an accurate mathematical +expression of the relation which exists between the value in +use of different goods.<note place='foot'><hi rend='italic'>Friedländer</hi> has, +however, made a general attempt in this direction. +Theorie des Werthes (Dorpat, 1852). But says <hi rend='italic'>Th. Fix</hi> +(Journal des Economistes, 1844, IX, 12): <q>It is as impossible to establish +a scale of values, as it is to find an exact mathematical and permanent measure +of our wants, passions, desires, tastes and fancies.</q></note> +Thus, it is possible to estimate the +<pb n='060'/><anchor id='Pg060'/> +nutritive power of different kinds of goods, the value of wheat +or of hay for instance, but not the goodness or quality of their +taste, of the attractiveness of their appearance, etc. +</p> + +<p> +But, the more men become used to comparing the aggregate +of human wants, and the aggregate of the goods which minister +to the satisfaction of these wants, as if they were two great +wholes, gradually shading each into the other, the more does +the value in use of the different kinds of goods assume, for +purposes of social rating or estimation, a fungible character.<note place='foot'>Compare +<hi rend='italic'>Knies</hi>, Geld und Credit, 1873, I, 126 ff. The very respectable +attempt made by <hi rend='italic'>A. Samter</hi>, Sociallehre (1875), with the idea +society-value (<foreign lang='de' rend='font-style: italic'>Gesellschaftswerth</foreign>) +covers too nearly the idea of value in exchange. Further +research will here have to be made, with the idea of <q>impotent need,</q> +inasmuch as, from a high ethical, national-dietetical point of view, the question +is asked whether, to what extent, and how, <q>impotent need</q> may be +made a potent one.</note> +If a new kind of goods be produced or discovered, which satisfies +the same wants in a more complete manner than another, +the latter, although it has suffered no change, generally +loses in the value put upon it, especially if the new goods can +be produced in any desired quantity. An instance of this is +the change effected in the value of the dyers weed, woad, by +the introduction of indigo. +</p> + +<p> +Things present in quantities greater than the amount +necessary to supply the want they satisfy, preserve their full +value in use, to the limit of that want, after which they are +simply an element of possible future value, dependent on an +increase of the want; but they have no value for present +use.<note place='foot'><hi rend='italic'>Friedländer</hi>, loc. cit, 50. If +too many copies of the very best book be published, there is a certainty +that a number of them will remain little better than waste paper.</note> +</p> + +<p> +The economic valuation of goods, however, is by no +means exhausted, so far as the isolated individual housekeeper +is concerned, by the mere establishing of its value in +use. As the systematic effort of every rational individual in +<pb n='061'/><anchor id='Pg061'/> +his household management is directed towards the obtaining, +by a minimum of sacrifice of pleasure and energy, a maximum +satisfaction of his wants, even an Adam or a Crusoe is, +in his economy, compelled to estimate not only what the goods +to be acquired accomplish (value in use) but also what they +will cost—cost-value. Even the most indispensable kind of +goods, for instance atmospheric air, is considered to have no +value, when it can be obtained in sufficient quantity, without +any sacrifice whatever.<note place='foot'><hi rend='italic'>Schäffle</hi>, +System, II, aufl., 55. See also his Kapitalismus und Socialismus, +1870, 31, 35, 43.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section V. Value.—Value In Exchange.'/> +<index index='pdf' level1='Section V.'/> +<anchor id="Section_5"/> +<head type='sub'>Section V.</head> +<head>Value.—Value In Exchange.</head> + +<p> +The value in exchange of goods, or the quality which makes +them exchangeable against other goods, is based on a combination +of their value in use with their cost-value, such as men +in their intercourse with one another will make.<note place='foot'>Thus +<hi rend='italic'>Kleinwächter</hi> (Hildebrand's Jahrbücher für N. Oek. und Statistik, +1867, II, 318), defines value in exchange=value in use + costliness. According +to Schäffle, it is <q>a covert comparison between the cost-value and +the value in use of the two kinds of goods to be exchanged.</q> (Kapitalismus +und Socialismus, 35.)</note> Without +value in use, value in exchange<note place='foot'>An intermediate dealer can, so +far as he is himself concerned, attribute value in exchange to goods only to the +extent that they have use for the last person who has acquired them. Hence, +<hi rend='italic'>Storch</hi> calls <emph>value in use</emph> immediate, +and <emph>value in exchange</emph>, mediate value. As the English are always wont to +express the immediate in words of Germanic origin, and the mediate in words +borrowed from the Latin, <hi rend='italic'>Locke</hi> calls value in use <q>worth,</q> +and value in exchange, simply <q>value.</q> (<hi rend='italic'>K. Marx</hi>, +Das Kapital. Kritik der politischen Œkonomie, 1867, I, 2.)</note> is unthinkable. +</p> + +<p> +But there are many, and even indispensable goods which +are not at all susceptible of being exchanged; for instance, +the light and heat of the sun, the open sea etc.<note place='foot'>It is, +of course, otherwise when, for instance, a beautiful sea view, or a +desirable position as regards air and sunshine, is connected with a piece of +land.</note> Other goods, +<pb n='062'/><anchor id='Pg062'/> +although capable of being exchanged, have no value in exchange, +because they exist in superabundance, and may be +obtained by everyone, without trouble and without reward; +for instance, drinking-water in most places, ice in winter, and +wood in the primeval forest.<note place='foot'>In Ravenna a cistern had greater +value in exchange than a vineyard: <hi rend='italic'>Martial</hi>, III, 56. In +Paris, too, drinking water, which is transported only with +considerable trouble, costs 1-1/3 thalers per cubic meter. We may also mention +snow and ice in summer, which last sells in the capitals of southern +Europe at 0.34, silber groschens per pound. According to <hi rend='italic'>Carey</hi>, +<q>utility</q> is the measure of man's power over nature, <q>value,</q> the +measure of nature's power over man. He very inaccurately adds, that both are always +in an opposite direction. (Principles of Social Science, 1861, VI, ch. 9.)</note> +Moreover, the idea of such +<q>free goods</q> is in great part relative. The water of a river +may, for drinking purposes, be <q>free</q> goods, and yet, for purposes +of irrigation, have great value in exchange. (<hi rend='italic'>John +Stuart Mill</hi>). +</p> + +<p> +But, goods, to obtain value in exchange, must, in addition to +their value in use, a value which must be recognized<note place='foot'>Hence +<hi rend='italic'>Ad. Müller</hi> calls value in use, individual value, and value in +exchange, social value. The Germans call the value of goods whose value in +use is recognized by only one person, +<foreign lang='de' rend='font-style: italic'>Affectionswerth</foreign>, +(affection-value) a value which influences its value in exchange only when the +individual who holds it in high esteem is not himself the possessor of the goods. An +instance of this latter is a piece of paper covered with notes, intelligible only to the +maker of them.</note> by +a certain number of persons, at least, have the capacity of becoming +the exclusive property of some one individual, and +therefore of being alienated or transferred; and this alienation +or transfer must be desired because of the difficulty to become +possessed of them in any other way.<note place='foot'>The very important difference +between value in use and value in exchange was recognized oven by Aristotle. +<hi rend='italic'>Aristot.</hi> Pol. I, 9. <hi rend='italic'>Hutchinson</hi>, +System of Moral Philosophy (1755), II, 53 ff. The Physiocrates speak very +frequently of <foreign lang='fr' rend='font-style: italic'>valeur usuelle</foreign> +and <foreign lang='fr' rend='font-style: italic'>vénale</foreign>, on which, according +to <hi rend='italic'>Dupont</hi>, Physiocratie, CXVIII, the difference between +<foreign lang='fr' rend='font-style: italic'>biens</foreign> and +<foreign lang='fr' rend='font-style: italic'>richesses</foreign> is based. +<foreign lang='fr' rend='font-style: italic'>La valeur d'un septicr de blé, +considéré comme richesse ne consiste que dans son prix.</foreign> +(<hi rend='italic'>Quesnay</hi>, éd. Daire, 300.) <hi rend='italic'>Turgot</hi> +distinguishes between <q><foreign lang='fr' rend='font-style: italic'>valeur +estimative</foreign></q> and +<q><foreign lang='fr' rend='font-style: italic'>échangeable</foreign> or +<foreign lang='fr' rend='font-style: italic'>appréciative</foreign>;</q> +the former designating the relation between the amount of energy, physical and mental, +which one is willing to spend in order to obtain the goods, to the sum total of his +energies, physical and mental; the latter the relation between the aggregate like +energy of two persons which they are willing to spend in order to procure +each of the goods to be exchanged, and the sum total of their energies in +general. (Valeurs et Monnaies, p. 87, seq., éd. Daire.) <hi rend='italic'>Ad. +Smith</hi>, in his Wealth of Nations, I, ch. 4, shows that he knew the difference +between value in use and value in exchange; but he afterwards drops the consideration of +the former, altogether. In this respect he has had only too faithful and one-sided +followers among his countrymen, so that <hi rend='italic'>Ricardo</hi>, Principles, ch. +28, asks what value in exchange can have in common with the capacity of commodities +to serve as food or clothing. (See, however, ch. XIX seq.) Many <q>free +traders</q> would have no objection to interpose, if a people should abandon +the cultivation of wheat, etc., to devote themselves exclusively to the manufacture +of point lace, provided the latter had a greater value in exchange. +The two degrees of the idea of value have been examined with much thoroughness +by <hi rend='italic'>Hufeland</hi> in his Neue Grundlegung der Staatswirthschaftskunst +(1807), I, 118 ff.; <hi rend='italic'>Lotz</hi>, Revision der Grundbegriffe (1811 ff.), +I, 31, ff.; <hi rend='italic'>Storch</hi>, Handbuch, I; <hi rend='italic'>Rau</hi>, +Lehrbuch, I, 56, ff.; <hi rend='italic'>Thomas</hi>, Theorie des Verkehrs, I, p. +11; <hi rend='italic'>Knies</hi>, Tübing. Zeitschr. 1855; +<hi rend='italic'>Bastiat's</hi> declaration (Harmonies, p. 171 ff.): that +<q><foreign lang='fr' rend='font-style: italic'>valeur</foreign></q> (by which +Bastiat means only value in exchange), = +<foreign lang='fr' rend='font-style: italic'>le raport de deux services +échangés</foreign>, contains a two-fold error: the ambiguity of the word +<hi rend='italic'>services</hi>, which applies equally to a yielding or affording of +utility, as to useful labor, and the error that the labor necessary to produce a +commodity, and of which the purchaser is relieved, alone determines its value in +exchange. Compare <hi rend='italic'>infra</hi> §§ <ref target="Section_47">47</ref>, +<ref target="Section_107">107</ref>, <ref target="Section_110">110</ref>, +<ref target="Section_115">115</ref> ff., and <hi rend='italic'>Knies</hi>, loc. cit., p. +644 ff.</note> +</p> + +</div> + +<pb n='063'/><anchor id='Pg063'/> + +<div> +<index index='toc' level1='Section VI. Value.—Alleged Contradiction Between Value +In Use And Value In Exchange.'/> +<index index='pdf' level1='Section VI.'/> +<head type='sub'>Section VI.</head> +<head>Value.—Alleged Contradiction Between Value In +Use And Value In Exchange.</head> + +<p> +Recent, and especially socialistic,<note place='foot'><hi rend='italic'>Proudhon</hi>, +Système des Contradictions économiques, 1846, ch. 2.</note> writers have alluded to +the great <q>contradiction</q> between value in use and value in +exchange. This contradiction, however, vanishes when the +above idea of economy, and the two sides or aspects, which +economic value presents, are kept steadily in view. It is said, +for instance, that a pound of gold has a much greater value in +exchange than a pound of iron; while the value in use of +iron, is incomparably greater than that of gold. I question +<pb n='064'/><anchor id='Pg064'/> +this latter statement. True it is, that the need of iron is much +more universal and urgent than the need of gold. On the +other hand, a pound of gold yields satisfaction to the want of +that metal, much greater than is yielded by a pound of iron, to +the want of iron. We may speak of a contradiction between +value in use and value in exchange, at the farthest, only in case +the existing quantity of an article in trade, which can be done +without, is not estimated correspondingly lower than the whole +existing supply of a thing which is indispensable. But this is +a case which cannot often occur. When, for instance, wheat is +very dear, as in years of scarcity, people prefer to pay a very +high price for it rather than to dispense, even in part, with its +use; and so of all the necessaries of life. As people progress +in economic culture, they become more expert in adapting the +value in exchange of related goods, not only to their cost-value, +but also to their value in use.<note place='foot'><p>In France, according to +<hi rend='italic'>Cordier</hi> (Mémoire sur l'Agriculture de la Flandre +Française), the wheat harvest yielded, in +</p> +<p> +1817, forty-eight million hectolitres, with a value in exchange of two thousand +and forty-six million francs; in +</p> +<p> +1818, fifty-three million hectolitres, with a value in exchange of one thousand +and four hundred and forty-two million francs; in +</p> +<p> +1819, sixty-four million hectolitres, with a value in exchange of one thousand +and one hundred and seventy million francs. +</p> +<p> +A rise in the value in exchange of wheat, such as was witnessed in 1817, +is synonymous with a decline in the value in exchange of money, and of all +those goods whose money price has not risen. It is no objection to the views +here advocated, that when the necessaries of life are very scarce, the want +of clothing, furniture, articles of luxury etc., is not felt so keenly as at other +times, and that the value in use of these commodities really falls; and +<hi rend='italic'>vice versa</hi>.</p></note><note place='foot'>Compare +<hi rend='italic'>B. Hildebrand</hi>, N. Œkonomie der Gegenwart und Zukunft, +1848, I, p. 316 ff. <hi rend='italic'>Knies</hi>, loc. cit.</note> +</p> + +<p> +The lower the state of a nation's economy, the more isolated +men live from one another, the greater is the prominence given +by them to value in use, as compared with value in exchange, +a fact which makes a valuation of resources, which shall be +universally applicable, a more difficult matter.<note place='foot'>The greater +importance attached, in our days, to value in exchange, than +to value in use, is seen especially in the attitude which the buyer, who is possessed +of the more current commodity (money), assumes toward the seller,—an +attitude not unlike that of a patron towards his client. In the interior of +Africa, the possessor of money, as such, would scarcely look down on the +possessor of the means of subsistence. The South American Indians are +ready to render an amount of service for a little brandy, which it would be +in vain to ask them to perform for ten times its value in gold. (Ausland, +Jan. 15, 1870.) The miser estimates the possibility of being able to procure +for himself, for one dollar, a hundred different articles worth a dollar each, to +be worth one hundred dollars.</note><note place='foot'>When the wants of a +person or of a people change, it is possible for the +value in use of one kind of goods, which had the greater prominence before, +to take the place occupied previously by its value in exchange; and +<hi rend='italic'>vice versa</hi>. Thus, the youth sells the plaything he used in +childhood; the man, the educational apparatus of his earlier years; the old man, the +implements that enabled him to acquire wealth, and which he can no longer use except +with great effort. (<hi rend='italic'>Menger</hi>, Grundsätze, I, 220 +ff.)</note><note place='foot'><p><hi rend='italic'>Rau</hi> (Lehrbuch, I, § 61 ff.) +distinguishes between the concrete or quantitative +value which a certain kind of goods may have for a certain person, +under certain circumstances, and the abstract or species-value which a whole +class of commodities may have for men in general. +</p> +<p> +But <hi rend='italic'>F. J. Neumann</hi>, (Tübinger Zeitschrift, 1872, p. 288 ff.) +objects, that even the abstract value of a commodity always suggests the relation of a +definite number of concrete men to a definite quantity of goods; else, by the +expression, value of goods, is to be understood not what it is generally meant +to signify, but only the capacity to satisfy a single want.</p></note> +</p> + +</div> + +<pb n='065'/><anchor id='Pg065'/> + +<div> +<index index='toc' level1='Section VII. Resources Or Means (Vermögen).'/> +<index index='pdf' level1='Section VII.'/> +<head type='sub'>Section VII.</head> +<head>Resources Or Means (Vermögen).</head> + +<p> +<hi rend='italic'>Resources</hi>, or <hi rend='italic'>means</hi>, in the sense in which +we here use the term, are the aggregate of economic goods owned by a physical +or legal person, after deduction is made of the person's +debts, and all valuable and rightful claims have been +added.<note place='foot'><hi rend='italic'>Storch</hi>, Ueber die Natur des +Nationaleinkommens (1824, 1825), 5, defines +(<foreign lang='de' rend='font-style: italic'>Vermögen</foreign>) thus: a source of +income, permanent in its nature, and +capable of being transmitted, the possessor of which does not need to work, +on its account. Hence he does not approve of the expression <q>the people's +resources</q> +(<foreign lang='de' rend='font-style: italic'>Volksvermögen</foreign>).</note> +Hence, there are private resources, corporative resources, +municipal resources, etc., state resources, national resources +and the world's resources. In estimating the resources of a +whole people, it is, of course, necessary to make deduction of +the debts due by the individual members of the nation to their +fellow countrymen. +</p> + +</div> + +<pb n='066'/><anchor id='Pg066'/> + +<div> +<index index='toc' level1='Section VIII. Valuation Of Resources.'/> +<index index='pdf' level1='Section VIII.'/> +<anchor id="Section_8"/> +<head type='sub'>Section VIII.</head> +<head>Valuation Of Resources.</head> + +<p> +It has often been made a question, whether the valuation of +resources should be based on the value in use, or the value in exchange +of their constituent parts.<note place='foot'>See especially +<hi rend='italic'>Lord Lauderdale</hi>, Inquiry into the Nature and Origin of +Public Wealth, 1804, ch. 2. <hi rend='italic'>Storch</hi>, loc. cit.</note> +The latter has, of course, +no interest, except in so far as we are concerned with the possibility +of obtaining the control of part of the resources, or +means, of another, by the surrender of a part of one's own +goods. In estimating the value of private resources, which +require to be made continually an object of trade, this point is, +of course, of the greatest importance. If certain of their component +elements, lands, for instance, belonging to a <hi rend='italic'>fidei commissum</hi>, +are incapable of entering immediately into the market, +at least the revenue they yield is measured by its value in exchange. +</p> + +<p> +It is quite otherwise, even with the resources of a whole +nation. Such resources are, evidently, much more independent, +and have much less need of being exchanged against +their equals, than private resources. The foreign commerce, +of the greatest and most advanced nations, has, hitherto, been +but a small quota of their internal commerce.<note place='foot'><hi rend='italic'>Moreau +de Jonnès</hi>, Le Commerce au 19. Siècle (1825) I, 114 ff., says that +the United States imported from abroad 9.6, France 6, and Great Britain +5.8 per cent. of their annual consumption; and exported respectively 10.4, +6.2, 9.8 per cent. of their annual production. The recent free trade tendencies, +and the improvement in the international means of transportation, have certainly +increased the relative importance of foreign commerce. In the kingdom +of Saxony (1853), <hi rend='italic'>Engel</hi> estimates that 10/47 of the whole +production of the country was destined for foreign countries, and that 10/47 of +the consumption was imported.</note> A valuation, +<pb n='067'/><anchor id='Pg067'/> +therefore, based on value in exchange, however interesting it +might be to enable us to determine how property is shared by +the different classes and persons that compose the nation, +would afford but little information concerning the absolute +amount of the national wealth. This, of course, applies in a +much higher degree to the resources of the whole world. +</p> + +<p> +If, now, we were to estimate the resources of an entire +people, or even of the world, by summing up the value in exchange +of their several component parts, many very important +elements would be left out of the account entirely; as for instance, +harbors, navigable streams, numberless relations which +have, indeed, no value in exchange whatever, but which are +of the highest importance, because promotive of the economy +of the nation. The same may be said of made roads of every +description, the politico-economical value of which may be +much greater than the value in exchange of their stock, than +their cost of production etc. The increase of the value in +exchange of any of the branches of the resources of a +physical or legal person contributes towards really enriching +the nation or the world, only in case that the increased +value in exchange is based on an increased utility in quality +or quantity. Should an earthquake suddenly dry up a +number of our springs, and thus give value in exchange to +the drinking water from the remaining ones, we should, indeed, +witness the introduction of a new object into the list of +exchangeable goods; the owners of springs would be able to +command a larger portion of the national resources, but at the +expense of the rest of the population; and the whole country +would have become poorer in goods by the catastrophe. Even +the value in exchange of the national resources would not be +increased; for all other goods, which, hitherto, as compared +with water, had an unlimited capacity for exchange, would +lose just as much of that capacity as water had gained, as +compared with them.<note place='foot'>When the land of a country +becomes dearer, simply on account of the increase +of population, or goods, the quantity of which is susceptible of increase, +because the cost of production has been increased, this cannot be considered +an increase in the wealth of the people, (<hi rend='italic'>v. Mangoldt.</hi>)</note> +On the other hand, if a new mineral +<pb n='068'/><anchor id='Pg068'/> +spring should be discovered, the great value in use of the +water of which gave it value in exchange, the resources of the +nation would be really increased, not only in point of utility, +but in exchange value; for no other goods, formerly known, +would, in consequence of the discovery, lose in their exchange +power.<note place='foot'>Neither is value in exchange a +quality inherent in goods, but only a relation +between them and other goods. Hence it is absurd to speak of a rise or +fall of all values in exchange. If the goods A lose in capacity to be exchanged +against goods B, goods B of course increase in exchange power as +compared with A, and <hi rend='italic'>vice versa</hi>. It is necessary to guard +against being misled here by the intervention of money, that is, by the custom universal +among men of employing a definite kind of goods as a medium of exchange +for all others. Yet there are many writers who have been thus misled. Thus +<hi rend='italic'>Galiani</hi>, Delia Moneta (1750), II, p. 2, who regards the lasting +increase of the prices of all commodities as an infallible sign of national prosperity. +To the same effect is the motto of the Physiocrates: <foreign lang='fr' +rend='font-style: italic'>Abondance et cherté c'est opulence</foreign>. In its coarsest +form, in <hi rend='italic'>Saint Chamans</hi>, Nouv. Essai sur la Richesse +des Nations (1824), 456, who would have that which is now the free gift of +nature, to come to us or be produced only as the reward of toil. +<hi rend='italic'>Verri</hi>, on the other hand, Meditazioni sull. econ. pol. (1771), +ch. V, thinks that the number of buyers in a country should be as small as possible, and +that of sellers as great as possible, in order that thus prices might be low; (as if +every buyer was not, <hi rend='italic'>eo ipso</hi>, also a seller.)</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section IX. Wealth.'/> +<index index='pdf' level1='Section IX.'/> +<anchor id="Section_9"/> +<head type='sub'>Section IX.</head> +<head>Wealth.</head> + +<p> +The possession of large and also of potentially lasting resources; +objectively, such resources themselves, we call wealth. +But it must be large in a two-fold sense; large as compared with +the rational wants of its possessor, and large, also, as compared +with the resources of other people, especially with the resources +of those in the same condition of life. To be called rich, it +is not enough <q>to have a sufficiency,</q> (the individual side); it +is necessary to have more than +others.<note place='foot'><hi rend='italic'>Kaufmann</hi>, Untersuchungen, I, +p. 165 seq. Also, <hi rend='italic'>Verri</hi>, Meditazioni, +XVII, 2.</note> If all men were possessed +<pb n='069'/><anchor id='Pg069'/> +of a great deal, but all of an exactly equal amount, each +would be compelled, it may be conjectured, to be his own +chimney-sweep, his own scavenger and <q>boot-black.</q> And +how could anyone, then, be properly called wealthy? This is +the social side of the idea of wealth.<note place='foot'>The +differences characteristic of poverty, indigence, managing to live, fortune and +wealth, cleverly treated by <hi rend='italic'>von Justi</hi>, Staatswirthschaft, I, p. +449, seq. <hi rend='italic'>Rau</hi>, Lehrbuch I, § 76, seq., establishes the +following gradation: privation and wretchedness, poverty, indigence, <q>getting on,</q> +comfort, wealth, superfluity. <hi rend='italic'>L. Say</hi> calls those who can +satisfy the wants of luxury rich; well-to-do, those who can command the +comforts of life; and wretched, those who cannot obtain a sufficiency of +the objects of prime necessity. In France, the limits of these situations are +marked by an income of respectively 60,000, 6,000 and 900 francs per family, +so that a family with an income of only 300 francs per year is in a +condition of wretchedness. (Traité de la Richesse, 1827, I ff., 71 ff.)</note> +Hence, a person, with the same resources, might be very wealthy in a provincial town, +while, in the capital, he could enjoy only moderate +comfort.<note place='foot'><hi rend='italic'>Palmieri</hi>, Ricchezza nazionale, Introd. +The greater number of the definitions of wealth are rather onesided than false. +<hi rend='italic'>Socrates</hi>, for instance, looks only at the relation existing +between means and their owner's wants. (<hi rend='italic'>Xenoph.</hi> Memor., IV, 2, +37, seq. Œconom. II, 2 ff.). <hi rend='italic'>Plato</hi>, on the other hand, as the +socialists are wont to do, looks to the excess over that possessed by others. +(Legg. V, 742, seq.). <hi rend='italic'>Xenophon's</hi> observations, Hiero, 4, on the +nature of wealth, are many-sided and beautiful. <hi rend='italic'>Aristotle</hi> +distinguishes between natural and artificial wealth: πλῆθος ὀργάνων οἰκονομακῶν καὶ +πολιτικῶν—πλῆθος νομίσματος. (Polit, I, 3, 9, 16.) Compare +<hi rend='italic'>Cicero</hi>, Parad. VI. The dominant idea of the so-called Mercantile +System is thus expressed in a Saxon pamphlet of 1530 (Müntzbelangende Antwort, etc.): +<q>Money is the real watchword; where there is much money, there is wealth, it is +clear.</q> Compare <hi rend='italic'>Luther</hi>, Werke, Irmisch edition, XXII, p. 200 +seq. See some excellent remarks in opposition hereto, in the Saxon pamphlet, Gemeyne +Stimmen von der Müntz, 1530. <hi rend='italic'>Schröder</hi>, Fürstliche +Schatz-und Rentkammer, 1686, ch XXIX. <q>A country grows rich in proportion as it draws +gold or money, either from the earth or from other countries; poor, in proportion as +money leaves it. The wealth of a country must be estimated by the quantity +of gold and silver in it.</q> See a very passionate argument against this view in +<hi rend='italic'>Boisguillebert</hi>, Dissertation sur la Nature des Richesses, written +sometime between 1697 and 1714. <hi rend='italic'>Berkeley</hi>, Querist (1735), Nos. +562, 542. Among Englishmen, the correct view was prevalent much earlier, especially +among the founders of the American colonial empire. See <hi rend='italic'>Hachluyt</hi>, +Voyages (1600) III, 22 ff. 45 ff. 152 ff. 165 ff. 182 ff. 266 ff; but especially the work +<q>Virginia's Verger</q> in <q>Purchas Pilgrims</q> (1625), IV, p. 809 ff. However, +several Spaniards were led by hard experience to adopt a view opposed to the Midas-view +(compare <hi rend='italic'>Aristotle</hi>, Polit. I, ch. 3, 16), by which the first +American explorers were carried away: <hi rend='italic'>Garcilasso de la Vega</hi> +(1609), Comment. reales II, ch. 6; <hi rend='italic'>Saavedra Faxardo</hi>, Idea +Principis christiani (1640) Symb. 69: <foreign lang='la' +rend='font-style: italic'>potissimæ divitiæ ac opes terræ fructus sunt, nec ditiores in +regnis fodinæ, quam agricultura; plus emolumenti, acclivia montis Vesuvii latera +adverunt, quam Potosus mons</foreign>. Contemporary with those Englishmen, was the +Italian, <hi rend='italic'>Giov. Botero</hi>, who called attention to the fact, that +France and Italy were the countries of Europe richest in gold, although they possessed no +mines of the precious metal themselves: Della Ragion di Stato (1591) p. 88 ff. Also +<hi rend='italic'>Sully</hi>, who called agriculture and cattle-breeding the breasts of +the state, the real mines and pearls of Peru. (Economies royales I, ch. 81. See however, +II, p. 381). <hi rend='italic'>Montchrêtien</hi>, Traité d'Économie politique (1615) 81, +172 seq. According to <hi rend='italic'>Sir D. North's</hi> Discourses upon Trade, 1691, +wealth is synonymous with freedom from want, and the ability to procure many comforts, +while <hi rend='italic'>Temple</hi> (ob. 1700, Works I, 140 seq.) looks entirely at the +subjective side of wealth. <hi rend='italic'>Pollexfen</hi>, <q>England and East India +inconsistent in their Manufactures</q> (1697), considers gold and silver as the only +real wealth. To this definition Davenant (ob. 1714), opposes another. Wealth, according +to him, is whatever places prince or people in a condition of superabundance, peace and +security. See his Works, I, p. 381 seq. He even reckons intellectual powers, alliances +etc., among the national wealth. Compare <hi rend='italic'>W. Roscher</hi>, Zur +Geschichte der englischen Volkswirthschaftslehre 1851, in the acts of the royal Saxon +Academy of Sciences, vol. III. <hi rend='italic'>Vauban</hi> (Dime royale 1707), Daire's +edition, says: <q>The real wealth of a people consists in an abundance of those things, +the use of which is so necessary to sustain the life of man, that they cannot at all be +dispensed with.</q> By the wealth of a people <hi rend='italic'>Galiani</hi>, Della +Moneta II, c. 2, understands the aggregate of all lands, houses, movable property, +money, etc. which belong to them, but, that the chief element of wealth, and the +condition precedent of all others, is men themselves. Hence, the process of the +impoverishment of a people in their decline, takes the following course: money first +emigrates, next, population diminishes, afterwards, the houses fall in ruin, finally, +the land itself becomes a waste. According to <hi rend='italic'>Broggia</hi>, wealth is +<foreign lang='it' rend='font-style: italic'>un avanzo osia valore di tutto cio che +avanza al proprio consumo e bisogno</foreign>, Delle Monete, 1743, IV, 307, 314; Cust. +<hi rend='italic'>Palmieri</hi> (ob. 1794), also says: <foreign lang='it' +rend='font-style: italic'>il superfluo constituisce la richezza</foreign>. (Publica +Felicità.) According to <hi rend='italic'>Turgot</hi>, Sur la Formation et Distribution +des Richesses 1771, § 90, the wealth of a nation consists in the net proceeds of landed +property capitalized at the ordinary price of land, and then of the aggregate of all +the movable property of the country. <hi rend='italic'>Büsch</hi>, Geluumlauf III, § 27, +considers a certain duration of the produce or revenue as an essential element in +the idea of wealth. <hi rend='italic'>Lauderdale</hi>, Inquiry, ch. II, distinguishes +national wealth and private wealth; the former embracing all that man covets as +agreeable or desirable; while it is one of the marks of the latter, that there +should be no general superfluity of it on hand. Several modern English +economists call wealth only that, the production of which cost human +labor. Thus, <hi rend='italic'>Malthus</hi>, Definitions (1827) p. 234. +<hi rend='italic'>Torrens</hi>, Production of Wealth, 1821, ch. I. When +<hi rend='italic'>Rossi</hi>, Cours d'Economie politique, 1835, L. 2, says: +<foreign lang='fr' rend='font-style: italic'>tout chose propre à satisfaire aux besoins +de l'homme est richesse</foreign>, he demonstrates how the frequent inaccuracy of the +French language stands in the way of a close analysis. The greater number of more recent +definitions are true of resources rather than of wealth. <hi rend='italic'>Bastiat</hi> +distinguishes between <foreign lang='fr' rend='font-style: italic'>richesse +effective</foreign> and <foreign lang='fr' rend='font-style: italic'>relative</foreign>, +the former being based on <foreign lang='fr' rend='font-style: italic'>utilité</foreign>, +the latter on <foreign lang='fr' rend='font-style: italic'>valeur</foreign>. +(Harmonies, ch. 6.)</note> +</p> + +</div> + +<pb n='070'/><anchor id='Pg070'/> + +<div> +<index index='toc' level1='Section X. Wealth.—Signs Of National Wealth.'/> +<index index='pdf' level1='Section X.'/> +<head type='sub'>Section X.</head> +<head>Wealth.—Signs Of National Wealth.</head> + +<p> +We should have a very imperfect idea of the wealth of a +people (§ <ref target="Section_8">8</ref>) if we should estimate it at the value in +exchange +<pb n='071'/><anchor id='Pg071'/> +of the sum<note place='foot'>The national wealth of Athens, at the time of the hundredth +Olympiad, is estimated by <hi rend='italic'>Böckh</hi> (Staatshaushalt der Athen, I, p. +636, 2d ed.) to have been from thirty to forty thousand talents, besides the non-taxable +property of the state. That of Great Britain is estimated at about 8,000 million pounds +sterling. (Athenæum 5 March, 1853.) <hi rend='italic'>Wolowski</hi> estimated that of +France at, at least, 116 milliards of francs, with an annual increase of 1-½ milliards, +(L'or et l'Argent, 1870. Enquête, 59.) <hi rend='italic'>David A. Wells</hi> estimated +that of the United States, in 1860, slaves not included, at 14,183 million dollars, or +$451.20 per capita, whereas in England, the per capita wealth was about $1,000. +(<hi rend='italic'>Hildebrand's</hi> Jahib., 1870, I, 431.) The national wealth of the +kingdom of Saxony is equal to 600 million thalers immovable, and 600 million movable, +property. (<hi rend='italic'>Engel</hi>, Statist. Zeitschr. August, 1856). That of +Würtemberg=2,710 million florins, of which 700 millions represent movable goods, and 100 +million, claims on foreign countries. (Statistisches Handbuch, 1863.) Of +course all these estimates are very inexact.</note>-total of the component parts of +the national resources. +By the following signs, however, an approximative +notion of the value in use of the resources of a nation may be +obtained: +</p> + +<p> +A. When, even the lower classes, who compose everywhere +the greatest portion of the people, are comfortable, in a condition +worthy of human beings. Thus, C. Dupin is surprised +at the great quantities of meat, butter, cheese and tea entered +on the accounts of the poor-houses in England, and the great +<pb n='072'/><anchor id='Pg072'/> +care taken to have these of the best quality.<note place='foot'><hi rend='italic'>Ch. +Dupin</hi>, Forces productives, p. 82. See <hi rend='italic'>infra</hi>, § 230.</note> +A good symptom of such a state of things is a high average duration of +human life, especially when there is a relatively large number +of births. (§ 246.) +</p> + +<p> +B. When a considerable outlay, devoted to the satisfaction +of the more refined wants, is voluntarily made, and by +those only possessed of a proper economic sense. Thus, in +England, the various mission, bible, and tract societies had, +in 1841, an aggregate income of £630,000. The expeditions +in search of Franklin cost over a million pounds sterling. The +state outlay also belongs to this category, provided, that taxes +are collected and loans obtained, without any noticeable oppression. +The sum of 20,000,000 pounds sterling, voted, in +1833, by the British Parliament for the abolition of slavery, is +one of the happiest signs of the national wealth of England.<note place='foot'>Compare +<hi rend='italic'>Meidinger</hi>, Das britische Reich in Europa, pp. 79, 238, 261.</note> +</p> + +<p> +C. A large number of valuable buildings, and permanent +improvements; for instance, roads of every description, works +for purposes of irrigation and drainage. Thus, in London, +from September, 1843, to September, 1845, there were constructed +squares and streets with an aggregate length of 11.1 +geographical miles. The number of newly built houses in +London, between 1843 and 1847, was nearly 27,000. And so, +in England and Wales there are 492 geographical miles of +navigable canals, while their navigable rivers are estimated to +have a length of only 449 miles. The number of miles of +railroad, in the British Empire, in 1865, was 2,897 geographical +miles, and they cost 459 million of pounds; in 1870, it was +3,270 geographical miles, at an aggregate cost of 650 millions +sterling. +</p> + +<p> +D. The frequent occurrence of heavy commercial payments, +which finds expression especially in the magnitude and costliness +of the most usual medium of exchange. Thus, all payments +are made in England in paper (for sums of at least five +<pb n='073'/><anchor id='Pg073'/> +pounds sterling) or in gold coin. Silver is used only as small +change, like copper in most other countries. (<hi rend='italic'>Infra</hi>, § +<ref target="Section_118">118</ref>, +seq.)<note place='foot'><hi rend='italic'>Davenant</hi> considers an increase in the +number of houses, ships and stocks of goods, as the surest sign of an increase in the +national wealth; and on the other hand, a high rate of interest, a low price of land, +small wages, a decrease of population, and an increase of uncultivated land, as the signs +of national impoverishment. (Works, I, pp. 354, seq. II, p. 283.) <hi rend='italic'>Sir +M. Decker</hi>, Essay on the Causes of Decline of Foreign Trade (1744), 3, gives as the +signs of impoverishment, the following: a wretched condition of the poor +and of manufactures, a low price of wool, long credit to retail dealers, frequent +cases of bankruptcy, exportation of the metals, unfavorable exchange, +few new coins, many cases of unpaid rent of leased land, and high poor rates.</note> +</p> + +<p> +E. Frequent loans to foreign nations. Hence, Storch divides +all countries into borrowing or poor countries, loaning or rich +countries, and independent countries which hold a middle +place between the two former.<note place='foot'><hi rend='italic'>Storch</hi>, Handbuch, +I, 45. Compare <hi rend='italic'>infra</hi>, § 187.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XI. Of Economy (Husbandry).'/> +<index index='pdf' level1='Section XI.'/> +<head type='sub'>Section XI.</head> +<head>Of Economy (Husbandry).</head> + +<p> +All normal economy<note place='foot'>On the difference between human and animal economy, +see <hi rend='italic'>Schön</hi>, Neue Untersuchungen der N. Œkonomie, (1835), 4.</note> +(husbandry) aims at securing a maximum of personal advantage with a minimum of cost or +outlay.<note place='foot'>Compare <hi rend='italic'>Schäffle</hi>, System, III, Aufl. +I, 2, 28.</note> And there are always two intellectual incentives at the +foundation of this economy. There is, first, self-interest, the +positive manifestation of which is the effort to acquire as much +of the world's goods as possible, and the negative expression +of which, the effort to lose as little of them as +possible—acquisitiveness—saving. Self-interest, losing its moral, and +assuming a guilty, character, degenerates into egotism; acquisitiveness, +into covetousness; and the disposition to save, into +avarice—the <hi rend='italic'>solipsismus</hi> of Kant. The incentive to ameliorate +one's condition is common to all men, no matter how varied +<pb n='074'/><anchor id='Pg074'/> +the form or different the intensity of its manifestation. It +guides us all from the cradle to the grave. It may be restricted +within certain limits, but never entirely extinguished. +It is, in the domain of economy, what the instinct of self-preservation +is to our physical existence, a powerful principle of +creation, preservation and of renewed life (I. Thessal., 4, 11, +seq.).<note place='foot'><hi rend='italic'>Knies</hi>, in his Polit. Œkonomie vom +geschichtl. Standpunkte, 1853, p. 160 ff., shows, very happily, how the love of one's +self,—which must, indeed, be distinguished from self-seeking—is not in +conflict with the love of one's neighbor; but that, in healthy natures, it is found +allied with a feeling of equity, and of the common good. See, also, <hi rend='italic'>F. +Fuoco</hi>, Saggi economici, Pisa, 1825, Nr. 7. <hi rend='italic'>Schutz</hi>, Das +sittliche Element in der Volswirthschaft: Tübinger Zeitschrift für Staatswissensch. +1844, p. 132, ff.</note> Then there is the incentive of the demand of God's +voice within us, the voice of conscience, whether we call it, in +philosophic outline <q>the adumbration of the ideas of equity, +right, benevolence, of perfection and inner freedom,</q> or, framing +our lives in accordance with them, the striving after the +Kingdom of God.<note place='foot'><q>That they should seek the Lord if haply they might +feel after him.</q> (Acts, 17, 27. Compare Matthew, 6:33, also I. Timothy, 5:8.) +<hi rend='italic'>Adam Müller</hi> in his Nothwendigkeit einer theolog. Grundlage, 49 +seq., is a strong advocate of all this, but a rather narrow one. The farmer, he says, +should first work for the love of God, then for the fruit, that is, for the gross +product, and lastly for the net product. His work is a trust. +<hi rend='italic'>Müller</hi> considers the business relations of men, as they exist at +present, as <q>the comfortless mutual slavery of all.</q> (Nothwendigkeit einer +theolog. Grundlage, 49 ff.) The economist, <hi rend='italic'>Ch. Perin</hi>, who writes +from the Catholic politico-economical standpoint, substitutes for conscience, +<foreign lang='fr' rend='font-style: italic'>renoncement</foreign>, as the force +antagonistic to <foreign lang='fr' rend='font-style: italic'>intérêt</foreign>, an +expression inappropriate, because merely negative, although in perfect harmony with the +ascetic religiousness of the middle ages. (De la Richesse dans les Sociétiés +chrêtiennes, 1861, II vol., passim) Compare <hi rend='italic'>Roscher</hi> in +<hi rend='italic'>Gelzer's</hi> Protestant. Monatsblättern, Jan. 1863. +<hi rend='italic'>Puchta</hi>, Institutionen, I, f. 8, opposes to individualism—or +the impulse to distinguish ourselves from others, and which, when uncontrolled, leads to +egotism, pride and hate—love and right, which are controlling powers over the +former.</note> It matters not, how much the image of +God may have been disfigured in most men, there is no one +in whom the longing for it has so far disappeared as to leave +no trace behind. This puts bounds to our self-interest, and +<pb n='075'/><anchor id='Pg075'/> +transmutes it into an earthly means to enable us to approximate +to an eternal ideal. +</p> + +<p> +As, in the structure of the world, the apparently opposing +tendencies of the centrifugal and centripetal forces produce +the harmony of the spheres, so, in the social life of man, self-interest +and conscience produce in him the feeling for the common +good.<note place='foot'>Even the ancients conceived Eros as a world-building principle. +According to <hi rend='italic'>Schön's</hi> expression, loc. cit., which it is not +difficult to misconstrue, the feeling of the common interest manifests itself, both as +law and force. And, in reality, it is necessary that, in order not to permit the drowsy +conscience to fall too far behind self-interest, which is always awake, it should +create lasting institutions and regulations above and beyond the caprice of +the individual or of the moment; for instance, in the family, marriage, education +etc.</note> This sentiment of the common interest is the +foundation on which rise in successive gradation, the life of +the family, of the community, of the nation and of humanity, +the last of which should be coincident with the life of the +Church. It, alone, can realize the kingdom of heaven on earth. +Through this sentiment alone can religion be made active and +moral. Only through it, can self-interest be made really sure +and always to the purpose. Even the most calculating mind +must acknowledge, that numberless institutions, relations etc., +are useful and even necessary to many individuals, which can +be established or maintained only from a sense of the general +welfare, for the reason that no one individual could make the +sacrifice required to establish or maintain them. And so, since +commerce has wrought the interests of all men into one great +piece of net-work, the best means of obtaining wherewith to +satisfy our own wants is to help others satisfy theirs. Self-interest +causes every one to choose the course in life in which +he shall meet with the least competition and the most abundant +patronage; in other words, that which answers to the most +pressing and least satisfied want of the community. As a rule, +the physician who cures the greatest number of patients with +the greatest skill, and the manufacturer who produces the +best goods cheapest, will grow to be the richest. It is, moreover, +easy to see that, according as the circle of common interests +grows smaller, it approximates to self-interest; and +<pb n='076'/><anchor id='Pg076'/> +to <q>the Kingdom of God</q><note place='foot'>The more private interest ceases to be +momentary, and becomes life-long and even hereditary, the better does it harmonize with +the feeling of the common interest.</note> as it grows larger. And yet, all +these circles respectively condition one another. Cosmopolitanism +or church-zeal, without love of country; patriotism, +without fidelity to the community in which one lives, or love +of one's family, are more than suspicious. The reverse is +also true. This is a chief connecting link between the great +apparent opposites.<note place='foot'><hi rend='italic'>Perin</hi> says (1, +93), that the conflict of interest is reconciled in the seeking +for the attainment of the supreme good, that is God, <q>who gives himself to +all in equal measure, and yet always remains the same, and out of whose fulness +all may draw, and yet no one's share grows less.</q> But the same is true +of all ideal goods, and of every form of the feeling for the common interest, +the highest of which is, indeed, religiousness.</note><note place='foot'>According +to <hi rend='italic'>Kant</hi>, Anthropologie, p. 239, the desire of comfort and +well-being, and the inclination to virtue, when the former is properly restrained +by the latter, produce the highest degree of moral, united to the +highest degree of physical, good. It is well known, that during the middle +ages, in all countries except Italy and, even up to the seventeenth century, +the moral sciences were under a one-sided theological influence, whose ascetic +condemnation of self-interest may have been well enough during a +period of violence. By virtue of a very natural reaction, and as a protest of +individualism against the constraint of absolute monarchy, the materialists +of the eighteenth century endeavored to discover, even in the most exalted +phenomena of human society, only the expression of an enlightened self-interest. +See <hi rend='italic'>Mandeville's</hi> Fable of the Bees, or private Vices +public Virtues (1723), but especially, <hi rend='italic'>Helvétius</hi>, De +l'Esprit (1758). <hi rend='italic'>Voltaire</hi> says, that, in all the +celebrated maxims of <hi rend='italic'>De Rochefoucauld</hi> (1665) there is but one +truth contained, <foreign lang='fr' rend='font-style: italic'>que l'amour propre est +le mobile de toutes nos actions</foreign>. (But see, per contra, +<hi rend='italic'>Pufendorf</hi>, Jus Naturæ et Gentium, 1672, II, 3, 15.) This tendency +was opposed, especially by the English, who could not be blind to the +influence exerted in public life by the feeling for the common good. +<hi rend='italic'>David Hume</hi>, Treatise on Human Nature (1739), III, 54, +is of opinion that the interests of others are, on the whole, in the case of +nearly every man stronger than even his own self interest. +<hi rend='italic'>Hutcheson</hi>, System of Moral Philosophy (1755), speaks of +the innate principle of benevolence. Man is not a perfect whole; a part belongs +to his own person, part to his family, part to the nation, part even to all +humanity. <hi rend='italic'>Burke</hi>, Inquiry into the Origin of our Ideas +of the Sublime and Beautiful (1756), distinguishes two fundamental principles +of action, that of self-preservation and that of society. On the former is +based the sense of the sublime; on the latter, of the beautiful. According +to <hi rend='italic'>Ferguson</hi>, History of Civil Society, (1767), I, 3, 4, +the <q>sense of union</q> is frequently strongest where the advantage drawn from +the connection is smallest; for instance, it is weakest in highly cultured commercial +countries. <hi rend='italic'>Adam Smith</hi>, Theory of Moral Sentiments (1768), +has been as one-sided in reducing everything to <q>sympathy,</q> as he has been in his +Wealth of Nations in reducing everything to <q>self-interest;</q> but not without +the consciousness, that to explain the reality, it is necessary to take both +into consideration (<hi rend='italic'>Buckle</hi>). It would, indeed, be just as +preposterous to base economy on self-interest alone, as to base marriage merely on +the sexual appetite. Recently, <hi rend='italic'>Hermann</hi>, Staatswirthschaftliche +Untersuchungen, 1st ed., part 1st, discovers in self-interest, and in the feeling for +the common good, the two springs of all economy. He would even base the so-called +theoretic Political Economy, on the study of self-interest, its practice in that +of the common good. <hi rend='italic'>M. Chevalier</hi>, Cours d'Economie politique, +1844, II, 412 ff., understands something very like this by the contrast between liberty +and centralization. The <foreign lang='fr' +rend='font-style: italic'>antagonisme</foreign> and <foreign lang='fr' +rend='font-style: italic'>association</foreign> of <hi rend='italic'>Bazard</hi>, +Exposition de la Doctrine de Saint Simon (1829), p. 144 ff. Closer investigation will +show, however, that self-interest, which must not be confounded with egotism, +and the common interest, are neither coördinate nor exhaustive opposites. +Compare the beautiful contrast drawn by <hi rend='italic'>Goethe</hi> (Pocket +edition of 1833, vol. 46, 97), between <q>Pietät</q> and <q>Egoisterei.</q></note> +</p> + +</div> + +<pb n='077'/><anchor id='Pg077'/> + +<div> +<index index='toc' level1='Section XII. Economy.—Grades Of Economy.'/> +<index index='pdf' level1='Section XII.'/> +<anchor id="Section_12"/> +<head type='sub'>Section XII.</head> +<head>Economy.—Grades Of Economy.</head> + +<p> +Thanks to this feeling for the common weal, the eternal and +destructive war—the <foreign lang='la' rend='font-style: italic'>bellum omnium +contra omnes</foreign>—which an +unscrupulous self-interest would not fail to generate among +men engaged in the isolated prosecution of their own economic +interests, ceases in the higher, well-ordered +organization<note place='foot'><hi rend='italic'>Paul</hi>, I. Corinth. 12, gives the +most beautiful model description of a social organism. Compare, however, the fable of +Menenius Agrippa in <hi rend='italic'>Livy</hi>, II, 32.</note> of +society. On it are based the various forms of economy in +common: family-economy, corporation or association-economy, +<pb n='078'/><anchor id='Pg078'/> +municipal economy, and national economy.<note place='foot'>Excellent beginnings +of a general theory of economies in common in <hi rend='italic'>Schäffle</hi>, +N. Œkonomie, II, Aufl., 62 ff., 331 ff.</note> And these forms +of economy in common are so essentially the condition and +complement of individual economy, that the latter, without +them, could either not be maintained at all, or, at least, only in +the very lowest stage of civilization. +</p> + +<p> +Although the higher science of Political Economy has, +nearly always, been conceived<note place='foot'>The French and English, with +their strong political bias, use the expressions respectively +<foreign lang='fr' rend='font-style: italic'>economie politique</foreign> and +Political Economy. In Germany, where the terms the people +(<foreign lang='de' rend='font-style: italic'>Volk</foreign>) and the state +(<foreign lang='de' rend='font-style: italic'>Staat</foreign>) are much less nearly +coextensive, the words <foreign lang='de' +rend='font-style: italic'>Volkswirthschaft</foreign> and <foreign lang='de' +rend='font-style: italic'>Nationalökonomie</foreign> are preferred. But even +<hi rend='italic'>Hufeland</hi>, who first gave currency to the term +<foreign lang='de' rend='font-style: italic'>Volkswirthschaft</foreign> +(Grundlegung, I, 14), called attention to the peculiarity <q>that the term economy +suggests that there is one who economizes and guides, an economist in +chief, and that such a one is, even according to the most correct opinion, +wanting in the public economy of a people.</q></note> as treating of the aggregate +national activity of a people, there have been many, recently, +who consider Political Economy as no real whole, but only as +a mere abstraction. This is true, especially of many unconditional +free-trade theorizers, partly from a repugnance toward +the governmental guardianship of private businesses or economy. +It is true, also, of certain philosophers who consider +the idea, <q>the people,</q> as merely nominal.<note place='foot'><p>According to +<hi rend='italic'>Th. Cooper</hi>, Lectures on the Elements of Political Economy, +(1726), 1, 15 ff. 117, the wealth of society is nothing but the aggregate wealth +of all the individuals that compose it. Each individual looks out best for his +own interests, and, hence, that nation must be the richest, in which each individual +is most completely left to himself. (If this were so, savage nations +would be the richest!) <hi rend='italic'>Cooper</hi> goes so far as to disapprove of +the protection afforded to commerce on the high seas by a national navy; no naval war is +worth what it costs, and merchants should protect themselves. He says, too, +that the word <q>nation</q> is an invention of the grammarians, made to save +the trouble of circumlocution, a nonentity! <hi rend='italic'>Adam Smith</hi> is, as +might be expected, far removed from such absurdities. (Compare Wealth of Nations, IV, +ch. 2, and the end of the fourth book.) But, even he is of opinion that men, +in the study of their own advantage are led <q>naturally, or rather necessarily</q> +(IV, ch. 2), to the employment which is most useful to society. But here +<hi rend='italic'>Adam Smith</hi> overlooks the fact, that every individual nation +strives after earthly immortality, and is, in consequence, frequently compelled to make +immediate sacrifices for the sake of a distant future, a thing which can never be +to the private interest of the mortal individuals who compose it. And thus, +<hi rend='italic'>D. North</hi>, Discourses upon Trade (1691), 13 seq., says, that in +commercial matters, different nations stand in precisely the same relation to the whole +world, that individual cities do to the kingdom, and individual families to +the city. Similarly, <hi rend='italic'>Boisguillebert</hi>, Factum de la France, ch. 10, +327, Daire's edition. <hi rend='italic'>Benjamin Franklin</hi> (ob. 1790), Political +Papers, § 4. And <hi rend='italic'>J. B. Say</hi>, Traité d'Economie politique (1802) +I, 15: every nation is, in relation to neighboring nations, in the situation of a +province in relation to neighboring provinces. Unfortunately, such doctrine is only too +palpably refuted by every war! <hi rend='italic'>J. Bentham's</hi> saying: +<foreign lang='fr' rend='font-style: italic'>Les intérêts individuels sont les seuls +intérêts réels</foreign> (Traité de Législation, I, 229). <hi rend='italic'>Infra</hi> +§ <ref target="Section_98">98</ref>. +</p> +<p> +Among those who, in antiquity, most energetically maintained that the +idea of national economy is not a merely nominal one, is <hi rend='italic'>Plato</hi> +(De Republ., IV, 420, I, 462); more recently, <hi rend='italic'>Fichte</hi> (Der +geschlossene Handelstaat, 1800), although, in general, the socialists attach as little +importance to nationality as their most decided opponents. Adam Müller is a writer +who deserves recognition for his advocacy of national economy, and of the state as a +whole, paramount to individuals, and even generations. He gives war the credit of +causing the scientific knowledge of the state to cast deeper roots, and of enlightening +individuals in the most forcible way, that they are parts of one +great whole. (Elemente der Staatskunst, 1809, I, 7, 113). He calls public economy, +as a whole, the product of all products. What, he inquires, is the use of +all wealth, if it does not guarantee itself? And this, it can do, only through +the organization of the whole people, that is, through the nation (I, 202). +<hi rend='italic'>Adam Smith's</hi> theory of labor would be correct if it considered +the entire national life of a people itself as one huge piece of labor. (II, 265). And +so, Müller directs his polemics against Adam Smith's premise of a merely mercantile +world-market. (II, 290). Similarly, the protective tariff theoreticians, +<hi rend='italic'>Ganieh</hi>, Théorie de l'Economie politique (1822), II, 198 ff. +and <hi rend='italic'>Fr. List</hi>, Nationales System der politischen Oek. (1842), I, +240 ff. <hi rend='italic'>Colton</hi>, Political Economy of the United States, 1853. +<hi rend='italic'>Sismondi</hi>, Nouveaux Principes (1819), I, 197, ridicules the +opinion which resolves the public interest into merely private interests: It is A's +interest to rob B; B, the weaker, is equally interested to let himself be robbed, +that he may fare no worse. But the state—?!</p></note> There are, however, +<pb n='079'/><anchor id='Pg079'/> +two things necessary to warrant us to call a thing made +up of a number of parts, one real whole: the parts and the +whole must have a reciprocal action upon one another, and the +whole, as such, must have a demonstrable action of its own. +(<hi rend='italic'>Drobisch.</hi>) In this sense, <q>the people</q> is, unquestionably, a +<pb n='080'/><anchor id='Pg080'/> +reality, and not alone the individuals who constitute the <q>people.</q> +Besides, it is truly said that all husbandry or economy +supposes a will (<q>systematized activity</q> etc., <hi rend='italic'>supra</hi>, § +<ref target="Section_2">2</ref>). +Such a will is ascribed to individuals, to legal persons, to the +state, but not, however, to <q>the people,</q> as a whole. But this +will need not be an entirely conscious one, as is plain from the +case of the less gifted and less cultured individuals engaged in +household economy. The systemization in the public economy +of a people finds its clearest expression in economic laws, +and in the institutions of the state. But it finds expression, +also, without the intervention of the state, in the laws established +by use, and by the opinions of jurists or courts, in community +of speech, of customs and tastes etc.: things which +have an important economic meaning, which depend on the +common nature of the land, of race and history, and which +influence the state, at least as much as they are influenced +by it.<note place='foot'>National wars are really no mere operations of the will of the +state! Since 1800, Ireland, and, since 1858, even British India, constitute one state +with England, and yet how different are the economic tendencies of these different +countries of which the individual husbandman or business man must take +cognizance!</note><note place='foot'>One might also deny the reality of a stream, +considered as a whole, since its bed, no one calls a stream, and its watery contents +change every moment. And yet, it is well known to scientific geography that every +stream has its own individual character.</note> +</p> + +<p> +The most that can be said, at present, so far as an economy +of mankind, or a world-economy, is concerned, is, that it may +be shown that important preparations have been made for it. +We are approaching more nearly to it by the ways of the +more and more cosmopolitan character of science, the increasing +international coöperation of labor, the improvement in the +means of transportation, growing emigration, the greater love +of peace, and the greater toleration of nations etc. +</p> + +</div> + +<pb n='081'/><anchor id='Pg081'/> + +<div> +<index index='toc' level1='Section XIII. Political Economy.—The Economic +Organism.'/> +<index index='pdf' level1='Section XIII.'/> +<head type='sub'>Section XIII.</head> +<head>Political Economy.—The Economic Organism.</head> + +<p> +The idea conveyed by the word <hi rend='italic'>organism</hi>, is doubtless, one +of the most obscure of all ideas; and I am so far from desiring +to explain<note place='foot'>This would be to be guilty of explaining +<hi rend='italic'>ignotum</hi> per <hi rend='italic'>ignotius</hi>. And yet, +there are a great many modern writers who imagine that they have said +something all-sufficient, when they have told us that the state is an organism. +As early a writer as <hi rend='italic'>Hufeland</hi> (N. Grundlegung, I, 113), +enters his protest against such abuses. The person who would operate with this notion, +should, at least, have read the acute observations, so well calculated to dissipate +preconceived opinions, made by <hi rend='italic'>Lotze</hi>, in his Allgemeine Physiologie +des körperlichen Lebens, 1-165. The organic conception of national life, +the life of a whole people, where the individual organs are free and rational +beings, is evidently a much more difficult one to form than that of the +animal or human body.</note> by that idea, the meaning of public or national +economy, that I would only use the word <hi rend='italic'>organism</hi> as +the shortest and most familiar expression of a number of +problems, which it is the purpose of the following investigation +to solve. +</p> + +<p> +There are two points, especially, of importance here. In the +motion of any machine, it is possible to distinguish with the +utmost accuracy, between the cause and the effect of the motion: +the blowing of the wind, for instance, is simply and purely, +the cause of the friction of the mill-stones in a wind-mill, +and is not in the least influenced or conditioned by the latter. +But, in the public economy of every people, patient thought +soon shows the observer, that the most important simultaneous +events or phenomena mutually condition one another. Thus, +a flourishing state of agriculture is impossible without flourishing +industries; but, conversely, the prosperity of the latter +supposes the prosperity of the former, as a condition precedent. +It is as in the human body. The motions of respiration are +produced by the action of the spinal cord; and the spinal +cord, in turn, continues to work only through the blood, that is, +<pb n='082'/><anchor id='Pg082'/> +by the help of respiration. In all cases like this, we are forced, +when accounting for phenomena, to move about in a circle, unless +we admit the existence of an organic life, of which every +individual fact is only the manifestation.<note place='foot'>I first called +attention, in my work on the life-work and age of <hi rend='italic'>Thucydides</hi>, +to the fact that that great historian always accounts for causes in the following +manner: A. is produced by B., and B. by A. (<hi rend='italic'>Roscher</hi>, Leben Work +und Zeitalter des Thukydides, 199 ff.; compare especially <hi rend='italic'>Thucyd.</hi>, +I, 2, 7, seq.) Such a circle is not a vicious one. All first class historians have thus +explained historical phenomena. The one-sided deduction of A. from B., and +B. from C., etc., which the so-called pragmatic writers like +<hi rend='italic'>Polybius</hi>, for instance, is the result of overlooking all +reciprocal action. <hi rend='italic'>Scialoja</hi>, Principii (1840), p. 60, makes +a somewhat similar observation for Political Economy.</note><note place='foot'>Whether +we call the unknown and inexplicable ground back of all analysis, +and which our analysis cannot reach, vital force, generic form, spirit of +the nation, or God's thought, is for the present a matter of scientific indifference. +All the more necessary are the self-knowledge and honesty, in general, +which admit the existence of this background, and which do not, by +denying it, deny the connection of the whole, which is, for the most part, +much more important than the analyzed parts. But I must at the same time, +enter my energetic protest against the imputations of heresy made by those +who do not comprehend the sacred duty of science, by never ceasing investigation, +to push farther back the bounds of this inexplicable background.</note> +</p> + +<p> +It is, also, undeniable, that human insight into the operation +and utility of a machine must always precede the existence of +the machine itself. This human insight is parent to the plan, +and the plan, in turn, is parent to the machine. The very reverse +of this is true in the case of organisms, those <q>divine +machines</q> as Leibnitz called them. Men had digested food +and reproduced their kind, thousands of years before physiologists +had attained to a true theory of digestion or reproduction. +I do not, indeed, by any means, pretend, that the public +economy of nations is governed by natural necessity, in the +same degree, as for instance, the human body. We shall find, +however, that the minute arbitrary variations usual here and +there in the course of its development, generally compensate +for one another, in accordance with the law of large numbers. +Here, too, we find harmonies, frequently of wonderful beauty, +which existed long before any one dreamt of them; innumerable +<pb n='083'/><anchor id='Pg083'/> +<hi rend='italic'>natural laws</hi>,<note place='foot'>When +<hi rend='italic'>Hildebrand</hi>, for instance, objects to the application of the +expression <q>natural law</q> to the economic actions of man, for the reason that it +conflicts with human freedom and man's capacity for progress (Jahrbücher +der N. Œek. und Statistik., 1863, Heft., I), I cannot agree with him. I use the +expression <q>natural law</q> wherever I observe uniformity, explicable in its +broader connections, and not dependent on human design. That there are +such uniformities there can be no question. I need only mention the philological +law of the so-called <q>permutation of consonants,</q> which individuals +follow when speaking—certainly not through compulsion,—and, by means +of which, the progress of the speaking aggregate is made manifest. Or, I +might call attention to the well known fact, that, in populous countries marriages +and crimes, which are for the most part free, are divided among the +different age-classes in a proportion much more uniform, from year to year, +than are deaths, which are not free. I adhere all the more firmly to the expression +<q>natural law,</q> because no one takes offense at or objects to the expression, +<q>nature of the human soul.</q> But to this very nature of the human +soul belong the freedom and responsibility of the individual, as well as the +capacity of the species for progress. Compare <hi rend='italic'>A. Wagner</hi>, on Law +in the Apparently capricious Actions of Man (<foreign lang='de' +rend='font-style: italic'>Die Gesetzmässigkeit in den scheinbar +willkürlichen menschlichen Handlungen</foreign>, 1864, p. 63 seq.), in which, however, +he only goes so far as to show that law and freedom coexist side by +side as indubitable facts, while the seeming contradiction between the two +remains. <hi rend='italic'>Drobisch's</hi> Moralische Statistik und die menschliche +Willensfreiheit, 1867, is an important contribution to the literature of this +question.</note> whose operation does not depend on their +recognition by individuals, and, over which, only he can obtain +power who has learned to obey them. +(<hi rend='italic'>Bacon</hi>)<note place='foot'><hi rend='italic'>Whately</hi>, in +his fourth lecture (Lectures, 1831), shows in a very clear way, +how London is supplied and provisioned by men with no object in view but +their own personal interest, each of whom is possessed of but a very limited +knowledge of the aggregate wants of its inhabitants, and yet they work into +one another's hands, in the interests of the whole, purely instinctively, and +infinitely better, perhaps, than the operations of the most skillful governmental +commission, organized for the same purpose.</note><note place='foot'>Alphonsus of +Castile, the king astrologer of the thirteenth century, is +reported to have said, that the universe would have been much better constituted, +if the Creator had asked his advice beforehand. Astronomers like +Newton and Gauss have, certainly, judged otherwise.</note><note +place='foot'><hi rend='italic'>MacCulloch</hi> remarks, that there is an +essential difference between the physical +and the moral and political sciences in this, that the principles of the former +apply in all cases, those of the latter, only in the greater number of cases—a +thought very ably developed by <hi rend='italic'>Knies</hi>, loc. cit., +<hi rend='italic'>passim</hi>. If, with <hi rend='italic'>Newmarch</hi>, +(London Statistical Journal, 1861, p. 460 seq.), we could grant, that there is no +<q>law,</q> except where it is possible to predict each individual occurrence under +it, there would be no such thing even as the <q>laws</q> of the probability of life. +The word <q>element,</q> also, means something very different in Political Economy +from what it does in chemistry: a combination which might be broken +up, but which that science leaves it to other sciences to do. The <q>element</q> +of Political Economy is Man. Compare <hi rend='italic'>Pickford</hi>, Einleitung +in die politische Œk., 1860, 17.</note> But +<pb n='084'/><anchor id='Pg084'/> +it should never be lost sight of, that the natural laws governing +the public economy of a people, like those of the human +mind, are distinguished in one very essential point from those +of the material world. They have to do with free rational beings, +who, because they are thus free and rational, are responsible +to God and their conscience, and constitute in their aggregate +a species capable of progress. +</p> + +</div> + +<div> +<index index='toc' level1="Section XIV. Origin Of A Nation's Economy."/> +<index index='pdf' level1='Section XIV.'/> +<anchor id="Section_14"/> +<head type='sub'>Section XIV.</head> +<head>Origin Of A Nation's Economy.</head> + +<p> +The public economy of a people has its origin simultaneously +with the people. It is neither the invention of man nor +the revelation of God. It is the natural product of the faculties +and propensities which make man man.<note place='foot'>It is in this sense that +<hi rend='italic'>Aristotle</hi> (Polit., I, p. 1, 9 Schn.) says: φανερὸν, +ὅτι τῶν φύσει ἡ πόλις ἐστὶ, καὶ ὅτι ἄνθρωπος φύσει πολιτικὸν ζῶον. +According to <hi rend='italic'>L. Stein, Lehrbuch der Volkswirthschaft</hi>, +1858, 33, the political economy of a people begins at the point where the +overplus of individuals begins.</note> Just as it may +be shown, that the family which lives isolated from all others, +contains, in itself, the germs of all political organization,<note place='foot'>Compare +<hi rend='italic'>K. L. von Haller</hi>, Restauration der Staatswissenchaft, I, p. +446 ff.</note> so +may it be demonstrated, that every independent household +management contains the germs of all politico-economical +activity. The public economy of a nation grows with the +nation. With the nation, it blooms and ripens. Its season +of blossoming and of maturity is the period of its greatest +strength, and, at the same time, of the most perfect development +<pb n='085'/><anchor id='Pg085'/> +of all its more important organs.<note place='foot'>As <hi rend='italic'>Sallust</hi> +characterizes the political apogee of the Romans: <foreign lang='la' +rend='font-style: italic'>Optimis moribus et maxima concordia egit populus Romanus +inter secundum atque postremum bellum Carthaginiense.</foreign> See +<hi rend='italic'>Augustin</hi> (Civ. Dei II, 18). <hi rend='italic'>Puchta</hi> +(Institutionen, I, f. 83), with a great deal of good sense, distinguishes in every +people their individual character from that which they share in common with +all mankind. The latter exists among savage nations, only as a germ buried +under the overpowering weight of that which is special to them. The period +of the perfect equilibrium of both elements is coincident with that of a +people's real culture. In the further course of development, the latter, more +general element becomes gradually over-powerful, destroys the individual, +and thus dissolves nationality.</note> In respect to it, the +economic endeavors of any epoch may be said to be represented +by two great parties, the one progressive, the other, +conservative. The former would hasten the period of the nation's +richest and most varied development, the latter postpone +its departure as long as possible; and hence it comes, that a +people's economic decline is sometimes taken for progress, by +the former class, and their progress for decline, by the latter. +As a rule, the union and equilibrium of these parties are wont +to be the greatest at the period of maturity, because, then, intelligence +and the spirit of sacrifice for the common good are +most general.<note place='foot'>Thus formulated, the principles +of the two great parties, evidently, no more contradict +one another than their ordinary watchwords, <q>freedom</q> +and <q>order,</q> are in contrast with one another. Hence all the great statesmen +of the best periods of history have adopted the middle course recommended +by Aristotle.</note> +</p> + +<p> +Finally, the public economy of a nation declines with the +people. (<hi rend='italic'>Infra</hi>, § 263 ff.) +</p> + +</div> + +<div> +<index index='toc' level1='Section XV. Diseases Of The Social Organism.'/> +<index index='pdf' level1='Section XV.'/> +<head type='sub'>Section XV.</head> +<head>Diseases Of The Social Organism.</head> + +<p> +If the public economy of a people be an organism, we must +expect to find that the perturbations, which affect it, present +some analogies to the diseases of the body physical. We +may, therefore, hope to learn much that may be of use in +<pb n='086'/><anchor id='Pg086'/> +practice, from the tried methods of medicine.<note place='foot'>See +<hi rend='italic'>Lotze</hi>, Allgemeine Pathologie, 1842. +<hi rend='italic'>Ruete</hi>, Lehrbuch der allgemeinen +Therapie, 1852. These analogies, obviously, should not be pushed too far. +One of the most essential differences between the two consists in this, that +in the diseases of the body politic, physicians and nurses are themselves part +of the diseased organism.</note> In the diseases +of the body economic, it is necessary to distinguish accurately, +between the nature of the disease and its external symptoms, +although it may be necessary to combat the latter directly, +and not merely with a view to alleviation. Following the +example of the physician, we should particularly direct our +attention to the curative method which nature itself would +pursue, were art not to intervene. <q>The curative power of +nature is no peculiar power; it is the result of a series of happy +adjustments, by means of which the morbid perturbation itself +sets in motion the springs which may either destroy the evil +or paralyze its action. It is, in fact, nothing but the original +power which formed the body and preserves its life in contact +with the external causes of perturbation and the internal disorder +provoked by these causes.</q> (<hi rend='italic'>Ruete.</hi>) +</p> + +</div> + +</div> + +<pb n='087'/><anchor id='Pg087'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter II. Position Of Political Economy In +The Circle Of Related Sciences.'/> +<index index='pdf' level1='Chapter II.'/> +<head type='sub'>Chapter II.</head> +<head>Position Of Political Economy In +The Circle Of Related Sciences.</head> + +<div> +<index index='toc' level1='Section XVI. Political Or National Economy.'/> +<index index='pdf' level1='Section XVI.'/> +<head type='sub'>Section XVI.</head> +<head>Political Or National Economy.</head> + +<p> +By the science of national,<note place='foot'>See <hi rend='italic'>Ahren's</hi> +very beautiful exposition, Organische Staatslehre, 1850, I, 77. National economy +(<foreign lang='de' rend='font-style: italic'>Nationalökonomie</foreign>=public +economy); national economics (<foreign lang='de' +rend='font-style: italic'>Nationalökonomik</foreign>=the science of public economy). +The latter term was first proposed, in Germany, in 1849, by +<hi rend='italic'>Uhde</hi>; the former was naturalized therein 1805: +<hi rend='italic'>v. Soden</hi>, Nationalökonomie, 1805; <hi rend='italic'>Jacob</hi>, +Grundsätze der N. Œk., 1806. In Italy, <hi rend='italic'>G. Ortes</hi> used it as +early as 1774, in his Dell Economia nazionale, and in England it was employed, even in +1867, by <hi rend='italic'>Ferguson</hi>, History of Civil Society, III, p. 4. +Holland. Volkshuyshoudkunde. As a rule, outside of Germany, the term political +economy, <foreign lang='fr' rend='font-style: italic'>économie politique</foreign>, +one which is somewhat calculated to mislead the student, is used. (Thus +<hi rend='italic'>Montchrêtien sieur de Vatteville</hi>, Traité de l'Economie +<foreign lang='fr' rend='font-style: italic'>politique</foreign>, 165; later +<hi rend='italic'>J. J. Rousseau</hi>, Discours sur l'Economie politique, later yet +the Traités d'E. p., <hi rend='italic'>Maillardère</hi>, <hi rend='italic'>Page</hi> +and <hi rend='italic'>J. B. Say</hi>, 1801-1803). Political Economy +(<hi rend='italic'>Sir J. Stewart</hi>, Inquiry into the principles of P. E., 1767); +also Public Economy (<hi rend='italic'>Petty</hi>, several Essays, 1682, 35); +<hi rend='italic'>Economia politica</hi> or <hi rend='italic'>pubblica</hi> (the +latter by <hi rend='italic'>Verri</hi> and <hi rend='italic'>Beccaria</hi>). The title +<hi rend='italic'>Economia civile</hi> (<hi rend='italic'>Genovesi</hi>, Lezioni, +d'Ec. civ. 1769), has found few adherents. It has, however, been used recently by +<hi rend='italic'>Cernuschi</hi>: Illusions des Sociétés coöperatrices (1866). The +term, <foreign lang='fr' rend='font-style: italic'>Economie sociale</foreign> has +been used all the more in France (Dunoyer, Nouveau Traité d'Ec. soc., 1830), since +recommended by <hi rend='italic'>J. B. Say</hi>, and employed by +<hi rend='italic'>Buat</hi> (Des vrais Principes de l'Origine et de la Filiation +du Mot Economie politique, in the Journal des Economistes, 1852.)</note> +or Political Economy, we understand +the science which has to do with the laws of the development +of the economy of a nation, or with its economic national +life. (Philosophy of the history of Political Economy, +<pb n='088'/><anchor id='Pg088'/> +according to von Mangoldt.) Like all the political sciences, or +sciences of <emph>national life</emph>, it is concerned, on the one hand, with +the consideration of the individual man, and on the other, it +extends its investigations to the whole of human kind.<note place='foot'><hi +rend='italic'>Stein</hi>, Lehrbuck der V. W., prefaces his <q>Science of Public +Economy</q> (pp. 329-358), by a <q>Science of Economy</q> (pp. 96-328), which, however, +treats individual economies only as the elements of the national economy. A science +of household or isolated individual economy could, of course, treat only +of the economic relations of anchorites. Those who object that Political +Economy is not a real whole will be satisfied with the definition of it given +by <hi rend='italic'>F. I. Neumann</hi>: <q>The Science of the bearing of household +or separate economies to one another, and to the state as a whole.</q> (Tüb. +Zeitschr., 1872, 267.)</note> +</p> + +<p> +National life, like all life, is a whole, the various phenomena +of which are most intimately connected with one another. +Hence it is, that to understand one side of it scientifically, it is +necessary to know all its sides. But, especially, is it necessary +to fix one's attention on the following seven: language, religion, +art, science, law, the state and economy.<note place='foot'>In so far +as these various institutions are concerned, with objects beyond +the human, or supernatural, only the manner in which they are accepted, or +in which they are made use of, is an expression of national life.</note> Without +language, all higher mental activity is unthinkable; without religion, +all else would lose its firmest foundation and highest +aim. Through art, alone, do all these sides attain to beauty; +through science, alone, to clearness. Law arises, the moment +conflicts of will become inevitable and an adjustment is desired. +The state has to do with them, in so far as they have any external +force or validity. Indeed, there is no human relation, +not even the highest and the sweetest, but has its economic +interests. It is, therefore, natural, that each of the sciences +which relate to these various regions of human life should, in +part, presuppose all others, and, in part, serve as a basis for +them.<note place='foot'>Thus, <hi rend='italic'>J. Tucker</hi> thinks +that religion, the state and commerce, are only +the parts of one same general plan: no institution, therefore, can be called +appropriate, within the limits of the province of any one of these, if it be +clearly in opposition to the other two, because the harmony of God's work +can not be broken up. (Four Tracts and two Sermons on political and commercial +Subjects, 1774, Serm. I.)</note> +</p> + +<pb n='089'/><anchor id='Pg089'/> + +<p> +But in the midst of this universal relationship, it is easy to +see that law, the state and economy constitute a family, as +it were apart and more closely connected. (The social sciences, +in the narrower sense of the expression.) +</p> + +<p> +They are confined almost exclusively to what Schleiermacher +has called <q>effective action</q> (<foreign lang='de' +rend='font-style: italic'>wirksame Handeln</foreign>), while art and +science belong almost entirely to the <q>action of representation</q> +(<foreign lang='de' rend='font-style: italic'>darstellenden Handeln</foreign>); +and religion and language combine both kinds. Law, the state, and economy too, have +their roots so deep in the physical and intellectual imperfection +of man, that we can scarcely imagine their continuance +beyond his life on earth (Gospel of Matthew, 22, 30). But +within these limits, their several provinces and the subjects +with which they are concerned are almost coincident. They +only consider these from different points of view: the science +of politics from that of sovereignty; the science of Political +Economy from that of the satisfaction of the requirement of +external goods by the people; the science of law from that of +the prevention or the peaceable adjustment of conflicts of will. +As every economic act, consciously or unconsciously, supposes +forms of law, so, by far the greater number of the laws relating +to rights, and the greater number of judgments in the +matter of rights, contain an economic element. In numberless +cases, the science of law gives us only the external <emph>how</emph>; the +deeper <emph>why</emph> is revealed to us by the science of Political +Economy.<note place='foot'><hi rend='italic'>Riedel</hi> (National Œkonomie, +1838, I, p. 178 seq.), gives a good illustration of the difference +between the manner in which law and Political Economy look +at the same question. The law (to avoid strife, or to settle controversies) +looks upon the debtor as the owner of the capital, and lets him run all the +risk; Political Economy, on the other hand, looking deeper into the nature +of the contract, reaches an entirely opposite result. The mere jurist has a +dangerous tendency to undervalue the reign of the laws of nature; the mere +political economist, just as readily, undervalues the element of free will. +(<hi rend='italic'>Arnold</hi>, Cultur und Recht I, 97.) In this respect, +the two sciences complement each other very well. <hi rend='italic'>Roesler</hi> +(<hi rend='italic'>Hildebrand's</hi> Jahrb., 1868, II, and 1869, +I.) shows, and he does not exaggerate the fact, that political economists have +made altogether too little use of the results of the science of +law.</note><note place='foot'>Jurists will always experience +the want of divesting their isolated ideas of +their purely accidental character, by grouping them together in such a manner +as to make them constitute a complete and independent whole. One +must be possessed of profound knowledge to perceive their necessary connection +from an historico-juridical point of view. Political Economy, with +its characteristic accuracy and practical utility, can best take its place, at the +present time. It is in the greater number of legal questions, the systematically +elaborated science of <q>the nature of the thing.</q> See the able beginnings +of a policy of legislation and higher history of law, based on Political Economy, +by <hi rend='italic'>H. Dankwardt</hi>: N. Œk. und Jurisprudenz, 3 Hefte, 1857, and my +preface to <hi rend='italic'>Dankwardt's</hi> Nationalökonomisch-civilistischen +Studien, 1862.</note> +And, as to the state, who, for instance, can appreciate +<pb n='090'/><anchor id='Pg090'/> +the political significance of a nobility, without understanding +the economic character of rent, and of the possession of large +landed estates? Who can politically appreciate the inferior +classes of society, unless initiated into a knowledge of the laws +that govern wages and population? It were much easier to +cultivate psychology without physiology! <q>The state is +society protected by force</q> (<hi rend='italic'>Herbart</hi>). There are two bases +to all material power:<note place='foot'>The intellectual power of a people +depends upon the vigorous and harmonious development of all seven +spheres of life.</note> wealth and warlike ability (χρήματα—ναυτικά, +according to Thucydides); and how much the latter +has need of the former is well expressed by the familiar saying +of Montecuccoli: <q>Money is not only the first, but the second and +third condition of war.</q><note place='foot'><hi rend='italic'>Montecuccoli</hi>, +Besondere und geheime Kriegsnachrichten (Leipzig, 1736). +A very similar judgment by Cæsar in <hi rend='italic'>Dio Cass.</hi>, XLII, 49.</note> +</p> + +<p> +Frederick the Great calls finance the pulse of the state, +and Richelieu, the point of support which Archimedes was in +search of, to move the world. In all modern nations, the history +of the debates on the raising of revenue and of the passing +of budgets is, at the same time, the history of parliamentary +life; and most great revolutions, the Reformation of the sixteenth +century not excepted, if not caused have been promoted, +by financial embarrassment. +</p> + +</div> + +<pb n='091'/><anchor id='Pg091'/> + +<div> +<index index='toc' level1='Section XVII. Sciences Relating To National Life.—The +Science Of Public Economy.—The Science Of Finance.'/> +<index index='pdf' level1='Section XVII.'/> +<head type='sub'>Section XVII.</head> +<head>Sciences Relating To National Life.—The Science +Of Public Economy.—The Science Of Finance.</head> + +<p> +If, by the public economy of a nation, we understand economic +legislation and the governmental guidance or direction +of the economy of private persons,<note place='foot'><hi rend='italic'>Bülan</hi>, +Handbuch der Staatswirthschaftslehre, 1835.</note> the science of public economy +becomes, so far as its form is concerned, a branch of +political science, while as to its matter, its subject is almost coincident +with that of Political Economy. Hence it is, that so +many writers use the terms public economy, or the economy +of the state (<foreign lang='de' rend='font-style: italic'>Staatswirthschaft</foreign>), +and National Economy (<foreign lang='de' +rend='font-style: italic'>Volkswirthschaft</foreign>), +as synonymous.<note place='foot'>Thus <hi rend='italic'>v. Justi</hi>, +Staatswirthschaft 1755. <hi rend='italic'>Kraus</hi>, Staatswirthschaft, published +by Auerswald, 1808; <hi rend='italic'>Schmalz</hi>, Handbuch der Staatswirthschaft, 1808. +More recently, <hi rend='italic'>Hermann</hi>, Staatswirthschaftliche Untersuchungen, +1832. In France, the expression <foreign lang='fr' rend='font-style: italic'>économie +de l'état</foreign>, is very seldom used. <hi rend='italic'>Gavard</hi>, +Principes del'E. d'Etat, 1796.</note> The hypothesis, in accordance +with which, this science should discard all consideration of the +state, or should refuse to presuppose its formation,<note place='foot'><hi +rend='italic'>Pölitz</hi>, Staatswissenschaften im Lichte unserer Zeit, II, 3. +Compare <hi rend='italic'>Lotz</hi>, Handbuch der Staatswirthschaft (2d ed., 1837), +I, 10 ff.</note> would lead +us into an ideal region, difficult to define, probably entirely impossible, +and inaccessible to experience. +</p> + +<p> +Just as clear, is the close connection between politics and +Political Economy, in the case of the science of finance, or +of the science of governmental house-keeping, otherwise the +administration of public affairs. The latter, evidently, so far +as its end is concerned, belongs to politics, but so far as the +means to that end are concerned, to National Economy. As +the physiologist cannot understand the action of the human +body, without understanding that of the head; so we would +not be able to grasp the organic whole of national economy, if +we were to leave the state, the greatest economy of all, the +<pb n='092'/><anchor id='Pg092'/> +one which uninterruptedly and irresistibly acts on all others, +out of consideration.<note place='foot'>Our view of Political Economy holds a +middle place between opposed extremes. The view expressed by <hi +rend='italic'>Whately</hi>, Lectures on Political Economy (1831), No. 1, and +covered by the proposed term <q>catalactics,</q> is by far too narrow. Similarly, +<hi rend='italic'>Macleod</hi>, Elements of Political Economy, 1858, I, 11. +A like objection may be raised to the earlier title of <hi +rend='italic'>Pritzwitz's</hi> book: Die Kunst reich zu werden,—the art of +growing rich. On the other hand, <hi rend='italic'>Dunoyer</hi>, Liberté du Travail +(1845), L. IX, ch. I, goes too far altogether: <q>not only in what manner a nation +grows rich, but according to what laws it best succeeds, in the execution of all its +functions.</q> And so <hi rend='italic'>Storch</hi>, Handbuch, translated into German +by <hi rend='italic'>Rau</hi>, I, 9. Many modern writers define Political Economy +simply as the theory of society; for instance, <hi rend='italic'>Scialoja</hi>, Principj. +dell'Economia sociale, 1840. <hi rend='italic'>Cibrario</hi>, E. polit. del medio +Evo, III, 1842.</note> +</p> + +<p> +By the term <hi rend='italic'>police</hi>, we mean the state power whose office it +is, without mediation, to prevent all disturbances of external order +among the people.<note place='foot'>For the many and various definitions of the +police power, see <hi rend='italic'>von Berg</hi>, Handbuch des Polezeirechts, I, +1-12; <hi rend='italic'>Butte</hi>, Versuch der Begründung eines System der Polezei +(1807), 6 ff.; <hi rend='italic'>Rosshirt</hi>, Ueber den Begriff der Staatspolizoi +(1817), 34 ff. One of the principal difficulties is, that the practical domain of +the police power is, in consequence of the successive grades of civilization +through which a people passes, subject to greater modifications than any +other state power. We call attention especially to the expressions <q>without +mediation, to prevent,</q> and <q>external order,</q> in our definition. The church, +the school, the administration of justice etc., act mediately towards the prevention +of such disturbances; and there are many other institutions which +offer immediate protection to order of a higher and more intellectual nature.</note> +It may extend its action into all the +domains of national life mentioned above, whenever external +order is there threatened, or calls for protection; but its action is +important especially in the domains of law and economy. The +science of the <hi rend='italic'>police power</hi>, therefore, of all those doctrines +resulting from investigation into national life, takes up only +one phase of each of them; and the phases of doctrine thus +taken up, it combines into a whole, for practical ends. Its relation +to those sciences is like that of surgery to the medical sciences, +or like the science of legal procedure to the science of +law. +</p> + +</div> + +<pb n='093'/><anchor id='Pg093'/> + +<div> +<index index='toc' level1='Section XVIII. Sciences Relating To National +Life.—Statistics.'/> +<index index='pdf' level1='Section XVIII.'/> +<head type='sub'>Section XVIII.</head> +<head>Sciences Relating To National Life.—Statistics.</head> + +<p> +Statistics we call the picture or representation of social life +at given periods of time, and especially at the present time, +drawn on a scale in accordance with the laws of development +discovered by means of the theoretical sciences above named; +as it were, a section through the stream. (<hi rend='italic'>Schlözer</hi> calls +them: history standing still.)<note place='foot'>See the great +number of earlier definitions collected in <hi rend='italic'>R. von Mohl</hi>, Gesch. +und Literatur der Staatswissenschaften III, pp. 637 ff. There are two principal +groups of them, the one of which considers it as the science of things +of political note, the other as the science of actual or past conditions.</note> +Statistics, as thus defined, are +as far removed from saying too much as from saying too little. +To give a complete tableau of their object, statistics should, +of course, take in the life of a people, in all its aspects. But +they should look upon such facts only as their own property, +the meaning of which they are able to understand; that is, +such only as can be ranged under known laws of development. +Unintelligible facts are collected only in the hope of +penetrating into their meaning in the future, by comparing +them with one another. In the meantime, they are to the statistician +only what unfinished experiments are to the investigator +of nature. +</p> + +<p> +The view is daily gaining ground, that statistics should be +occupied—without, however, confining themselves to them—with +present facts, with <q>facts affecting society and the state, +which are susceptible of being expressed in figures.</q><note place='foot'>See +<hi rend='italic'>Dufau</hi>, Traité de Statistique, 1840; <hi rend='italic'>Moreau +de Jonnès</hi>, Elements de Statistique, 1847; <hi rend='italic'>Knies</hi>, Die +Statistik als selbstständige Wissenschaft, 1850. <hi rend='italic'>B. Hildebrand</hi>, +in his Jahrbüchern, 1866, I etc., but especially <hi rend='italic'>Quetelet's</hi> works. +For the contrary view, see <hi rend='italic'>Fallati</hi>, Einleitung in die +Wissenschaft der Statistik der St., 1843; <hi rend='italic'>Jonak</hi>, Theorie der +Statistik, 1856, and <hi rend='italic'>Heeren</hi>, in the Gött. +Gelehrten Anzeigen, 1806, No. 84, 1807, 1302.</note> The +more deceptive the immediate observation of an individual, +isolated fact is, in cases where a great number of simultaneous +<pb n='094'/><anchor id='Pg094'/> +or scattered individual isolated facts of national life should be +observed, the more important it is to discover proper numerical +relations, by noting all the like acts or experiences of men, +the time and place in question, and the relation of the aggregate +of these phenomena, to the sum-total of the population, +or to the sum-total of corresponding phenomena in other +places. When this is done, and the facts are completely enumerated +and correctly recorded, there is no danger of subjective +error. And this species of <q>political and social measuring,</q> +as Hildebrand calls it, may be applied, not only to +quantities, but to all qualities accessible to the observation of +the senses; since the individual or isolated qualities of the +things enumerated, may be again made objects of enumeration. +Without doubt, this mode of numerical procedure is the +most perfect for all those divisions of statistics in which it can +be followed; and hence, it should be our endeavor to make +the numerical side of statistics as comprehensive as possible. +But, one side of a science is not a science itself. As there is +no natural science proper called microscopy, embracing all +the observations made by means of the microscope, so care +should be taken not to deduce the principle of a science from +the chief instrument it employs. There will always be many +and important facts in national life which can not be subjected +to numerical calculation, although they may be established +with the usual amount of historical certainty. Were statistics +to be limited, in the manner mentioned above, they would remain +a collection of fragments, and instead of being a science, +properly so-called, become a method.<note place='foot'>So thinks <hi rend='italic'>v. +Rümelin</hi> (Tübinger Zeitschr., 1863, 653 ff.); and he recommends +in place of statistics an independent branch of learning bordering on history +and geography, to be called demography. His statistics is a science auxiliary +to all the experimental sciences of man, just as criticism and hermeneutics +are a methodological science auxiliary to many sciences, otherwise different. +It would be difficult to justify the use of the name statistics for such a science, +as such a science corresponds to neither of the two meanings of the word +<hi rend='italic'>status</hi> (state—condition).</note> +</p> + +<p> +Besides, it is evident, that, of statistics in general, economic +<pb n='095'/><anchor id='Pg095'/> +statistics constitute a chief part, and precisely the part most +accessible to numerical treatment. As these economic statistics +need to be always directed by the light of Political Economy, +they also furnish it with rich materials for the continuation +of its structure, and for the strengthening of such foundations +as it already has. They, are, moreover, the indispensable condition +of the application of economic theorems to practice. +</p> + +</div> + +<div> +<index index='toc' level1='Section XIX. Private Economy—Cameralistic Science.'/> +<index index='pdf' level1='Section XIX.'/> +<head type='sub'>Section XIX.</head> +<head>Private Economy—Cameralistic Science.</head> + +<p> +The meaning of the term cameralistic science (<foreign lang='de' +rend='font-style: italic'>Cameralwissenschaft</foreign>) +can be explained only by the history of the cameralistic +system.<note place='foot'>The ancients understood by the term καμάρα +<hi rend='italic'>camera</hi>, covered places such especially as were vaulted, also +vaults of the most varied kind. Compare <hi rend='italic'>Herod</hi>, I, 199; +<hi rend='italic'>Diod.</hi>, II, 9; <hi rend='italic'>Strabo</hi>, XI, 495; +<hi rend='italic'>Arrian</hi>, Exp. <hi rend='italic'>Alex.</hi>, VII, 5, 55; +<hi rend='italic'>Dio Cass</hi>. XXXVI, 32; <hi rend='italic'>Sallust</hi>, B. C., 55; +<hi rend='italic'>Cicero</hi>, ad Q. fratrem III, 1; <hi rend='italic'>Plin.</hi>, H. +N. XXX, 27; <hi rend='italic'>Seneca</hi>, Epist., 86; <hi rend='italic'>Tacit.</hi> +Hist. III, 47; <hi rend='italic'>Sueton</hi>, Nero, 34. During the middle ages, the +meaning treasure-chamber (<foreign lang='de' +rend='font-style: italic'>Schatzkammer</foreign>) became predominant: <foreign lang='la' +rend='font-style: italic'>camera est locus, in quem thesaurus recoilligitur, vel +conclave, in quo pecunia reservatur</foreign> (<hi rend='italic'>Ocham</hi>, Cap. Quid +sit Scaccarium). It gradually became synonymous with finance,—from the time of +Charlemagne, or at least since Louis II. (Charter of 874). See +<hi rend='italic'>Ducange</hi>, Glossarium, v. Camera, and +<hi rend='italic'>Muratori</hi> Antiquitt. Ital., I, 932 ff.</note> +From the end of the middle ages, we find, +in most German countries, an institution called the Council +(<foreign lang='de' rend='font-style: italic'>Kammer</foreign>) whose +province it was to administer the public +domain, and to watch over regal rights. At first, a mere +governmental commission, it was not long before it developed +into an independent board. This change had taken place in +Burgundy as early as the year 1409. It was in that country +that the emperor Maximilian became acquainted with the institution; +and by the erection of the aulic councils at Innspruck +and Vienna (1498 and 1501), he gave the principal impulse to +the imitation of it in Germany. As, at that time, the division +of labor was very little developed, and personal and collegial +authority all the more developed in consequence, it is easy to +<pb n='096'/><anchor id='Pg096'/> +conceive that a great part of all the new and rapidly increasing +business of police administration was confided to these +councils. They were charged especially with what is known +to-day as economic police (<foreign lang='de' +rend='font-style: italic'>Wirthschaftspolizei</foreign>) and an important +part of the administration of justice, in its lower departments, +was turned over to their subordinates. The most +eminent men who wrote, in the seventeenth century, on cameralistic +matters, laid great stress on the point, that it was the +duty of the aulic councils to entertain not only fiscal questions, +but that it was within their province also, to determine questions +of economic police.<note place='foot'><q>A husbandman must plow and manure his land +if he would reap a harvest from it. He must fatten his cattle if he would slaughter +them; and furnish his cows with good fodder if he would have them give good milk. +In like manner, a prince should begin by assuring his subjects healthy and abundant +food, if he would take anything from them.</q> <hi rend='italic'>von Schröder</hi>, +Fürstl. Schatz-und Rentkammer (1686), preface, § 11. <hi rend='italic'>Von Horneck</hi> +before him, Oesterreich über alles wann es nur will, p. 220, ed. of 1707, had expressed +the idea that the watchful solicitude for the public economy of the country was +no <hi rend='italic'>parergon</hi>, no <hi rend='italic'>appendix</hi>, to the council +(<foreign lang='de' rend='font-style: italic'>Kammer</foreign>), but its real basis, and +that it embraced many subjects which had nothing in common with the +cameralia (<q><foreign lang='de' +rend='font-style: italic'>Cameralien</foreign></q>).</note> +The interest of absolute princes +must have greatly favored these cameralistic institutions, for +they were in their hands docile tools, which escaped the annoying +intervention of the states of their realms. +</p> + +<p> +By degrees, the knowledge necessary to these council +officials, and which found no place in the lectures on law, were +formed into a special body of doctrine. After such men as +Morhof and Thomasius had prepared the way,<note place='foot'><hi +rend='italic'>Morhof</hi>, Polyhistor (1688), III. <hi rend='italic'>Thomasius</hi>, +1728, Cautelæ circa præcognita Jurisprudentiæ (1710), ch. 17. (Cautelæ circa studium +œconomicum.) Also, in his lectures on <hi rend='italic'>Seckendorff's</hi> +<q>Teutschen Fürstenstaat.</q> Compare <hi rend='italic'>Roscher</hi>, Gesch. der N. +Œk. in Deutschland, 328 ff.</note> Frederick +William I., himself a clever cameralist, and author of the masterly +financial system of Prussia, took the important step of +founding, at Halle and Frankfurt on the Oder, special chairs +of economy and cameralistic science; which, considering the +time, were very ably filled by Gasser and Dithmar. (1727.) +<pb n='097'/><anchor id='Pg097'/> +There was thus formed in the German universities a distinct +school of cameralists, which, through Jung, Rössig and +Schmalz, reached to the nineteenth century. The term cameralistic +science, the creature of chance, was used, it must be +said, with very various limits to its meaning.<note place='foot'>While +<hi rend='italic'>Dithmar</hi> (1731) distinguishes economy-police and cameralistic +sciences and restricts the latter to finance and taxation; +<hi rend='italic'>Darjes</hi> (1756) comprises under the name of cameralistic science, +economy (municipal and rural), and police, as well as cameralistic subjects in the +strict sense of the term, that is, the public, domain and regal rights. While +<hi rend='italic'>Nau</hi> (1791), in his <q>Ersten Linien der C.,</q> treats only of +the branches of private economy, <hi rend='italic'>Schmalz</hi>, (1797) treats also of +national or public economy, and <hi rend='italic'>Rössig</hi> (1792) divides +cameralistic science into the doctrine of the public demesne and regal rights +(cameralistic science in the narrower sense), and the doctrine of taxation and +police.</note> +</p> + +<p> +However, Political Economy in Germany developed out of +the science of law and the cameralistic sciences, while in England +and Italy it had its origin chiefly in the study of questions +of finance and foreign commerce. +</p> + +</div> + +<div> +<index index='toc' level1='Section XX. Private Economy. (Continued.)'/> +<index index='pdf' level1='Section XX.'/> +<head type='sub'>Section XX.</head> +<head>Private Economy. (Continued.)</head> + +<p> +If we abstract from cameralistic science as it was understood +in the last century, what it has in common with all economy,<note place='foot'>Thus, +for instance, all that concerns domestic economy, book-keeping and +private financial administration.</note> +and therefore with public economy, next that which belongs to +the aggregate of governmental economy, there remains only a +number of rules, such as those which govern the principal +branches of private business, and which indicate how they are +to be carried on with the greatest advantage to those who engage +in them. Such are forest and rural economy, mining +science, technology, including architecture, and all that concerns +founderies, and commercial science. Now that the expression +cameralistic science is altogether obsolete, the aggregate +<pb n='098'/><anchor id='Pg098'/> +of these might be designated by the name private economy. +Obviously, we should have here, neither a simple nor pure science, +but only a compilation of natural-philosophical and economic +lemmas. Thus, in agriculture, for instance, a knowledge +of the different kinds of soil, of the tillage of land, of the +different plants and animals etc., belongs to the domain of natural +science; while all that relates to the cost of production, the +employment of capital, the wages of labor, the exchange of +products, net product and the price of land, are purely politico-economical. +The political economists also require a knowledge +of the natural side of the cameralistic sciences. Such a +knowledge is indispensable to every detailed and living theory, +and especially to the application of economic science to practice. +The great difference lies in this, that the cameralist interests +himself in the production of material goods for their own +sake, while the political economist regards them only in their +relations to national life.<note place='foot'><p><hi rend='italic'>John Stuart +Mill</hi>, Principles of Political Economy (1848), I, p. 25, draws +a distinction between the physical conditions which influence the economic +situation of a people, and the moral and psychological conditions; which last +have their origin in social institutions or in the fundamental principles of human +nature. Only the latter belong to the domain of Political Economy. +According to <hi rend='italic'>J. B. Say</hi>, Traité, Introd., this science embraces +at once agriculture, manufactures and commerce, but only in their relation to the +increase or diminution of wealth, and does not concern itself with the means employed +to reach the desired end. As a rule, says <hi rend='italic'>Arndt</hi> (Naturgemässe +Volkswirthschaft, 1851, p. 16), it takes into consideration not so much things themselves +as their exchange value. <hi rend='italic'>Lotz</hi> (Handbuch, I, p. 6 seq.), in like +manner, defines Political Economy—the science of the one activity which constitutes +the basis of all industries etc. <hi rend='italic'>F. G. Schulze</hi> (Ueber +volkswirthschaftliche Begründung der Gewerbswissenschaften, 1826), characterizes +Political Economy as the science of the fundamental conditions of the well-being of a +people, in so far as they lie in human nature. +</p> +<p> +When <hi rend='italic'>Adam Smith</hi> (book IV, c. II) says that the government in +respect to matters of economy is inferior to the first best person engaged in industrial +pursuits, he is right only from a technic point of view. And when +<hi rend='italic'>Stewart</hi>, on the other hand, vindicates for the state the office +of a pater-familias (book II, ch. 13), he evidently means only in national economical +matters.</p></note> +</p> + +<p> +It would seem, moreover, that political economists, especially +<pb n='099'/><anchor id='Pg099'/> +in Germany, have attached too much importance to putting +formal bounds to their special science. Why not rather follow +the example of the students of nature who care little +whether this or that discovery belongs to physics or chemistry, +to astronomy or mathematics, provided, only, very many +and important discoveries are made?<note place='foot'>See also +<hi rend='italic'>Rau</hi> (Ueber die Cameralwissenschaft, Entwickelung ihres Wesens +und ihrer Theile, 1825); <hi rend='italic'>Baumstark</hi> (Cameralistische +Enclycopädie, 1835).</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XXI. What Political Economy Treats Of.'/> +<index index='pdf' level1='Section XXI.'/> +<head type='sub'>Section XXI.</head> +<head>What Political Economy Treats Of.</head> + +<p> +Political Economy treats chiefly of the material interests of +nations. It inquires how the various wants of the people of a +country, especially those of food, clothing, fuel, shelter, of the +sexual instinct etc., may be satisfied; how the satisfaction of +these wants influences the aggregate national life, and how +in turn, they are influenced by the national life. (Gospel of +Matth., 4, 4.) This alone suffices to enable us to estimate the +importance of the science. The relation of virtue to wealth +is likened by Bacon to that of an army to its baggage. In +Xenophon's opinion, wealth is really useful only to him who +knows how to make a good use of it. From an economic point +of view, the happiest man is he who has accumulated most, +honorably, and used it best.<note place='foot'><hi rend='italic'>Xenoph.</hi> Œconom. +I, 8 ff. Cyrop. VIII; 2, 23. He saw with equal clearness +the moral light and shade of wealth. (Œcon. XI. 9. Conviv. 4. Memor. +I, 6. Cyrop. VIII, 3, 35 ff. Hiero 4.)</note> That, even in a material sense, +the intellect of a people is their most important element, is evident +from the example of the Chinese, who were so long acquainted +with printing, powder, and the mariner's compass, +without, by their means, attaining to intelligent public opinion, +forming a good army, or coming to an understanding of the +art of navigation, to any great extent. +</p> + +<p> +The undervaluing of economic matters, for which ages of +inferior cultivation, our own middle ages for instance, are now +<pb n='100'/><anchor id='Pg100'/> +praised and now blamed, was really a rare exception even +during these ages.<note place='foot'><hi rend='italic'>Thomas Aquinas</hi> +values earthly goods according to the end they are made to serve; when +used for a good purpose, they have a mediately true value. Hence it was +an error of the stoics to despise them under all circumstances. +(Summa Theol. II, 2. Qu., 50, 3. 58, 2. 59, 3. 125, 4.)</note> +Other kinds of acquisition and enjoyment +then occupied the foreground; but there never was a time, +when gain and enjoyment in general were not favorite objects +of pursuit, and held in high esteem. The physical wants of +uncultured men cry out much louder than intellectual ones. +(§ <ref target="Section_2">2</ref>, +<ref target="Section_14">14</ref>.)<note place='foot'><hi rend='italic'>Whateley</hi> +considers the savage much beneath the materialist, instead of +superior to him. The latter possesses, although he frequently abuses it, the +faculty of self-control and forethought, which is entirely wanting in the +former. (Lectures, No. 6.) <hi rend='italic'>Dunoyer</hi>, De la Liberté du Traväil, +liv. IV, ch. I, 8, an apology for the moral wholesomeness of civilization, since promotive +of military prowess, favorable to the development of the sciences, and even +poetical. <hi rend='italic'>Baudrillart</hi>, Manual d'Œkonomie politique, 1857, 24. +See <hi rend='italic'>Fallati</hi>, Ueber die sogennannte materiellen Tendenz der +Gegenwart, 1842.</note> On the other hand, in over-cultivated ages, when +decay begins, an over-estimation of material things is wont to +become general.<note place='foot'>See the inscription on the tomb of Sardanapalus: +ταῦτ᾽ ἔχω, ὄσσ᾽ ἔφαγον καὶ ἐφύβρισα καί μετ᾽ ἔδωτος τέδπν ἔπαθον. (Strabo, XIV, +672.) <hi rend='italic'>Isaiah</hi>, 122, 13, 56, 12, and the book of wisdom (2) +characterizes the view of the fallen Jewish people. In Greece, the Cynic and Epicurean +schools were only different phases of the same degeneration. <q>Thirst, for +money, and nothing else, will be the ruin of Sparta!</q> (<hi rend='italic'>Cicero</hi>, +De Offic, II, 22, 77.) See the magnificent description by Demosthenes, in which he shows +the over-estimation of material things to be the principal cause of the decline +of Athens, and in which he lays great stress on the fact, that Athens, on its +decay, had a larger population, more wealth, ships, and evidences of external +power, than in its golden age. (Phil., III, 120 seq.) Also Phil., IV, 144, +cautions us against the Manchester criterion of national prosperity. See +<hi rend='italic'>Plato</hi>, De Rep., VIII. In Rome, the principle <foreign lang='la' +rend='font-style: italic'>ommia venalia esse</foreign> was a chief element in the total +decline and fall of the republic. (<hi rend='italic'>Sallust</hi>, Cat., 10 ff., Jug., +8 ff.) In an age when people think they can do everything with money, the +ruin of all things is the last end of mercantile, financial and political speculation. +(<hi rend='italic'>Condillac</hi>, Le Commerce et le Gouverment, 1776, II, 18.)</note> +The mere servants of mammon, whether +as political economists or as private individuals, may see their +depravity faithfully reflected in communism as in a mirror. +We should not overlook the fact that it is with whole nations +<pb n='101'/><anchor id='Pg101'/> +as with the individual man who amasses his own fortune. He +reaches the culminating point of his wealth generally after he +has passed the prime of life. The most flourishing period of +a nation's existence is wont just to precede its decay, and to +introduce it.<note place='foot'>Under Pericles, the Athenian treasury of the state +contained at most 9,700 talents. (<hi rend='italic'>Thucyd.</hi> II, 13.) On the +other hand, Alexander the Great had a treasure of 180,000 talents accumulated in the +citadel of Ecbatana. (<hi rend='italic'>Strabo</hi>, XV, 731); Ptolomy II. left after +him 740,000 talents. (<hi rend='italic'>Appian.</hi> præf. 10, +<hi rend='italic'>Droysen</hi>, Geschichte des Hellenismus II, 44 ff.) In Nero's time +there was many a freedman's daughter who owned a looking glass worth a greater sum +than the senate had appropriated as a dowry to the daughter of the great Scipio. +(<hi rend='italic'>Seneca</hi>, Quæst. Natur. I, 17. Compare Cons, ad Helviam, 12.) +<hi rend='italic'>McCulloch</hi> says that an intelligent despotism can enrich a +nation as well as freedom. (In his Discourse on the Rise, etc. of Polit. Econ., 1825, +77 seq.)</note> Hence, here nothing could be more untrue, as +Macchiavelli has remarked, than the general opinion that +money is the sinew of war.<note place='foot'><hi rend='italic'>Bacon</hi> (Sermones, +56) says that youthful states distinguish themselves specially by +their warlike instincts; mature states in literature; old and decaying +ones in industry and commerce. <hi rend='italic'>Davenant</hi> very happily remarks, +that the development of commerce among a people has an ambiguous value. +It, indeed, increases wealth, but, at the same time, it may introduce luxury, +covetousness and fraud, destroy virtue, do away with simplicity of manners +and customs, and then it inevitably ends in internal or external slavery. +(Works II, 275.) The simplicity of the patriarchal state, however, cannot +last always, if for no other reason, because of the emulation of foreign nations. +(1, 348, ff.) The impoverishment of even the wealthiest nation is +certainly inevitable when its morality declines. It is especially true, that the +public economy of a people can be prosperous only where political liberty +obtains, and this, independent of the fact that wealth without freedom has no +value. (II, 336 ff., 380, ff., 285.) According to <hi rend='italic'>Ferguson</hi>, +private wealth, honestly acquired, used rightly and with moderation, managed with a +sense of independence, may be to those who possess it, an element of self-confidence +and of liberty, provided they loosen their purse strings not through vanity +or for their personal gratification, but for commendable party purposes. But +in periods of decay, even a greater amount of wealth is very far from producing +these results. (History of Civil Society, VI, 5.) <hi rend='italic'>Whately</hi>, on the +contrary, maintains that only personal wealth—never national wealth—has +a disastrous influence on morals. Lectures, No. 2.</note> +</p> + +</div> + +</div> + +<pb n='102'/><anchor id='Pg102'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter III. The Methods Of Political Economy.'/> +<index index='pdf' level1='Chapter III.'/> +<head type='sub'>Chapter III.</head> +<head>The Methods Of Political Economy.</head> + +<div> +<index index='toc' level1='Section XXII. Former Methods.'/> +<index index='pdf' level1='Section XXII.'/> +<head type='sub'>Section XXII.</head> +<head>Former Methods.</head> + +<p> +The methods<note place='foot'><q>The method of a science is of +much greater importance than any individual discovery, +however wonderful.</q> (<hi rend='italic'>Cuvier.</hi>)</note> +which would apply to any science of national +life, principles borrowed from any other science, are now generally +looked upon as obsolete. This is true, especially, of +the theological method which prevailed, almost exclusively +during the middle ages,<note place='foot'>Thus, for instance, <hi rend='italic'>G. +Biel</hi> (ob. 1495), the <q>last of the schoolmen,</q> gives +us his doctrine of Political Economy, in a work on Dogmatic Theology, in +the chapter on Penance, his starting point being the inquiry, how the economic +damage caused by the sinner may be repaired. <hi rend='italic'>Roscher</hi>, Geschichte +der Nationalökonomik in Deutchland, 1074, I, 23. The Melittotheologia, +Arachnotheologia of later times! A recent attempt in this direction +has been made by <hi rend='italic'>Ad. Müller</hi>, Nothwendigkeit einer theologischen +Grundage der gesammten Staatswissenschaften und der Staatswirthschaft +insbesondere (1819), i.e., <q>necessity of a theological basis for all political science, +and especially for Political Economy.</q> He divides political science +into two parts: the science of law, and the science of wisdom, embracing +under the latter denomination, politics, Political Economy, etc. Law emanates +from God, as supreme judge; the science of wisdom from God, as our +Supreme Father.</note> and of the juridical method of the +seventeenth century. +</p> + +<p> +It would be much more in harmony with the intellectual +tendencies of the time, to adopt a mathematical mode of treatment +in Political Economy, involving, as such a mode of treatment +does, not the matter of the science, but only a formal +<pb n='103'/><anchor id='Pg103'/> +principle. That which is general in Political Economy has, +it must be acknowledged, much that is analogous to the mathematical +sciences. Like the latter, it swarms with abstractions.<note place='foot'>Abstraction +is indulged in on a large scale, when a number of elements +which are always found combined in life, are here separated and examined +apart. It is precisely thus that anatomy proceeds, dissecting each member of +the human frame, separating the bones, ligaments and muscles from one another, +thus becoming the necessary preparatory school to physiology.</note> +Just as there are, strictly speaking, no mathematical +lines or points in nature, and no mathematical lever, there is +nowhere such a thing as production or rent, entirely pure and +simple. The mathematical laws of motion operate in a hypothetical +vacuum, and, where applied, are subjected to important +modifications, in consequence of atmospheric resistance. Something +similar is true of most of the laws of our science; as, for +instance, those in accordance with which the price of commodities +is fixed by the buyer and seller. It also, always supposes +the parties to the contract to be guided only by a sense +of their own best interest, and not to be influenced by secondary +considerations. It is not, therefore, to be wondered at, that +many authors have endeavored to clothe the laws of Political +Economy in algebraic formulæ.<note place='foot'>Thus, for instance, +<hi rend='italic'>Canard</hi>, Principes d'Economie politique (1801). Also +<hi rend='italic'>Kröncke</hi>, in several of his works, and +<hi rend='italic'>Count Buquoy</hi>, in his Theorie der Nationalwirthschaft +(1816), p. 333 ff.; <hi rend='italic'>Lang</hi>, Grundlinien einer politischen +Arithmetik, Charkow, 1811, and more especially <hi rend='italic'>v. Thünen</hi>, +Der isolirte Staat, vol. I (1842), vol. II, 1850. See my criticism of his method in +<hi rend='italic'>Birnbaum's</hi> Georgika, 1869, 77 ff. <hi rend='italic'>Voa +Thünen's</hi> first volume is an essay towards a geometrical exposition of the +science. See also <hi rend='italic'>Rau</hi>, Lehrbuch I, § 154, appendix; +<hi rend='italic'>von Mangoldt</hi>, Grundriss der Volkswirthschaftslehre (1862); +<hi rend='italic'>Cazaux</hi>, Elements d'Economie privée et Principes mathématiques +de la Théorie des Richesses (1838); <hi rend='italic'>F. Fuoco</hi>, Saggi economici +(1827) II, 61 ff. <hi rend='italic'>Walras</hi>, Eléments d'Econ. politique pure +(1874). <hi rend='italic'>Jevons</hi> has recently endeavored to give Political +Economy a mathematical basis by reducing the objects of which it treats to the +calculable feelings of pleasure (+) and pain (-). The duration of a feeling is +treated as an abscissa, its intensity as the ordinate of a curve, and its quantity +as the area. Future feelings are reduced to present ones, by allowing for their +distance, and the uncertainty of their occurrence. All this, however, is rather +curious than scientifically useful.</note> And, indeed, wherever magnitudes +<pb n='104'/><anchor id='Pg104'/> +and the relations of magnitudes to one another are +treated of, it must be possible to subject them to calculation. +Herbart has shown that this is so in the case of psychology;<note place='foot'><hi +rend='italic'>Herbart</hi>, Ueber die Möglichkeit und Nothwendigkeit, Mathematik auf +Psychologie anzuwenden; Kleinere Schriften, II, 417.</note> +and all the sciences which treat of national life, especially our +own, are psychological.<note place='foot'>How detrimental it is +to ignore the psychological nature of Political Economy is evident from the +errors of <hi rend='italic'>Karl Marx</hi>, who personifies things in a +manner almost mythological. Thus, according to him, modesty should be +ascribed to a coat which exchanges for a piece of linen, and purpose to the +linen, etc. (Das Kapital, 1867, I, 19, 22, seq.) The greatest fault of this intelligent +but not very acute man, his inability to reduce complicated phenomena +to their constituent elements, is greatly increased by his way of thus +looking at things.</note> But the advantages of the mathematical +mode of expression diminish as the facts to which it is applied +become more complicated. This is true even in the ordinary +psychology of the individual. How much more, therefore, +in the portraying of national life! Here the algebraic +formulæ would soon become so complicated, as to make all +further progress in the operation next to impossible.<note place='foot'>Compare +<hi rend='italic'>J. B. Say</hi>, Traité I, introd. Thus, it would be certainly possible +to describe every individual's physiognomy by means of a very complicated +mathematical formula, and yet there is no one who would not prefer +the usual mode of taking pictures. The simple motions of the heavenly +bodies, on the contrary, are always treated mathematically. +(<hi rend='italic'>Lotze</hi>, Allgemeine Physiologie, 322 ff.)</note> Their +employment, especially in a science whose sphere it is, at present, +to increase the number of the facts observed, to make +them the object of exhaustive investigation, and vary the combinations +into which they may be made to enter, is a matter of +great difficulty, if not entirely impossible.<note place='foot'>When +<hi rend='italic'>Fawcett</hi> says that all <q>principles of Political Economy +are describing tendencies instead of actual results</q> (Manual of Political Economy, +1863, p. 90), our method, the historical, would give also the theory of the +latter.</note> For, most assuredly, +as our science has to do with men, it must take them and +treat them as they actually are, moved at once by very different +and non-economic motives, belonging to an entirely definite +people, state, age etc. The abstraction according to which +<pb n='105'/><anchor id='Pg105'/> +all men are by nature the same, different only in consequence +of a difference of education, position in life etc., all equally +well equipped, skillful and free in the matter of economic production +and consumption, is one which, as Ricardo and von +Thünen have shown, must pass as an indispensable stage in +the preparatory labors of political economists. It would be +especially well, when an economic fact is produced by the cooperation +of many different factors, for the investigator to mentally +isolate the factor of which, for the time being, he wishes +to examine the peculiar nature. All other factors should, for +a time, be considered as not operating, and as unchangeable, +and then the question asked, What would be the effect of a +change in the factor to be examined, whether the change be +occasioned by enlarging or diminishing it? But it never should +be lost sight of, that such a one is only an abstraction after all, +for which, not only in the transition to practice, but even in finished +theory, we must turn to the infinite variety of real life.<note place='foot'>This +was lost sight of by most writers during the second half of the +eighteenth century, because they looked upon that equality as the really +oldest condition, and its restoration the ideal to be striven for. How much +of this still clings to the present free-trade school; see in +<hi rend='italic'>Roscher</hi>, Gesch. der N. Œk. in Deutschland, 10, 17 ff.</note> +</p> + +<p> +There are two important inquiries in all sciences whose subject +matter is national or social life: 1. What <emph>is</emph>? (What has +been? How did it become so? etc.) 2. What <emph>should be</emph>? The +greater number of political economists have confounded these +questions one with the other, but not all to the same extent.<note place='foot'>Thus, +for instance, <hi rend='italic'>Ricardo</hi> examines, almost exclusively, the actual +condition of things, while the socialists confine themselves, still more exclusively, +to the investigation of how things should be. It has been very usual in Germany +since <hi rend='italic'>Rau</hi> wrote, to draw a distinction between theoretical and +practical Political Economy. There are many who think that a good manual +of practical Political Economy, dropping the introduction, demonstrations +etc., would be also a good code of law, of universal application. +<hi rend='italic'>Mercier de la Rivière</hi> has said that he wished to propose an +organization which should be necessarily productive of all the happiness which can be +enjoyed on earth. (Ordre essentiel et naturel (1767), Disc. prélim.) Compare, also, +<hi rend='italic'>Sismondi</hi>, N. Principes, I, ch. 2.</note> +</p> + +<pb n='106'/><anchor id='Pg106'/> + +<p> +When a careful distinction is made between them, the contrast +between the (realistic) physiological or historical, and the idealistic +methods is brought out.<note place='foot'>The word method is used +in an essentially different sense, when the inquiry +is, whether the inductive or deductive method is followed in Political +Economy. <hi rend='italic'>J. S. Mill</hi> calls Political Economy, and, +indeed, all <q>sociology,</q> a concrete deductive science, whose +<hi rend='italic'>a priori</hi> conclusions, based on the laws of +human nature, must be tested by experience, either by comparing them with +the concrete phenomena themselves, or with their emperical laws. It, in +this, resembles astronomy and physics. (System of Logic VI, ch. 9. Essays +on some unsettled questions of Political E., No. 5.) According to this, +an economic fact can be said to have received a scientific explanation only +when its deductive and inductive explanations have met and agreed. <q>Only +those principles which, after they have been obtained by the one, are confirmed +by the other method, can be said to have a scientific basis.</q> (<hi rend='italic'>von +Mangoldt</hi>, Grundriss, 8.) While I agree to this view, it seems necessary to +me to mention points wherein caution is necessary: A. Even the deductive +explanation of economic facts is based on observation, namely, on the +self-observation of the person accounting for them, who, consciously or unconsciously, +must always inquire: If I had experienced or accomplished the +same fact, what should I have thought, willed and felt? The man who cannot +translate himself into the souls of others, will give a wrong explanation +of most economic facts. In the question, for instance, of the determination +of the price of an article, the person who can look into the mind of one of +the contracting parties only, will give a one-sided explanation of the facts. +B. Moreover, every explanation, that is, satisfactory connection of the fact +seeking explanation with other facts which are already clear, can be only +provisional. The wider our horizon grows, the deeper should our solution +of all questions become. A hundred years hence, should science increase in +the mean time, the solutions which are satisfactory to us will be looked +down upon by our posterity, as the speculations of our fathers antecedent to +Adam Smith's time are looked down upon by us.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XXIII. The Idealistic Method.'/> +<index index='pdf' level1='Section XXIII.'/> +<head type='sub'>Section XXIII.</head> +<head>The Idealistic Method.</head> + +<p> +Any one who has read a goodly number of idealistic works +treating of public economy (the state, law etc.) cannot have +failed to be struck by the enormous differences, and even contradictions, +as to what theorizers have considered desirable and +<pb n='107'/><anchor id='Pg107'/> +necessary. There is scarcely an important point which the +highest authorities may not be cited for or against. We must +not close our eyes to this fact. <q>The giddiness that comes +from contemplating the depths of knowledge is the beginning +of philosophy, as the god Thaumas was, according to the fable, +the father of Iris.</q> (<hi rend='italic'>Plato.</hi>) In a precisely similar manner, +the student of public economy (politics, the philosophy of +law etc.) must familiarize himself with the variations that have +taken place in what men, at different periods of history, have +required of the state and public economy, until he is lost in +wonder at the contemplation. +</p> + +</div> + +<div> +<index index='toc' level1='Section XXIV. The Idealistic Method. (Continued.)'/> +<index index='pdf' level1='Section XXIV.'/> +<head type='sub'>Section XXIII.</head> +<head>The Idealistic Method. (Continued.)</head> + +<p> +It is impossible to fail to notice at once that those ideal descriptions +which have enjoyed great fame and exerted great +influence, depart very little from the real conditions of the public +economy (of the state, law etc.) surrounding their authors.<note place='foot'><foreign +lang='la' rend='font-style: italic'>Tanquam e vinculis sermocinantur</foreign>, says +<hi rend='italic'>Bacon</hi> (De Dignit. et Augm. Scient., III, 3), of those who have +written in a not non-practical way on the laws. <hi rend='italic'>Hugo</hi>, also +(Naturrecht, 1819, p. 9), calls attention to the resemblance of the so-called laws +of nature, to the positive law in force at the time. As to political idealism, see +<hi rend='italic'>Roscher</hi>: De historicæ doctrinæ apud sophistas majores +vestigiis (Gött. 1838, 26 ff.). The only exceptions to this rule are the eclectics, +who form their own system from the blossoms of all foreign ones, a system, +indeed, without root, and which therefore must soon wither.</note> +This is not mere chance. The power of great theorizers, as, +indeed, of all great men, lies, as a rule, in this, that they satisfy +the want of their own time to an unusual extent; and it is the +peculiar task of theorizers to give expression to this want +with scientific clearness, and to justify it with scientific depth. +But the real wants of a people will, in the long run, be satisfied +in life,<note place='foot'>In this place, naturally, such an assertion can +be made only as a programme to be carried out, the proof whereof is to be +sought in the rest of the work. By <q>the people,</q> we do not mean the +governed, to the exclusion of the governing classes, but both classes +together. We attach to the expression the most extensive meaning possible. +We do not limit it to the present generation, but intend it to cover all +the generations from the beginning of a people's history to its end.</note> +so far as this is possible to the moral imperfection +<pb n='108'/><anchor id='Pg108'/> +of man. We should at least be on our guard when we +hear it said that whole nations have been forced into an <q>unnatural</q> +course by priests, tyrants and cavilers. For, to leave +human freedom and divine Providence out of consideration +entirely, how is such a thing possible? The supposed tyrants +are generally part and parcel of the people themselves; all +their resources are derived from the people. They must have +been new Archimedeses standing outside of their own world. +(Compare, however, <hi rend='italic'>infra</hi>, § 263.) +</p> + +<p> +It is true, that if the result of the growth of generations be +to gradually produce a different people, these different men +may require different institutions. Then a struggle arises between +the old and those of the younger generation; the former +wish to retain what has been tested by time, the latter to seek +for the satisfaction of their new wants by new means. As the +sea always oscillates between the flowing and ebbing of the +tides, so the life of nations, between periods of repose and of +crisis: periods of repose, when existing forms answer to the +real substance of things, and of crisis, when the changed substance +or contents seeks to build up a new form for itself. +Such crises are called <hi rend='italic'>reforms</hi> when they are effected in a +peaceful way, and in accordance with positive law. When +accomplished in violation of law, they are called revolutions.<note place='foot'>The +custom, which has become general, of calling all democratic movements, +and them only, revolutions (thus <hi rend='italic'>Stahl</hi>: Was ist Revolution? 1852, +and many other writers of an entirely opposite tendency, especially in France), +is not warranted. It is true that democratic (and imperial) revolutions are +more frequent than others in our times, just as aristocratic revolutions were +in the middle ages, and monarchical at the beginning of modern history. +The essence of revolution, however, is in the operation of change contrary to +positive law, acknowledged as such by the consciousness of the people.</note> +</p> + +<p> +That every revolution, it matters not how great the need of +the change produced by it, is as such an enormous evil, a serious, +<pb n='109'/><anchor id='Pg109'/> +and sometimes, fatal disease of the body politic, is self-evident. +The injury to morals which the spectacle of victorious +wrong almost always produces can be healed, as a rule, only +in the following generation. Where law has been once trampled +on, the <q>right of the stronger</q> will prevail; and the +stronger is, to some extent, the most unscrupulous and reckless +in the choice of the means to be employed. Hence, the +well-known fact, that in revolutionary times the worst so frequently +remain the victors. The counter-revolution which is +wont to follow on the heels of revolution, and with a corresponding +violence, is a compensation only to the most shortsighted. +It allows the disease, the familiarizing of the people +with the infringement of law, to continue, until the hitherto +sound parts are attacked. Hence, a people should, if they +would have it go well with them, in the changes in the form +of things which they make, take as their model Time, whose +reforms are the surest and most irresistible, but, at the same +time, as Bacon says, so gradual that they cannot be seen or +observed at any one moment. It is true, that, as all that is +great is difficult, so also is the carrying out of uninterrupted +reform. Its carrying out, indeed, supposes two things: a constitution +so wisely planned as to keep the doors open both to +the disappearing institutions of the past and to the coming +institutions of the future; and, among all classes of the people, +a moral control of themselves, so absolute that, no matter what +the inconvenience, or how great the sacrifice, legal ways shall +alone be used. In this manner, two of the greatest and apparently +most contradictory wants of every legal or moral +person, the want of uninterrupted continuity and that of free +development, may be satisfied. +</p> + +</div> + +<pb n='110'/><anchor id='Pg110'/> + +<div> +<index index='toc' level1='Section XXV. The Idealistic Method. (Continued.)'/> +<index index='pdf' level1='Section XXV.'/> +<head type='sub'>Section XXV.</head> +<head>The Idealistic Method. (Continued.)</head> + +<p> +It is doubtless true that all economic laws, and all economic +institutions are made for the people, not the people for such laws +and institutions. Their mutability is, therefore, by no means +such an evil as mankind should endeavor to remove, but is +wholesome and laudable, so far as it runs parallel with the +transformation of the people, and the changes which their +wants have undergone.<note place='foot'>Compare, especially, the first pages of +<hi rend='italic'>Sir J. Stewart</hi>, Principles of Polit. Economy.</note> +Hence, there is no reason why the +most various ideal systems should contradict one another. Any +one of them may be right, but, of course, only for one people +and one age. In this case, the only error would be, if they +should claim to be universally applicable. There can no more +be an economic ideal adapted to the various wants of every +people, than a garment which should fit every individual. +The leading-strings of children and the staff of age would +be great annoyances to the man. <q>Reason becomes nonsense +and beneficence a torment.</q> Hence, whoever would +elaborate the ideal of the best public economy—and the greater +number of political economists have really wished to do this—should, +if he would be perfectly true, and at the same time practical, +place in juxta position as many different ideals as there +are different types of people.<note place='foot'>See <hi rend='italic'>Colton</hi>, +Public Economy of the United States, p. 28, who, indeed, unwarrantedly, refers to +the whole of Political Economy, what properly belongs to its precepts.</note> +He would, moreover, have +to revise his work every few years; for, in proportion as +a people change, and new wants originate, the economic +ideal suitable to them must change also. But it is impossible +to accomplish this on so large a scale. Besides, to appreciate +the present thus instantaneously, and to perfectly feel the pulse +<pb n='111'/><anchor id='Pg111'/> +of time thus uninterruptedly, requires a species of talent different +from what even the most distinguished scientists are +wont to possess; talents of an entirely practical nature, such as +become a great minister of the interior or of finance. And it is +an acknowledged fact, that even the cleverest of such practicioners, +as the younger Pitt said of himself, generally feel +their way instinctively, and do not see it with the clearness +necessary to indicate it to others. +</p> + +</div> + +<div> +<index index='toc' level1='Section XXVI. The Historical Method—The Anatomy And +Physiology Of Public Economy.'/> +<index index='pdf' level1='Section XXVI.'/> +<anchor id="Section_26"/> +<head type='sub'>Section XXVI.</head> +<head>The Historical Method—The Anatomy And Physiology +Of Public Economy.</head> + +<p> +We refuse entirely to lend ourselves in theory to the construction +of such ideal systems. Our aim is simply to describe +man's economic nature and economic wants, to investigate the +laws and the character of the institutions which are adapted to +the satisfaction of these wants, and the greater or less amount +of success by which they have been attended.<note place='foot'><foreign lang='fr' +rend='font-style: italic'>Je n'impose rien, je ne propose même rien: j'expose.</foreign> +(<hi rend='italic'>Ch. Dunoyer</hi>). <hi rend='italic'>Cherbuliez</hi>, +Précis de la Science économique, 1862, p. 7 ff., has exaggerated this +idea in a strangely non-practical manner. That the historical method does not +differ essentially from the statistical as recently recommended, see +<hi rend='italic'>Roscher</hi>, Gesch. der Nat. Œk., 1035 seq.</note> Our task is, +therefore, so to speak, the anatomy and physiology of social +or national economy! +</p> + +<p> +These are matters to be found within the domain of reality, +susceptible of demonstration or refutation by the ordinary operations +of science; entirely true or entirely false, and, therefore, +in the former case, not liable to become obsolete. We +proceed after the manner of the investigator of nature. We, +too, have our dissecting knife and microscope, and we have +an advantage over the student of nature in this, that the self-observation +of the body is exceedingly limited, while that of +mind is almost unlimited. There are other respects, however, +in which he has the advantage over us. When he wishes to +<pb n='112'/><anchor id='Pg112'/> +study a given species, he may make a hundred or a thousand +experiments, and use a hundred or a thousand individuals for +his purpose. Hence, he can easily control each separate observation, +and distinguish the exception from the rule. But, +how many nations are there which we can make use of for +purposes of comparison? Their very fewness makes it all the +more imperative to compare them all. Doubtless, comparison +cannot supply the place of observation; but observation may +be thus rendered more thorough, many-sided, and richer in +the number of its points of view. Interested alike in the differences +and resemblances, we must first form our rules from +the latter, consider the former as the exceptions, and then endeavor +to explain them. (<hi rend='italic'>Infra</hi>, § 266). +</p> + +</div> + +<div> +<index index='toc' level1='Section XXVII. Advantages Of The Historical Or Physiological +Method.'/> +<index index='pdf' level1='Section XXVII.'/> +<head type='sub'>Section XXVII.</head> +<head>Advantages Of The Historical Or Physiological +Method.</head> + +<p> +The thorough application of this method will do away with +a great number of controversies on important questions.<note place='foot'><hi +rend='italic'>Storch</hi>, Handbuch, II, 222.</note> Men +are as far removed from being devils as from being angels. +We meet with few who are only guided by ideal motives, but +with few, also, who hearken only to the voice of egotism, and +care for nothing but themselves. It may, therefore, be assumed, +that any view current on certain tangible interests +which concern man very nearly, and which has been shared +by great parties and even by whole peoples for generations, is +not based only on ignorance or a perverse love of wrong. The +error consists more frequently in applying measures wholesome +and even absolutely necessary under certain circumstances, to +circumstances entirely different. And here, a thorough insight +into the conditions of the measure suffices to compose the +differences between the two parties. Once the natural laws +of Political Economy are sufficiently known and recognized, +<pb n='113'/><anchor id='Pg113'/> +all that is needed, in any given instance, is more exact and +reliable statistics of the fact involved, to reconcile all party +controversies on questions of the politics of public economy, +so far, at least, as these controversies arise from a difference +of opinion. It may be that science may never attain to this, +in consequence of the new problems which are ever arising +and demanding a solution. It may be, too, that in the greater +number of party controversies, the opposed purposes of the +parties play a more important part even than the opposed +views. Be this as it may, it is necessary, especially in an age +as deeply agitated as our own, when every good citizen is in +duty bound to ally himself to party, that every honest party-man +should seek to secure, amid the ocean of ephemeral opinions, +a firm island of scientific truth, as universally recognized +as truth as are the principles of mathematical physics by +physicians of the most various schools. +</p> + +</div> + +<div> +<index index='toc' level1='Section XXVIII. Advantages Of The Historical Method. +(Continued.)'/> +<index index='pdf' level1='Section XXVIII.'/> +<head type='sub'>Section XXVIII.</head> +<head>Advantages Of The Historical Method. +(Continued.)</head> + +<p> +Another characteristic feature of the historical method is +that it does away with the feeling of self-sufficiency, and the +braggadocio which cause most men to ridicule what they do +not understand, and the higher to look down with contempt on +lower civilizations. Whoever is acquainted with the laws of +the development of the plant, cannot fail to see in the seed the +germ of its growth, and in its flower, the herald of decay. If +there were inhabitants of the moon, and one of them should +visit our earth, and find children and grown people side by +side, while ignorant of the laws of human development, would +he not look upon the most beautiful child as a mere monster, +with an enormous head, with arms and legs of stunted growth, +useless genitals, and destitute of reason? The folly of such a +judgment would be obvious to every one; and yet we meet +with thousands like it on the state and the public economy of +<pb n='114'/><anchor id='Pg114'/> +nations when in lower stages of civilization, and this, even +among the most distinguished writers.<note place='foot'><hi rend='italic'>Ad. +Müller</hi>, an essentially mediæval mind, is guilty of this same braggadocio +in an opposite direction, when he calls the <q>present with its political +disorders simply an intermediate state,—the transmission of the natural or +unconscious wisdom of the fathers, through the inquisitiveness of their children +to the rational acknowledgment of that wisdom by their grandsons.</q> +(Theorie des Geldes, 1816, pref.)</note> +</p> + +<p> +We may, indeed, make a critical comparison of different +forms, each of which answers perfectly to its object or contents; +but such a comparison can possess historical objectivity, +only when it is based on a correct view of the peculiar +course of development followed by the people in question. +</p> + +<p> +The forms of the period of maturity may be considered the +most perfect; earlier forms as the immature, and the later as +those of the age of decline.<note place='foot'>Thus, for instance, it +can not be said that a model university is better than a model public +school; and yet the former is higher, because the age to which it is adapted +is doubtless intellectually higher.</note> But it is a matter of the greatest +difficulty, accurately to determine the culminating point of +a people's civilization. The old man believes, as a rule, that +the times are growing worse, because he is no longer in a +way to utilize them; the young man, as a rule, that they are +growing better, because he hopes to turn them to account. +It is, however, always a purely empirical question; and in the +solution of it, the observer's eye may acquire a singular acuteness +by the comparative study of as many nations as possible, +especially of those which have already passed away.<note place='foot'><hi +rend='italic'>Knies</hi> (Polit. Œk., 256 seq.) remarks, that it would be a great +mistake, and it is the mistake of the majority, to consider what has been achieved or +striven for in the present, as the absolute <foreign lang='la' +rend='font-style: italic'>non plus ultra</foreign>, and thus to look upon all +future generations as called upon to play the parts of apes and ruminators; a +remark worthy to be taken to heart.</note> +</p> + +<p> +Could anyone contemplate the history of mankind as a +a whole, of which the histories of individual nations are but the +parts, the successive steps in the evolution of humanity would +of course afford him a similar objective rule for all these +<pb n='115'/><anchor id='Pg115'/> +points in which whole peoples permanently differ from one +another.<note place='foot'>I have, myself, no doubt, that up to the +present time, mankind, as a whole, has, from the beginning of historical knowledge, +always advanced. In individual cases, their movement has been interrupted by so many +pauses, and even by so many occasional retrogressions, that great care must be taken +not to infer superior excellence from mere subsequency.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XXIX. The Practical Character Of The Historical +Method In Political Economy.'/> +<index index='pdf' level1='Section XXIX.'/> +<head type='sub'>Section XXIX.</head> +<head>The Practical Character Of The Historical +Method In Political Economy.</head> + +<p> +Before I close, I must refer to a possible objection which +may be made to historical or physiological Political Economy: +that it may indeed be taught, but that it cannot be a practical +science. If it be assumed that those principles only are practical, +which may be applied immediately by every reader, in +practice, this work must disclaim all pretensions to that title. +I doubt very much if, in this sense, there is a single science +susceptible of a practical exposition.<note place='foot'><hi rend='italic'>Buckle</hi> +writes of people whose knowledge is about limited to that which +they see going on under their eyes, and who are called practical, only because +of their ignorance; and he adds that, although they assume to despise theory, +they are in fact slaves of theory, of others' theories.</note> Genuine practitioners, +who know life with its thousands of relations by experience, +will be the first to grant that such a collection of prescriptions, +when the question is the knowledge and guidance of men, +would be misleading and dangerous in proportion as such +prescriptions were positive and apodictic, that is non-practical +and doctrinarian. +</p> + +<p> +Our endeavor has been, not to write a practical book, but +to train our readers to be practical. To this end, we have +sought to describe the laws of nature which man cannot control, +but, at most, only utilize. We call the attention of the +reader to the different points of view, from which every economic +fact must be observed, to do justice to every claim. We +would like to accustom the reader, when he is examining the +<pb n='116'/><anchor id='Pg116'/> +most insignificant politico-economical fact, never to lose sight +of the whole, not only of public economy but of national life. +We are very strongly of the opinion, that only he can form a +correct judgment and defend his views against all objections, +on such questions as to where, how and when certain liens +and charges, monopolies, privileges, services etc., should be +abolished, who fully understands why they were once imposed +or introduced. Especially, do we not desire to impress a certain +number of rules of action on those who have confided +themselves to our guidance, after having first demonstrated +their excellence. Our highest ambition is to put our readers +in a way to discover such rules of direction for themselves, +after they have conscientiously weighed all the facts, untrammeled +by any earthly authority whatever.<note place='foot'>Compare this whole +chapter with <hi rend='italic'>Roscher</hi>, Leben Werk und Zeitalter des +Thukydides, 1842, pp. 25, 239-275; <hi rend='italic'>Roscher</hi>, Grundries +zu Vorlesungen über die Staatswirthschaft nach geschichtlicher Methode, 1843, +preface; <hi rend='italic'>Roscher</hi> Geschichte der Nat. Œk. in Deutchland +(1874), 882 f., 1017 seq., and D. Vierteljahrsschrift, ff. See also +<hi rend='italic'>J. Kautz's</hi> learned and accurate Theorie und Geschichte +der N. Œkonomik, vol. I, 1858, II, 1860. I find no real contradiction between +the views here expressed and those of <hi rend='italic'>Kautz</hi>, when he (I, pp. +313 ff.) introduces history and ethico-practical reason with their ideals as +sources of Political Economy, to the end that the science may be something +more than simply a picture, namely, a model of economic life. Apart from +the fact that it is only the ethico-practical reason that can understand history +at all, the ideals of a period constitute one of the most important elements of +its history. The aspirations of an age find in them their best expression. +The historical political, economist as such, is certainly not disinclined to +form plans of reform, nor can it be said that he is not adapted to the performance +of such a task. Only, he will scarcely recommend his reforms as +absolutely better than what they are intended to supplant. He will confine +himself to showing that there is a want which may, probably, be best satisfied +by what he proposes. See <hi rend='italic'>Sartorius</hi>, Einladungsblätter zu +Vorlesungen über die Politik, 1793.</note><note place='foot'><q>There is a book +which youth may use to grow old, and the old to remain young—History.</q> +(<hi rend='italic'>K. S. Zaccharia</hi>).</note> +</p> + +</div> + +</div> + +</div> + +<pb n='119'/><anchor id='Pg119'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Book I. The Production Of Goods.'/> +<index index='pdf' level1='Book I.'/> +<head type='sub'>Book I.</head> +<head>The Production Of Goods.</head> + +<div> +<index index='toc' level1='Chapter I. Factors Of Production.'/> +<index index='pdf' level1='Chapter I.'/> +<head type='sub'>Chapter I.</head> +<head>Factors Of Production.</head> + +<div> +<index index='toc' level1='Section XXX. Meaning Of Production.'/> +<index index='pdf' level1='Section XXX.'/> +<anchor id="Section_30"/> +<head type='sub'>Section XXX.</head> +<head>Meaning Of Production.</head> + +<p> +To create new matter is more than it is given to man to do. +Hence, by the term production, in its widest sense, we mean +simply the bringing forth of new goods—the discovery of new +utilities, the change or transformation of already existing +goods into new utilities,<note place='foot'>Especially when natural +science begins to be <q>a practical science.</q> (<hi rend='italic'>L. +Stein</hi>).</note> the creation of means for the satisfaction +of human wants, out of the aggregate of matter originally +present in the world. (<hi rend='italic'>Producere!</hi>) We confine ourselves, +however, in this to economic goods, as defined in § <ref target="Section_2">2</ref>. +In a secondary and more limited sense, production is an increase +of resources, in so far as the goods produced satisfy a greater +human want, than those employed in the production itself.<note place='foot'>The +difference between the broader and narrower sense of production, +corresponds essentially with that of gross and net income (§ 145). Compare +also §§ 206, 211 ff.</note><note place='foot'><hi rend='italic'>Von Mangoldt</hi> +distinguishes the coming into existence of free values of +the production undertaken for an economic purpose. (Grundriss, 9.)</note><note +place='foot'><hi rend='italic'>Gioja</hi>, Nuovo Prospetto delle Scienze +economiche (1815), I, 49 ff. Besides positive production, there is +a latent production, which prevents the decay of goods. It is +not possible to make as exact an estimate of the latter as of the +former; and much more depends in the latter case than in the former +on continuity and proper extension. Hence, latent production is especially a +state concern. (<hi rend='italic'>Knies</hi>, Telegraph als Verkehrsmittel, 1857, +232.)</note> +</p> + +<pb n='120'/><anchor id='Pg120'/> + +<p> +It would, however, be an error to suppose, that the creation +of certain utilities for the producer himself, or for others, +constitutes the only end of economic production. The +more perfect economic production becomes, the greater grows +the pleasure the producer feels in his products, which pleasure +is at once the effect and the cause of his success. Hence, +production is to a great extent its own end. That this is +so in the case of artists is well known. <q>If you want only +progeny from her, a mortal can beget them as well. Let +him who rejoices in the goddess, not seek in her the woman,</q> +says Schiller. There is not a really clever workman but has +something artistic in his mode of production. And even the +meanest productive activity, provided it is neither over-driven +nor misdirected, must of itself exert a good influence on the +physical and moral development or preservation of the producer. +An idle brain is the devil's workshop.<note place='foot'>See <hi +rend='italic'>Schäffle</hi>, in the Tübinger Univ. Programm, September 27, 1862, on +the disastrous effect on the community of idleness. The leading of a happy +life the Greeks called very appropriately, εὐπράττειν (<hi +rend='italic'>Garve</hi>).</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XXXI. The Factors Of Production.—External +Nature.'/> +<index index='pdf' level1='Section XXXI.'/> +<head type='sub'>Section XXXI.</head> +<head>The Factors Of Production.—External Nature.<note place='foot'>We +use the expression <q>external nature</q> through the whole of this work +in contradistinction not only to the soul, but also to man's body, designating +his entire physico-intellectual activity by the term <q>labor-force</q> +(<foreign lang='de' rend='font-style: italic'>Arbeits kraft</foreign>).</note></head> + +<p> +The division of natural forces which formerly obtained, into +organic, chemical and mechanical, is of no great importance +in Political Economy. The tendency is more and more to resolve +organic forces partly into chemical and partly into mechanical. +Between mechanical and chemical forces, again, the +boundary is not fixed, heat being always capable of producing +motion, and motion always of producing heat. Hence, it is +all the more important for us to find a division of the economic +gifts (matter, forces<note place='foot'>By the expression <q>natural forces,</q> +we designate the economically useful changes of matter, +changes of place as well as of composition, which are +made without man's cooperation; for instance, the gigantic machinery which +supplies the greater part of mankind with water to drink, for domestic and +other purposes—the evaporation of the sea, the formation of clouds, rain, +springs, rivers etc. See <hi rend='italic'>Bastiat</hi>, Harmonies, 277. +Thus the sun's rays are indirectly the cause, not only of vegetation, but +also of all wind and steam forces.</note> and relations) of external nature, into such +<pb n='121'/><anchor id='Pg121'/> +as are capable of acquiring exchange value, and such as are +not. (See § <ref target="Section_5">5</ref>.) +</p> + +<p> +A. Those gifts of nature which, because they cannot be +appropriated by any one, or which at least are inexhaustible +as compared with the wants of man, and therefore never have +a direct value in exchange, belong either to the class of <hi rend='italic'>free</hi> +goods, in the fullest sense of the word, as, for instance, sunlight +and the atmosphere (<hi rend='italic'>supra</hi>, § +<ref target="Section_5">5</ref>);<note place='foot'>Spite of this <q>freedom,</q> +it may well happen that these gifts of nature can +be utilized, in many cases, only on condition of some expenditure. The photographer +can compel the sunlight to work for him only by means of a camera +obscura, and the smithy the atmosphere, only by means of a bellows. But +neither will ever successfully make an item, in their accounts with their customers, +of the services of the sun or air.</note> or they constitute, by reason +of their peculiar and intransmissible connection with the +whole country, an essential element of the national resources. +</p> + +</div> + +<div> +<index index='toc' level1='Section XXXII. External Nature.—The +Sea.—Climate.'/> +<index index='pdf' level1='Section XXXII.'/> +<head type='sub'>Section XXXII.</head> +<head>External Nature.—The Sea.—Climate.</head> + +<p> +To the last category belongs, for instance, the sea, the only +natural boundary of a country, which from a military point +of view, constitutes a protection to it, without, at the same +time, disturbing peaceful traffic. (<hi rend='italic'>Riedel.</hi>) Here, also belong +ocean currents, especially when uniformly supported by +regular winds,<note place='foot'>The most important ocean currents may be explained by +two causes: the flowing of the water from the polar seas to the equator (polar current), +and the revolution of the earth about its axis (equinoctial current); besides +which, there are the reflex currents produced by the horizontal form of the +coast-lands. Thanks to these natural ocean highways, England is nearer to +almost all the important mercantile coasts of the world by 300 geographical +miles than the Eastern States of the American Union. The only exception +is the Atlantic coast of America north of the Equator. North Americans +to pass the line, or to double one of the two great capes, are obliged first to +traverse the ocean as far as the Azores. On the other hand, the western +coast of South America is very widely separated from Mexico, for instance, +by its ocean currents. The colonization of America by Europe, instead of +by China, is a consequence of the direction of ocean currents, as is also the +fact that America has now the fairest prospect of influencing the civilization +of China and Japan. What an influence the warm gulf stream has on the +mild climate of north-western Europe!</note> the ebb and flow of the tides, which +constitute +<pb n='122'/><anchor id='Pg122'/> +a piece of commercial machinery of the very greatest +importance, particularly when they affect the waters of rivers +to a great distance.<note place='foot'>While the Mississippi has no ebb or +flow whatever, the influence of the ocean is felt in the Hudson, which is +60 geographical miles long, a distance of 29 miles from its mouth.</note> +In this age, when the love of travel is +so great and so universal, what prices are paid in many +places by strangers for the beauty of a landscape, to its +owner. +</p> + +<p> +Special mention should be here made of climate, and of its +heat or moisture. The lines called isothermal, that is, lines of +equal annual heat, are, therefore, of greatest importance to +public economy, because the <q>zones of production</q> depend +mainly on them.<note place='foot'>Thus, <hi rend='italic'>A. Young</hi>, Travels +in France I, 293 ff., has defined, with approximate accuracy, the limits +within which the vine, maize and the olive grow. And so +<hi rend='italic'>von Cancrin</hi>, Dorpater Jahrbuch IV, 1, distinguishes the ice +zone, the reindeer-moss (a lichen on which the reindeer live in winter) zone, the forest +zone, the zone within the limits of which cattle are raised; that in which the +culture of rye begins, that in which it becomes permanent; the wheat, fruit-tree, +vine, maize, olive, sugar cane and silk-worm zones. The United States +are divided into cattle-raising, wheat-raising, cotton-raising, rice-raising and +sugar-raising zones. Even in Europe, beyond the 60th parallel of north latitude, +wheat can scarcely be cultivated; the polar limits of rye raising extend, +at most, six or seven degrees farther. Towards the north, barley extends +sometimes as far as the 70th degree. Here agriculture almost ceases, and +the inhabitants are compelled to confine themselves to animal substances for +food. On the other hand, these three cereals are not adapted to a tropical +climate, while the bread-fruit tree, for instance, does not thrive at more than +22 degrees from the Equator, nor the banana at more than 35. Compare +<hi rend='italic'>Grisebach</hi>, Die Vegetation der Erde nach ihrer klimatischen +Anordnung. II, 1871.</note> However, we are concerned here, not only +<pb n='123'/><anchor id='Pg123'/> +with the average temperature of the whole year, but especially +with the distribution of heat among the several parts of +the day and the different seasons of the year, and the maximum +summer heat and winter cold (the isothermal and iso-cheimenal +lines). Coast lands are wont to have a milder winter +and a cooler summer than continental ones with an equal average +yearly heat. This produces a great difference in vegetation, +because there are a great many plants which can endure +the winter's cold very well, but require a hot summer; and +<hi rend='italic'>vice versa</hi>.<note place='foot'>Thus rye and wheat thrive in +many parts of Siberia (Iakutzk) at an annual temperature of - 7.50, while +in Iceland no cereals ripen at an annual temperature of + 4°. But +in the former place the summer heat is + 16.2°; the winter cold, +- 39.2°; in Iceland, + 12° and - 1.6°. In England, the myrtle, +laurel, camelia and fuchsia stand the winter well; while the vine no where +ripens. On the other hand, Astrakan and Hungary are vine growing countries, +although the former is as cold in winter as North Cape, and although the +cold is more intense in Hungary than in the Faroe Islands, where neither +the oak nor the beech grow any longer. No good wine is produced on the +western coast of France, north of 47° 20' north latitude; in Champagne, +north of 49°, or in the Rheingau, north of 51°. In Norway, the average +heat is greater on the coast than in the heart of the country where, however, +grain ripens, while it does not on the coast; for the mildness of the winter, +no matter how great, can make no compensation for the want of heat. On +the other hand, the cattle on the coast can remain much longer out of doors, +and the sea seldom freezes in such a way as to interfere with the fisheries. +<hi rend='italic'>Blom</hi>, Norwegen I, 39. <hi rend='italic'>Boussingnault</hi> +(Economie rurale considérée dans ses Rapports avec la Chimie, II) +has made some interesting attempts to calculate by a mathematical +process the amount of heat necessary to vegetable, during the period +of vegetation. Thus, for instance, wheat requires about 12° +(Réaumur) of heat during 140 days; that is, nearly 140 x 12° = 1680° Réaumur. +In Venezuela, the sugar cane requires a longer time to grow in a higher and +therefore cooler position than in a lower and warmer, and the length of time +required is in proportion to the height.</note> Were it not for this +fact, in connection with the winter-sleep of plants, a +large portion of the north would be entirely uninhabitable. +Besides, the temperature of a place does not depend +exclusively on its latitude, or on its height +<pb n='124'/><anchor id='Pg124'/> +above the sea-level.<note place='foot'>Hence it is that the isothermal lines +are not parallel with the equator or with one another. The greater number +of these have two northern and two southern summits; the former on +the western coasts of Europe and America, and the latter in eastern +North America, and in the interior of Asia.</note> The humidity of the climate is, +as a rule, great in proportion to the quantity of water in its neighborhood, +and to the height of its temperature; although, for instance, +in Europe, the number of rainy days increases, the +further we advance towards the north.<note place='foot'>The quantity of rain which +falls every year is, at St. Petersburg and Pesth, from 16 to 17 inches; at Berlin +19, Mannheim 21, Tübingen 26: in the interior of France 16-24; on the French coast +25, on the eastern coast of England 24, on the western coast 35, in Milan 36, +Genoa 44, on the coast of most tropical lands 70-120. On the political-economical +influences of most climates, see <hi rend='italic'>Gobbi</hi>, Ueber die Abhängikeit +der Populationskräfte von den einfachen Grundfstoffen, 1842.</note> Although the distance +of a place from the equator and its height above the +level of the sea have, in many respects, a similar effect (vertical, +horizontal isothermal lines and zones of production), mountainous +regions are uniformly distinguished by a greater +degree of humidity, which makes them better adapted for +pasturage and forest-culture. But the flora of a locality, being +the resultant of all its conditions, affords us a much better +criterion of the value of the climate for economic purposes, +than the most accurate thermometric observations. Other +things being equal, the productive force of nature operates, +doubtless, with most energy, in warm climates. The more +remote a country is from the equator, the more is its fertility +confined to its lowest parts.<note place='foot'>The snow limit +at Mageröe in Norway is 2,200, in Iceland 2,900, in the +northern Ural 4,500, in the Alps 8,200, in the Caucasus 10,400, and Quito +14,850 feet high. Hence it is that mountainous countries which produce +nothing in the north, make magnificent vineyards in warmer countries.</note> +Greater heat will, as a rule, ripen the same product sooner, +and thus permit the same land to be used several times in +the same year.<note place='foot'>In central Germany, even a second crop can +be produced after the corn harvest. In Arabia, the same seed produces three harvests, +because the grain which falls at the time of harvesting to the ground, germinates +immediately and suffices for new seed. (<hi rend='italic'>Niebuhr</hi>, Beschreibung, +154.)</note> Each individual +<pb n='125'/><anchor id='Pg125'/> +harvest, as a rule, is more abundant,<note place='foot'>Thus in the northern states +of the American union, wheat yields a return of only from four to five times the +amount sown; in France, 5-6 times (<hi rend='italic'>Lavoisier</hi>): in Chili, +12 times; in northern Mexico, 17 times; in Peru, 18 and 20 times; in southern +Mexico, 25 and even 35 times; in Germany, maize seed yields at best one hundred +fold, while in the torrid zone there is a return of from three hundred to four +hundred fold, generally.</note> and the products better in +many respects. The fruit, for instance, and wine, contain +more sugar,<note place='foot'> Andalusian corn produces in the mill only one-half as much +bran-waste as Baltic wheat produces. <hi rend='italic'>Bourgoing</hi>, Tableau de +l'Espagne, II, 155. Baltic wheat contains 6-7 per cent, of azote, and Algerian, 20-25 +Per cent. (<hi rend='italic'>Kabsch</hi>, Pflanzenleben der Erde, 1865.)</note> +and oleaginous plants contain more oil. Lastly, +since nature in warm countries is so much more generous, it +may be utilized by man with less regard for consequences. +There is less need of extensive woods, of large winter supplies, +especially for animals;<note place='foot'>In Europe the blossoming season is retarded +four days for each degree of northern latitude. (<hi rend='italic'>Schübler</hi>.) +As we advance towards the north, the difference becomes less noticeable, but more so +as we go towards the south. In mountainous countries a similar difference is +observable, produced by a like climatic influence. It is from about 10 to 12 days, +for a height of from 500 to 600 feet. (<hi rend='italic'>Wolff</hi>, Naturgesetzliche +Grundlagen des Ackerbaues I, p. 332 ff.) In the cantons, in which the Swiss +confederation had its origin, the pasturage of the Alps lasts generally thirteen +weeks, but in the higher Alps it lasts only from six to seven weeks. +(<hi rend='italic'>Businger</hi>, C. Unterwalden., p. 52.)</note> fewer +buildings are demanded, and there is also less demand for human and brute labor, since +the work of plowing, sowing etc., extends over a greater portion +of the year.<note place='foot'>In central Italy, winter wheat may be sown in +October, November or December; summer wheat, in February or March. +(<hi rend='italic'>Sismondi</hi>, Tableau de l'Agriculture Toscane, p. 35.) +In Judæa, it was possible to harvest figs ten months in the year. +(<hi rend='italic'>Joseph</hi>, Bell. Jud., Ill, p. 10.) On the other hand, +there is Jemtland, where the peasant in many places surrounds the northern +portion of his cornfield with fagots, and lights them in August when the +north wind blows, to protect his land from the frost; and where the expression +<q>green years</q> is used to designate those in which the harvest has to be +reaped before it is ripe. (<hi rend='italic'>Forsell</hi>, Statistik von Schweden, +24.) In the valuation made of the lands of the kingdom of Saxony, for assessment purposes, +the cost of supporting a yoke of oxen in the lowest country is estimated at +only three-fourths of what it is in the highest localities, because in the former, +200 work days can be calculated upon in the year, in the latter only 159. +In central Russia, the greater part of the labor of agriculture, sowing and +harvesting, has to be finished within the space of four months. In central +Germany, they are spread over seven months. Other things being equal, +seven horses and ploughmen are needed in Russia where only four are called +for in central Germany, (<hi rend='italic'>von Haxthausen</hi>, Studien I, 174.) +On the impediments put in the way of agriculture by the climate of eastern +Prussia, see <hi rend='italic'>Meitzen</hi>, Boden und landwirthsch. Verhältnisse +des preussichen Staats, 1868, I, Abschn., 6.</note> +It is true, on the other hand, that also the +<pb n='126'/><anchor id='Pg126'/> +destructive force of nature is greater in warmer than in colder +countries. (§ 209.)<note place='foot'><q>In both hemispheres, the zone in +which the temperature decreases most rapidly lies between the 40th and +50th degrees of north latitude. This circumstance must have a happy +influence on the culture and industry of the nation inhabiting the neighborhood +of that zone. Here is the point where the regions of the +vine touch upon those of the olive. Nowhere in the world, do +the products of the vegetable kingdom, and the most varied wonders +of agriculture, follow with such rapidity on one another. The great variety +of products enlivens the commerce and increases the industrial activity +of agricultural nations.</q> (<hi rend='italic'>Humboldt</hi>.) It is +true, however, that tropical countries possess, also, in their mountainous +parts, the <hi rend='italic'>tierra fria</hi>, <hi rend='italic'>templada</hi> +and <hi rend='italic'>caliente</hi>, superimposed the one on the other.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XXXIII. External Nature.—Gifts Of Nature With +Value In Exchange.'/> +<index index='pdf' level1='Section XXXIII.'/> +<anchor id="Section_33"/> +<head type='sub'>Section XXXIII.</head> +<head>External Nature.—Gifts Of Nature With Value In +Exchange.</head> + +<p> +B. Those gifts of external nature which may become objects +of private property, and at the same time possess sufficient +relative scarcity to give them value in exchange, are +either movable, and exhaustible in a given place, or firmly +connected with the land. The first category embraces, for +instance, such wild animals and plants as serve some useful +purpose, minerals, above all, fossil combustible matter<note place='foot'>The +aggregate coal supply of Great Britain (1869) was 2,180 millions cwt.; +of Belgium (1862), 207 millions; of France (1868) 256 millions; of Prussia +(1870), 600 millions, of Austria (1870), including brown lignite coal, 158 millions; +of Russia (1868), only a little over 9 millions. The great English coal +field, in the counties of Durham and Northumberland, embraces 732 English +square miles; that of South Wales, 1,200, with a depth of 95 feet, so that the +geographical square mile contains here 679 millions of tons, each of twenty +cwt. To obtain the same quantity of combustible material as was furnished +to Prussia, in 1865, by its coal, it would be necessary to use up 6,331 square +miles of forest, (<hi rend='italic'>von Dèchen</hi>, in <hi rend='italic'>Engel's</hi> +Zeitschrift, 1867, 258.) The supply of coal is, of course, exhaustible while, +for instance, turf-fields replace themselves by slow degrees. Compare +<hi rend='italic'>Griesbach</hi>, über die Bildung des Torfs, in +the Göttinger Studien, 1845, vol. I. The importance of the coal-fields of the +United States, which are twenty-two times as large as those of Great Britain, +in the distant future, cannot be over-estimated.</note>—the +<pb n='127'/><anchor id='Pg127'/> +<q>black diamonds,</q> coal, of which, with its canals, Franklin +said that it had made England what it is. The economical +effect of their moveable character is best seen, when the use +made of an ordinary stratum of coal is compared with that of +a protracted subterranean fire in a coal mine.<note place='foot'>I need only call +attention to the earth-fire (<foreign lang='de' +rend='font-style: italic'>Erdbrand</foreign>) for the purpose of +forcing the growth of garden plants in the neighborhood of Zwickau, which +is said to have existed since 1505.</note> The latter can +be directly useful only to those in its immediate vicinity. +Every lower layer of the burning coal would be less useful. +An increase of its actual power by accumulation in time or +place is scarcely possible. In all these respects, the movable +coal is incomparably better adapted to the satisfaction of man's +wants. It may be said that the capacity of heat for drying, +distilling, melting and hardening purposes, of imparting rapid +motion to heavy objects by the production of confined steam, +is, at least, a thousand times as great when a thousand bushels +of coal are consumed as when one is consumed. In most cases +even the concentration of a large quantity of coal will increase, +the result not only absolutely, but relatively.<note place='foot'>Thus, in +Watt's steam engines of the larger kind, an hourly consumption +of ten pounds of coal is needed to produce a force equivalent to that of one +horse, while in the smallest machines of only one horse power, twenty-two +pounds are needed. See <hi rend='italic'>Prechtl</hi>, Technolo. Encyklopädie, III, +669.</note><note place='foot'>It is easy to see that it is the most important +substances needed in industry which are mentioned in this +section. Many political economists have considered the principal +difference between agriculture and the industries and economies +of towns to lie in the contrast here referred to. Thus, <hi rend='italic'>A. +Sena</hi>, Sulle Cause che possono far abbondare li Regni d'oro e d'argento, +dove non sono miniere, 1613, I, 3. See the description of the difference between +land and machines in <hi rend='italic'>Malthus</hi>, Principles, III, 5; +<hi rend='italic'>Senior</hi>, Outlines, 86. But it is +nothing more than a difference of gradation. Even in the most active +of businesses there is a limit which the accumulation of means of +production cannot pass without a relative diminution of the income. This +boundary is imposed by the limited nature of those organic beings which +must contribute to production either actively or passively. Thus, for instance, +a manufacturing establishment or commercial business can be enlarged +with advantage only so long as it is still possible for one superintendent +to conduct it. And so, when cattle are furnished with very abundant +and substantial food, a pound of meat costs the producer a much higher +price than when they are more moderately supplied: sometimes in the ratio +of 1.95:0.98. <hi rend='italic'>Boussingault</hi>, Economie rurale, II. +Where there is absolute over-feeding, the producer must suffer loss. +But, even inorganic nature imposes its own limits here; as, for +instance, when ships, machines etc., on account of the insufficient +strength of the materials of which they are made, cannot be +constructed beyond a certain size. But all these limits are much +narrower than those imposed by the quality of immovability.</note> +</p> + +</div> + +<pb n='128'/><anchor id='Pg128'/> + +<div> +<index index='toc' level1='Section XXXIV. External Nature. (Continued.)'/> +<index index='pdf' level1='Section XXXIV.'/> +<head type='sub'>Section XXXIV.</head> +<head>External Nature. (Continued.)</head> + +<p> +The materials, forces and relations or conditions of external +nature, immovably connected with parts of the land, even +when in themselves exhaustless, either allow only of a definite +amount of economic utilization, as, for instance, the mechanical +force of a given waterfall, which can drive only a definite number +of mills of a definite size;<note place='foot'><hi rend='italic'>Senior</hi>, +Outlines, 26, 81 ff. See <hi rend='italic'>Stewart</hi>, Principles, II, ch. +11; <hi rend='italic'>Ortes</hi>, E. N., I, 18, II, 18 ff. This most important +principle in Political Economy is thus illustrated by <hi rend='italic'>John +Stuart Mill</hi>, Principles, book I, ch. 12. <q>The limitation +to production from the properties of the soil is not like the obstacle +opposed by a wall, which stands immovable in one particular spot, and offers +no hindrance to motion short of stopping it entirely. We may rather compare +it to a highly elastic and extendible band, which is hardly ever so violently +stretched, that it could not possibly be stretched any more, yet the +pressure of which is felt long before the final limit is reached, and felt more +severely the nearer that limit is approached.</q> This is, if possible, more obvious +in building than in agriculture, both as to the construction of new +stories and the excavation of deeper cellars.</note> or their increased utilization is +accompanied by difficulties which increase with still greater +rapidity. This last is the case, especially in the employment +of land for agricultural purposes. It is, according to Senior, +one of the four fundamental axioms of Political Economy, that +additional labor, spent on a given quantity of land, produces, +as a rule, a relatively smaller yield; assuming, of course, that +the art of agriculture remains the same. It is not possible to +<pb n='129'/><anchor id='Pg129'/> +determine either generally, or in particular cases, the precise +point at which agriculture should stop, to prevent relatively +smaller returns from increased expenditure of labor and capital. +Improvements in the art of agriculture may remove it a +great distance. But, that there is such a point admits of no +doubt. No one will believe that an acre of land can be made +to produce a quantity of the means of subsistence sufficient to +support all Europe, no matter what the amount of seed used, +or of manure etc. employed.<note place='foot'><hi rend='italic'>Ad. Mayer</hi>, +Das Düngerkapital und der Raubbau (Heidelberg, 1869), sees +the only conditions of production which man cannot increase at will exclusively +in the sun's rays, the employment of which also depends on the quantity +of land. Thus would he explain <hi rend='italic'>Senior's</hi> law.</note> +This is most apparent in forest-economy, +where the absolute increase of the so-called wood-capital +becomes, after a certain time, smaller from year to +year.<note place='foot'>See the tables of increase in <hi rend='italic'>Cotta</hi>, +Anweisung zum Waldbau, p. 228. <hi rend='italic'>Count Buquoy</hi>, Theorie der N. +Wirthschaft, p. 54, ridicules the absurd procedure of a great many farmers, +as if by forcing the ploughshare deeper into the soil, they could compel +it to produce a double return, and asks: if one should dig a square foot +of land to the center of the earth and manure it, who would take it +off his hands? As to the effect of manure, <hi rend='italic'>Kuhlmann's</hi> +investigations have shown that 300 kilogrammes of guano produced in three years +an increase per <hi rend='italic'>hectare</hi> in the yield, of 2,469 kilogrammes +of hay; while 600 kilogrammes produced an increase of only 2,870 kilogrammes. +<hi rend='italic'>Schübler</hi>, found that where salt had been used for +manuring purposes, 40 kilogrammes produced a maximum of fertility from which +point forward every increase in the amount of salt was attended by +diminished returns, and finally led to complete barrenness. See +<hi rend='italic'>Wolff</hi>, Naturgesetzliche Grundlagen, I, 408, 412, +502. Constantly increased irrigation would convert the land into a swamp +instead of indefinitely adding to its fertility. Nor can abundant sowing be +of any use when it reaches such a point that the plants stand so closely together +as to interfere with their proper development.</note> +</p> + +</div> + +<pb n='130'/><anchor id='Pg130'/> + +<div> +<index index='toc' level1='Section XXXV. External Nature.—Elements Of +Agricultural Productiveness.'/> +<index index='pdf' level1='Section XXXV.'/> +<head type='sub'>Section XXXV.</head> +<head>External Nature.—Elements Of Agricultural Productiveness.</head> + +<p> +In treating of the agricultural productiveness of a piece of +land, it is necessary to distinguish three things,—its bearing-capacity, +its capacity for cultivation, and its direct capacity to +afford food to plants.<note place='foot'>These differences correspond with +the differences in the kinds of deterioration to which land is liable from +rivers, floods, lava, etc., soil-exhaustion, and the growing wild of +the land.</note> Plants grow by drawing a part of the +elements which enter into their composition from the atmosphere, +and a part from the earth through the agencies of sunlight +and of water. While the air, the sun's heat, and in most +parts of the world, water, are free and inexhaustible goods, +the earth's supply of food for plants must be considered as analogous, +so far as its exhaustibility and capacity to be appropriated +are concerned, to the beds of coal and of ore etc. which +occur in mining districts. This is certainly true, with a few +important differences, however, as for instance, that, as a rule, +it is impossible, except through the cultivation of plants, to obtain +from the earth the stores of plant food which it contains;<note place='foot'>From +a technic point of view, it would, perhaps, be practicable, in most +instances, to obtain the phosphoric acid immediately from the land and +transfer it to other land; but the relation of the cost to the result makes it +impossible from an economical point of view.</note> +and that it is possible to husbandry to replace the portion of +these stores taken from the earth by the harvest, through the +agency of manures.<note place='foot'>It most certainly is always +an uncommon advantage that certain kinds of soil, rich in +kali and decayed vegetable matter, yield a long series of harvests +without the addition of manure, provided, always, that a short interval +is allowed to the process of decay to replace the exhausted plant-food. Thus +in many volcanic regions. Compare on similar districts in the Deccan: +<hi rend='italic'>Rilter</hi>, Erdkunde, V, 714.</note> +</p> + +<p> +Incomparably more important in the economic valuation of +a piece of land is its capacity for cultivation, because this depends +<pb n='131'/><anchor id='Pg131'/> +much less on the good or bad quality of the husbandman's +art. I mean here the so-called physical constitution of +the vegetable soil; its water-holding power, its consistency +(light or heavy soil) on which the difficulty of working it depends; +its ability to dry, in a shorter or longer time, and its +accompanying diminution in volume; its ability to draw moisture +from the atmosphere and to absorb the various kinds of +gases; its heat-absorbing and heat-containing power (hot, +warm and cold soils).<note place='foot'>According to <hi rend='italic'>Schübler</hi>, +the absorption of water by 100 parts of earth is, in the case of +quartz-sand, 25 per cent. of its weight; for clay, 70 per cent.; for +calcareous earth, 85 per cent.; humus, 190 per cent.; and for 100 parts of +their value, respectively, 37.9, 66.2, and 69.2 per cent. The consistency of +the four kinds of earth, in a dry state, is in the proportion of 0.100, 5, 8.7; +their adhesion in a moist state, to iron agricultural implements, is in that of +0.17, 1.12, 0.65, 0.40. Of 100 parts of water mixed with these kinds of earth, +the evaporation in four hours, at a temperature of 18° 75' (centigrade) is +88.4, 31.3, 28 and 20.5 per cent, respectively. The diminution of volume +when the moist earth dries, under the same degree of temperature, is, 0, +18.3, 5 and 20. Their relative absorption of atmospheric moisture for 48 +hours is as 0, 24, 17.5 and 55; their absorption of oxygen in 30 days is +respectively 1.6, 15.3, 10.8 and 2.03 per cent.; and, lastly, their heat-holding +power is in the ratio of 95.6, 66.7, 61.8, 49.</note> Much depends here on the depth of +the vegetable soil and on the constitution of the sub-soil, +which, for instance, when it is very permeable, improves a +very moist soil, but in the form of meadow iron-ore (<hi rend='italic'>Wiesenerz</hi>), +works great injury. The vertical form of the land is +also a very important element in estimating the natural fertility +of the soil. In mountainous districts, the quantity of land +which can be used (and with what labor!) is wont to be relatively +smaller than in low lands. Hence it is, that the former +become too small for their inhabitants; who, therefore, +swarm over the plains lying before them either as settlers or +conquerors.<note place='foot'>In Austria, below the Enns, only 3.8 per +cent. of the soil is barren; in the Tyrol, 29 per cent.; in Dalmatia, +48.1 per cent. (<hi rend='italic'>Springer</hi>). In the French +Pyrenees, 43 per cent. is considered incapable of cultivation; in the Alps, in +Landes and Morbihan, 42 per cent.; in the departments of Nord and Somme, +1.3 per cent. (<hi rend='italic'>Schnitzler</hi>). +<hi rend='italic'>Franscini</hi> considers 36 per cent. of Switzerland +unfit for tillage. The idea <q>barren</q> is a very vague one, and hence a comparison +of different countries on this point should not be made without great +caution.</note> In the eastern hemisphere, the northern slopes +<pb n='132'/><anchor id='Pg132'/> +of mountain regions are most unfavorably situated, although +the southern slopes are frequently subjected to more trying +and more sudden variations of thawing and freezing weather.<note place='foot'><hi +rend='italic'>Wolff</hi>, loc. cit., 353 ff. As to the manner in which soil and +climate mutually improve or injure one another, see <hi rend='italic'>Schwerz</hi>, +Prackt. Ackerbau I, 12.</note> +</p> + +<p> +But all these more special qualities of the soil must be distinguished +from their general basis, the bearing or carrying capacity +which land possesses as a mere superficies, and which +the most naked rock (Malta!), and the bed of a flowing +stream (the floating gardens of China!) possess to some extent, +since there is a possibility of establishing a plant-feeding +surface on them. This bearing capacity, which in most instances +is given only by nature, and which can be added to +only to a very limited extent and at great outlay, is wont, +when the population is very dense, to acquire considerable exchange +value in the vicinity.<note place='foot'>In this respect, also, the fundamental +difference between agriculture and industry is very important, inasmuch +as the products of the former, equal in value to those of the latter, +require a very large supporting or bearing surface; those of industry, +a very small one. If <hi rend='italic'>Nobbe's</hi> <q>water-cultivation</q> +should ever come to assume any great practical importance, agriculture +would approach to industry in this respect.</note><note place='foot'><hi +rend='italic'>Wolkoff</hi> has called special attention to mere <hi +rend='italic'>emplacement</hi>: Lectures d'Economie polítique rationelle (1861), +pp. 90 seq., 157 seq. <hi rend='italic'>Bastiat's</hi> rather broad and +enthusiastic assertion, that no mere product of nature possesses +value (in contradistinction to utility), an exaggeration of his very honorable +contest with the socialists (1848!), is refuted by daily experience, as when, +for instance, discoveries are made accidentally of metallic veins, coal-fields +etc., which immediately acquire great exchange value.</note> +</p> + +</div> + +<pb n='133'/><anchor id='Pg133'/> + +<div> +<index index='toc' level1="Section XXXVI. External Nature.—Further Divisions Of +Nature's Gifts."/> +<index index='pdf' level1='Section XXXVI.'/> +<anchor id="Section_36"/> +<head type='sub'>Section XXXVI.</head> +<head>External Nature.—Further Divisions Of Nature's +Gifts.</head> + +<p> +The gifts of nature, we further divide into those which can +be directly enjoyed and those which are of use only indirectly, +by facilitating production. (Natural means of enjoyment,—means +of acquisition.)<note place='foot'><hi rend='italic'>Aristotle</hi> +distinguishes between ἀπολαυστικὰ and κάρπιμα. (Rhet., I, 5.)</note> +An extreme superfluity of the former +is as disastrous to civilization as a too great scarcity of them. +How simple the economy of a tropical country! A banana +field will support twenty-five times as many men as a wheat +field (<hi rend='italic'>K. Ritter</hi>); and with infinitely less labor; for all that +is needed is to cut the stems with their ripened fruit, to +loosen the earth a little and very superficially, when new +stems shoot up.<note place='foot'><hi rend='italic'>Humboldt</hi>, Essai +politique, súr la N. Espagne, IV, 9, in which he estimates +the relation of the culture of the banana to that of wheat, in respect of mere +quantity, to be as 4,000 to 30,—<q>probably the best gift of nature to awakening +man, and the object of the most ancient cultivation.</q></note> +At the base of the mountains of Mexico, a +father needs labor only two days in the week to support his +family. Hence, nothing so much excites the wonder of the +traveler there as the diminutiveness of the cultivated ground +surrounding each Indian hut.<note place='foot'>It was said that in Easter +Island, three days' labor sufficed for a man's maintenance through +the whole year. A similar gift of nature to tropical lands is the +date tree. It is turned to so many different uses that the Arabs +of the coast of the Persian Gulf say that it is possible to construct a ship, +rig it, supply and freight it, from date trees. Houses are built of palm wood, +covered with palm leaves, furnished with palm mats, lighted with palm chips, +and heated with palm coals. The whole architecture of these countries is fashioned +by the date tree. Date wine is the favorite intoxicating beverage. There +is a proverb current there that a good housewife can vary the preparation of +the date for her guests every day in the month. Even the pulp is eaten. +Each tree yields an average of 50-250 lbs. of dates; and a tree may last over +200 years. An acre may contain more than 200 trees. The labor of cultivation +is very slight, although it demands more care than the banana. Compare +<hi rend='italic'>Ritter</hi>, Erdkunde, XII, 763. An acre planted with the +sago-palm yields as much nourishment as 163 acres of wheat land. (Reise der +Frigatte Novara, II, 113.)</note> But in these earthly paradises, +<pb n='134'/><anchor id='Pg134'/> +where, as Byron said, even bread is gathered like fruit, the +powers of man slumber as certainly as they grow torpid in +polar deserts.<note place='foot'>See <hi rend='italic'>D. Hume</hi>, +Discourses No. I (On Commerce). While in hot countries +<q>the sun does more work for man, it diminishes human strength itself.</q> +(<hi rend='italic'>M. Wirth</hi>.) That, however, such people, to their +surplus of the natural means of enjoyment and the consequent laziness +and absence of care, add the bright side of a joyous disposition, is well +shown by <hi rend='italic'>Goethe</hi>, Werke (16 mo., 1840), XXIII, 246.</note> +The sentence: <q>In the sweat of thy brow shalt +thou eat bread,</q> has been a blessing to mankind. Athens was +not only the literary and political, but also the economic capital +of Greece; and yet Attica was one of the most sterile countries +in the world.<note place='foot'>Noticed even by <hi rend='italic'>Thucyd.</hi>, +I, 2. See also <hi rend='italic'>Euripides'</hi> comparison of Sparta +and Messina, in <hi rend='italic'>Strabo</hi>, VIII, 366.</note> +Unfortunate Messina, on the other hand, +was the most fertile province of Greece. In modern times, no +countries of equal extent have produced as many great captains, +statesmen, savants and artists as Holland, whose securest portions +are as unfertile as those which are fertile are threatened +by the sea. On the other hand, how lately and imperfectly +has the so-called black-earth of southern Russia fallen under +the influence of civilization!<note place='foot'>We find, in a great +many countries, that their northern portions are endowed more +sparingly by nature with means of enjoyment (<foreign lang='de' +rend='font-style: italic'>Genussmitteln</foreign>) than southern portions, +but more abundantly with means of acquisition. +(<foreign lang='de' rend='font-style: italic'>Erwerbsmitteln</foreign>.) +Hence, the former are latest to develop; but once developed, +they assume a much higher place in civilization than the latter. This is true +of Italy, Spain, Portugal, France, the Netherlands, and the United States, +and of North America in general, as compared with South America. Something +similar may be seen in the contrast between Austria and Prussia. +The latter is colder and less fertile, but far superior to the former in extent +of coast, in rivers, and fossilized combustible matter.</note> +</p> + +</div> + +<pb n='135'/><anchor id='Pg135'/> + +<div> +<index index='toc' level1='Section XXXVII. External Nature.—The Geographical +Character Of A Country.'/> +<index index='pdf' level1='Section XXXVII.'/> +<head type='sub'>Section XXXVII.</head> +<head>External Nature.—The Geographical Character +Of A Country.</head> + +<p> +The geographical character of a country is, as a rule,<note place='foot'>The +rule is not without its exceptions. Thus, for instance, Borneo and +New Guinea are physically very like each other, but zoölogically two different +worlds; the former belonging to India and the latter to Australia.</note> most +intimately connected, not only with its flora and fauna, but also +with the character of its people. One of the crowning glories +of the progress of modern science is, that it has recognized +anew the power of this wonderful organism, and that it has +made geography an explanatory medium between nature and +history. The conditions most favorable to the development of +civilization are found in a well developed country which slopes +gradually through a series of intermediate terraces from a +mountain summit to a plain; especially when they are connected +with one another by a good system of streams; since +here the opposite peculiarities of the populations of the highlands +and coast-lands<note place='foot'>Even language, which is the +most general and most accurate expression of the +intellectual genius of a people, presents a strikingly analogous contrast +in mountainous and coast countries. Thus, compare the Ionic, Latin, +Low German, Danish and Portuguese, with the Doric, Oscan, High German, +Swedish and Spanish.</note> tend to produce a nationality both one +and varied. Where the transitions are too abrupt, as for instance, +in New Holland, they easily impede inter-communication; +and, still more, where the several parts of the country +are of very great extent; as, for example, the desert of North +Africa, the plateau of South Africa or that of Central Asia. +Europe is favored above all other parts of the world by the +happy combination of mountain and plain.<note place='foot'>See +<hi rend='italic'>Strabo</hi>, II, 126. seq.</note> We might pursue +the parallel existing between the soil and the character of +a people into the minutest details, and discover, even in the +<pb n='136'/><anchor id='Pg136'/> +difference between Spanish, French, German and Hungarian +wines, a reflection of the different characters of the people.<note place='foot'>The +most striking instance, illustrative of the manner in which the nature +of a country influences the character of a people is afforded by the difference +in the development of the Aryans in India and Persia, especially +when their sojourn in the territory of the Indus before that near the Ganges +is looked upon as an intermediate stage.</note> +</p> + +<p> +But whence is this? Can it be that dead nature has thus +irresistibly affected the living mind? We do not need to give +a materialistic answer to the question.<note place='foot'>French writers, +especially, have exaggerated the influence of nature over man. Thus, +<hi rend='italic'>Bodin</hi>. de Repub. (1584), V, I; +<hi rend='italic'>Montesquieu</hi>, Esprit des Lois, XVII, 6. XVIII, 1, 18. +<hi rend='italic'>Cabanis</hi>, Rapport du Physique et du Moral de +l'Homme (1805), IX, Mémoire, Influence des Climats. <hi rend='italic'>Comte</hi>, +also, Traité de Législation (1827), is of opinion that <q>the degree of +civilization which a people may attain does not depend on the degree of +development of which they are capable by nature, but on that which +their geographical situation permits them to attain.</q> See, also, +<hi rend='italic'>Herodot</hi>., III, 106; <hi rend='italic'>Hippocr</hi>., +De Ære etc., 71; <hi rend='italic'>Euripid</hi>., Medea, 820 ff.; +<hi rend='italic'>Plutarch</hi>, De Exilio, 13. The proper mean has been +found by <hi rend='italic'>E.M. Arndt</hi>, in his Anleitung zu historischen +Characterschilderungen (1810), and by <hi rend='italic'>Ritter</hi>, and his +school. See, also, <hi rend='italic'>K.S. Zachariæ</hi>, Idee einer +volkswirthschaftlichen Geographic als Grundlage der praktischen N. +Œkonomie fur jedes einzelne Volk: Vierzig Bücher v. Staate, II, 79. See, +also, <hi rend='italic'>Turgot</hi>, Géographie politique, 1750, Œuvres (ed. +Daire, II, 611 ff.); <hi rend='italic'>Lueder</hi>, Nationalindustrie und +Staatswirthschaft, III, 1800 ff.</note> Almost every people +has migrated at some period of its existence. Urged on by +their peculiar tastes and tendencies, they settled in the places +most in harmony with their character. A higher hand was +over them; one which, we should unreservedly trust, placed +them in such external circumstances as were most favorable +to the development of all their faculties. +</p> + +<p> +But the influences of man on nature are no less notable than +those of nature upon man. The greater number of domestic +animals and plants which Europe possesses to-day, it has been +obliged to introduce from other parts of the globe.<note place='foot'><hi +rend='italic'>Malte Brun</hi>, Précis. de la Geographie universelle, VI. +pr.</note> In the interior of Gaul, the vine rarely ripened, at the time of +Christ.<note place='foot'><hi rend='italic'>Strabo</hi>, IV, 178. On the +climate of ancient Germany, see <hi rend='italic'>Tacit</hi>, Germ, 2.</note> +On the other hand, Mesopotamia, formerly one of the gardens +<pb n='137'/><anchor id='Pg137'/> +of the world, is now covered with dried-up canals, filled a +little below the surface with heaps of brick and broken vases, +the remains and other vestiges of a once dense population. +Its former rich alluvial soil, now almost calcined, produces +at present scarcely anything except a few saline plants, mimosas +etc.<note place='foot'><hi rend='italic'>Fraser</hi>, Travels in +Koordistan and Mesopotamia, II, 5. See, also, the description of +ancient Susiana in <hi rend='italic'>Strabo</hi> XV, 731, with that of the new one +by <hi rend='italic'>M'Kinneir</hi>, Geogr. Memoir of Persia, 92.</note> +The higher the civilization of a people, the less +does it depend on the nature of the country. +</p> + +</div> + +<div> +<index index='toc' level1='Section XXXVIII. Of Labor.—Divisions Of Labor.'/> +<index index='pdf' level1='Section XXXVIII.'/> +<anchor id="Section_38"/> +<head type='sub'>Section XXXVIII.</head> +<head>Of Labor.—Divisions Of Labor.</head> + +<p> +Man's capacity for most economic labor is so closely connected +with the exquisite articulation of the human hand, that +Buffon could say without exaggeration that reason and the +hand made man man.<note place='foot'>Thus, <hi rend='italic'>Galenus</hi>, De +Usu Partium Corporis humani, L. I. The animal nearest to man mentally, the elephant, +is also possessed of a member more like the human hand than any other animal. Its +trunk was called <foreign lang='la' rend='font-style: italic'>manus</foreign> by +the Romans. Hence the Indians call the elephant, the animal gifted with a +hand. <hi rend='italic'>Buffon's</hi> view is exaggerated by Helvetius in the +interests of materialism. <hi rend='italic'>Aristotle</hi>, (De partt. anim. IV, +10), opposes the saying of Anaxagoras: διὰ τὸ χεῖρας ἔχειν φρονιμώτατον εἶναι τῶν +ζώων ἄνθρωπον. Compare <hi rend='italic'>Bell</hi>, On the human Hand, 1836.</note> +But it is true of economic labor, as of +all other labor, that it is more efficient in proportion as mind +predominates over matter. +</p> + +<p> +The best division of economic labor is the following:<note place='foot'>As to +the imperfection of the ordinary division into agricultural, industrial +and commercial labor, see <hi rend='italic'>John Stuart Mill</hi>, I, ch. 2, +9. The division of all labor into mental and physical, is not more satisfactory; +for even the basest labor is not wholly physical. See <hi rend='italic'>Buckle</hi>, +History of Civilization, vol. II.</note> +</p> + +<p> +A. Discoveries and inventions.<note place='foot'><hi rend='italic'>Dioscorides</hi> +and <hi rend='italic'>Galen</hi> were acquainted with, at most, 600 plants; +<hi rend='italic'>Linnæus</hi>, with 8,000. About 1812, about 30,000 had been +described; in 1837, about 60,000; in 1849, about 100,000. +<hi rend='italic'>Buckle</hi>, History of Civilization etc., II, p. 359.</note> +</p> + +<p> +B. Occupation of the spontaneous gifts of nature, as, for instance, +<pb n='138'/><anchor id='Pg138'/> +of wild plants, wild animals, and of minerals.<note place='foot'><hi +rend='italic'>Industrie extractives</hi>, according to <hi rend='italic'>Dunoyer</hi>. +When nature's spontaneous gifts are exhausted, this <emph>occupation</emph> readily +becomes <emph>production</emph>.</note> Where +this is the only kind of economic labor, man is necessarily dependent +on nature in a high degree. +</p> + +<p> +C. The production of raw materials; that is, a direction +given to nature in order to the production of raw materials, +by stock-raising, agriculture, forest-culture etc., but not by +mining. +</p> + +<p> +D. The transformation (<foreign lang='de' +rend='font-style: italic'>Verarbeitung</foreign>) of raw material by +means of manufactories, factories, the trades etc. +</p> + +<p> +E. The distribution of stores of goods among those who +are to use them directly, whether from people to people or +from place to place (wholesale), or among the individuals of +the same place (retail).<note place='foot'><foreign lang='fr' +rend='font-style: italic'>Industrie voituriére</foreign>, according to +<hi rend='italic'>Dunoyer</hi>; <foreign lang='fr' rend='font-style: italic'>industria +traslocatrice</foreign> in opposition to <foreign lang='fr' +rend='font-style: italic'>trasformatrice</foreign>, according to +<hi rend='italic'>Scialoja</hi>. <hi rend='italic'>Ortes</hi> distinguishes only four +classes: <hi rend='italic'>agricoltori</hi>, <hi rend='italic'>artefici</hi>, +<hi rend='italic'>dispensatori</hi> and <hi rend='italic'>administratori</hi>, or +<hi rend='italic'>raccoglitori</hi>, <hi rend='italic'>manifattori</hi>, and +<hi rend='italic'>difensori di bene</hi> (E. N. I, 2; III, 14). +<hi rend='italic'>A. Walker</hi>, Science of Wealth (1867), p. 34, knows only three +classes: transmutation, transformation, transportation.</note> +To this class also belong leasing, +renting, loaning, etc. +</p> + +<p> +F. Services, in the more limited sense of the term, which +embraces personal as well as incorporeal goods; as, for instance, +the labors of the doctor, teacher; virtuoso, of the statesman, +judge, and of preachers, whose office it is, by way of +eminence, to produce and preserve the immaterial wealth, +known as the State and the Church.<note place='foot'>This is not to be understood +in the sense, that there ever was a period in which these sciences were unknown. +We need only mention the position occupied by the priest and knight in the middle +ages. But, looked upon as economic labor, intended only for purposes of free commerce, +they have become very important only within a relatively recent period of time. +Thus, for instance, there was in Lower Austria, in 1866, one lawyer or notary to every +6,569 inhabitants; in Bohemia, to every 14,860; in Galicia, to every 22,361; +in the whole of Cis-Leithanian Austria, 12,259. In 1865, there was in Prussia, +one to every 11,149; in Bavaria, to every 7,350; in Hanover, to every 4,946; +in 1862, in Baden, one to every 4,992; in 1867, in Saxony, one to every 3,048. +<hi rend='italic'>Hildebrand's</hi> Tagebuch, 1868, I, 234. There was in Prussia, +in 1871, one doctor to every 3,230 inhabitants; in Berlin, to every 1,100; in +Heldesheim, to 1,803; in Cologne, to 2,120, in Marienwerder, to 7,240; in Gumbinnen, to +10,047. <hi rend='italic'>Engel</hi>, Preuss. Statis. Zeitschrift, 1872, 376. The +verb <q>to plow</q> is, according to comparative philologists, of more recent origin +than <q>to weave.</q> (<hi rend='italic'>Lassen</hi>, Indische Alterth. I, 814 ff.) +And yet agriculture, in the sense above indicated, undoubtedly precedes industry.</note> +</p> + +<p> +The order followed in the above classification is that in +which the different classes of labor are wont to be historically +developed. +</p> + +</div> + +<pb n='139'/><anchor id='Pg139'/> + +<div> +<index index='toc' level1='Section XXXIX. Labor.—Taste For +Labor.—Piece-Wages.'/> +<index index='pdf' level1='Section XXXIX.'/> +<anchor id="Section_39"/> +<head type='sub'>Section XXXIX.</head> +<head>Labor.—Taste For Labor.—Piece-Wages.</head> + +<p> +Man's taste for labor is conditioned especially by the extent +to which, and the security with which, he may hope to enjoy +the fruit of his labor himself. Hence it is that, as a rule, the +slave (§ <ref target="Section_71">71</ref>, ff.) and socager work least willingly, the +day laborer with less industry than the piece-worker,<note place='foot'>Observed +by <hi rend='italic'>Geiler v. Kaisersberg</hi>. Compare +<hi rend='italic'>Schmoller</hi> in the Tübinger Zeitschr., 1860, 483. Hour +wages occupy a middle place between day wages and piece wages.</note> who is at the +same time more satisfied with himself, and gives most satisfaction +to his master,<note place='foot'>Thus the introduction of piece wages into +lower Silesia has increased the daily earnings of workmen by one-third, +one-half, and even more. <hi rend='italic'>Engel's</hi> Stastist. Zeitschr. +(1868), p. 327. The investigations of the German agricultural +congress on the condition of agricultural laborers in the German empire +(report of <hi rend='italic'>v. d. Goltz</hi>, 1875) show that in all Germany +on an average, the daily earnings of a contract workman (<foreign lang='de' +rend='font-style: italic'>Accordlöhner</foreign>) is to the daily summer +wages of a day laborer as 15:10 (1420). On the other hand, +<hi rend='italic'>Brassey</hi>, in the construction of a railway, found that the +same workmen engaged in grading, digging, etc., cost 18 pence per yard when paid by +the day, and 7 pence when paid by the piece. (Work and Wages, 266.) Swiss experience +is, that production became 20 per cent. cheaper under the piece wages system. +(<hi rend='italic'>Böhmert</hi>, Beitr., 109.)</note> since +he acquires more both for himself and for his master. The superiority of piece-paid +labor is +<pb n='140'/><anchor id='Pg140'/> +greater in proportion as the workman calculates his own advantage. +It is, therefore, smallest in the case of ingenuous uneducated +workmen, and in that of the really conscientious.<note place='foot'>According to +<hi rend='italic'>v. d. Goltz's</hi> Enquête, the earnings of workmen by the piece, +compared with the wages paid workmen by the day in summer, is especially +high in middle Franconia (16.5:10); in the Leipzig circle of the German +empire (16.6), in the Braunschweig plain (16.8), within the jurisdiction of +Hildesheim (18.1), of the Bavarian Palatinate (18.6), in Rhenish Hesse (23.2), +especially low in Stettin (13.2:10), in Stralsund (12.4), in Schleswig Holstein +(12), in Osnabrück, (11.7.)</note> +The fear of seeing one's condition grow worse, through want +of industry, exerts an influence precisely similar to the hope of +improving it. In both respects, free competition (§ <ref target="Section_97">97</ref>) +must be considered one of the principal means of furthering the +taste for labor.<note place='foot'>According to <hi rend='italic'>v. Flotow</hi>, +Anleitung zur Fertigung der Ertragsanschlage, I, 80, four days of serf labor are +equivalent to only three of a free day laborer. According to <hi rend='italic'>v. +Jacob</hi>, Ueber die Arbeit Leibeigener und freier Bauern (1815), 21, two day +laborers are equal to three serfs, and one farm horse is equal to two employed by +serfs. It is as impossible to obtain accurate general estimates +here, as in the case of slave labor. As a rule, hope is not only a more +humane but a sharper spur to action. But if force is employed at all, there is +no doubt that the greater it is, the more effectual it is. Wherever the right of +corporal punishment has been taken from the masters, the technic value of +serfdom has uniformly decreased. In the English West Indies, formerly, +philanthropic masters who treated their negroes with unwonted gentleness, +obtained from them, as a rule, very poor economic results. While each of +the slaves expressed the greatest indignation at the idleness of the others +when they had <q>so good a master,</q> they were all equally and excessively +lazy. The weekly production of a plantation sank rapidly under this system +from thirty-three hogsheads to twenty-three, and finally to thirteen. +<hi rend='italic'>Math. Levis</hi>, Journal of a West India Proprietor, 1834; +Edinburg Review, XLV, 410. For the same reason, the negroes in the Spanish colonies, +who were treated much more gently than those owned by other European nationalities +produced much worse work. See, however, <hi rend='italic'>Columella</hi>, De Re +rust., I, 8.</note> +</p> + +<p> +Among the causes which have contributed to make England +the first country in the world, viewed from a politico-economical +stand-point, English writers on Political Economy +have pointed out as one of the principal, the prevalence there +of piece-wages.<note place='foot'>According to <hi rend='italic'>Howlett</hi>, +The Insufficiency of the Causes to which the Increase of our Poor Rate have been +ascribed (1788), piece wages had become usual <q>a few years ago.</q> Very +recently the trades unions have again restricted the system of piece wages (§ +176).</note> Payment by the piece should, of course, be +<pb n='141'/><anchor id='Pg141'/> +practiced, only in cases in which the work may be broken up +into a series of isolated tasks, and is completed by such a series. +Hence, it is not applicable where a great many different +things are required of the same workman; nor in relations +in which continuity, as, for instance, of the inclination +or disposition of the workman is the chief thing.<note place='foot'>This +system is inapplicable in the case of domestic servants (<foreign lang='de' +rend='font-style: italic'>Gesinde</foreign>) who are a +part of the household, and who afford to their masters, besides their services, +the advantage of having a person at their disposal always about them, +and whose wages are therefore in great part their board and lodging. Still +less can it apply to the case of the family physician, whose services consist +not simply in writing prescriptions, but who is also the professional family +friend. The same may be said of the state official, clergyman etc., from +whom it is demanded that he should sacrifice his entire life to the service of +the public. Against adopting piece wages in the case of state officials, it may +be further urged that no case at law, no act of public life is precisely similar +to any other. It cannot be applied to that of soldiers, because they are called +upon for action only after a long term of peace, during all of which they must +keep themselves in readiness for war. (<hi rend='italic'>Schäffle</hi>, N. Œk., +II, 388.) It has also been the practice of courts, until recently, on +account of their dignity, to pay their mechanics not by the piece, +wherever that was practicable, but by a fixed salary. An able +professor in a university is of use to it not only by +his lectures, but by his reputation and example etc.; hence, here, a combination +of piece wages and of a regular salary is preferred. As to services, the +permanency of which constitutes their essential character, remuneration is +also wont to be permanent or hereditary, as in the case of very many public +officers, while civilization is as yet unadvanced. Later, in proportion as the +progress of civilization makes itself felt, this hereditariness is wont to be +confined to the sovereign. For an opposite view, see <hi rend='italic'>Boxhorn</hi>, +Institutt. politt. (1663), 41.</note> The further +the division of labor is carried in our day, the greater +the part money plays in our social economy, and the more +lasting relations are dissolved, the more general becomes piece-work, +which, with all its material advantages, has, speaking +morally, its dark side. (<hi rend='italic'>Atomism!</hi>)<note place='foot'>Thus, +the Chinese, who, by a ridiculous exaggeration bordering on caricature +of many of our recent tendencies, may afford us a warning reflection of +ourselves in our present state of civilization, rarely labor efficiently when not +watched. Only by means of piece wages or the share-system can they be +induced to do good work. <hi rend='italic'>R. M. Micking</hi>; Recollections +of Manilla and the Phillippine Islands, 1851.</note> In a great many branches +<pb n='142'/><anchor id='Pg142'/> +of manufactures it has been relinquished because the excellence +of his work suffered from the workman's haste, and because +he could not be properly controlled.<note place='foot'>Day laborers, for +instance, must be watched over during the harvest, to prevent +their idling away their time, and piece-workers to prevent their continuing +to work in spite of wet weather, binding sheaves, for instance, which +causes the sheaves to rot. In England, it is considered almost an impossibility +to induce laborers to cut wheat close enough to the soil. +(<hi rend='italic'>Sinclair</hi>, Code of Agriculture, 102.) The +haste of piece-workers, in the harvest of the rape, occasions +great loss, by the fall of the seed. In Russia the removing +of the hide from animals is paid for by the piece, and the laborers injure a +very large number of skins in their haste. <hi rend='italic'>Steinhaus</hi>, +Russlands industrielle und commercielle Verhältnisse, 425. +Piece-wages are to be entirely discountenanced in the reeling +of silk. See <hi rend='italic'>Bernouilli</hi>, Technologie, II, 215. A +yearly salary is to be recommended in the tending of cattle, because here a +certain connection (<foreign lang='de' rend='font-style: italic'>Anschluss</foreign>) +with individuals is desirable. In building trades, +contractors in England prefer a regular salary; but they employ model +workmen, the so-called <q>bell horses,</q> to whom they pay a large salary, and +who keep the others on the strain by their example, and who on that account +are very much hated by their colleagues.</note> It is rather the quantity +than the quality of work which increases with piece-work, +and where the quality of the work is what is desired, +this system has not the same field. And where it obtains, as, +for instance, in the case of ordinary type-setters, resort is had +to payment by the day for compositors engaged on mathematical +treatises, fac-similes, inscriptions etc. On the side of the +workman, it is generally only the idle and awkward who oppose +piece-work on principle. It is a subject of regret that +the best and most industrious workmen are carried away by +it to an extent detrimental to their health.<note place='foot'><hi rend='italic'>Adam +Smith</hi>, W. of Nations, I, ch. 8. <hi rend='italic'>Howlett</hi>, also, l. c., +thinks that piece-wages increase the earnings of workmen, but at the expense of their +capacity for constant labor. <hi rend='italic'>Count Görtz</hi>, in his Reise, 328, +relates with what fatal effect piece-work in Demarara tells on white laborers and their +horses. After the February Revolution, Parisian workmen demanded the abolition +of piece-wages, and obtained it in several manufactories. Revue des deux +Mondes, March 15, 1848.</note> However, many +<pb n='143'/><anchor id='Pg143'/> +of the deficiencies of the piece-wage principle may be removed +by agreements made with whole groups of workmen; provided, +always, that the groups are not too large to prevent +the mutual knowledge and surveillance of their members.<note place='foot'>In +several Swiss factories, understrappers receive a salary, while +<hi rend='italic'>monteurs</hi> work by groupe-contract. +(<hi rend='italic'>Böhmert</hi>, Arbeiterverältnisse und Fabrikeinrichtungen +der Schw., II, 70.) Sub-contracting, where the contract is generally +made with only one person, for the most part of more than average capacity, +and this latter contracts with other workmen on his own account entirely, is +considered by philanthropic employers of labor as one of the worst kinds of +remuneration. The more democratic system of gang-contract is much +better, although even here, it is very easy for the weaker members of a +good gang to overwork themselves. (Edinburg Review, October, 1873, +365.)</note> The quantity of work is greatest, its quality best, and the +material<note place='foot'>Especially important in chemical factories. The expense +of greasing on the Rhenish railways fell, through premiums offered as rewards for saving, +from 27,000 thalers to 5,000, in spite of an increase in the amount of traffic. +(<hi rend='italic'>v. Mangoldt</hi>, Volkswirthschaftslehre, 349.) This was, besides, +the most effectual way of controlling the theft of material.</note> +employed used most sparingly, when the workman works +on his own account, or has a share in the profits. This last is +proper only in those branches of the business the success of +which depends on the quality of the work. To compel the +workman to share in the profits alone will not do, because he +is generally too poor to run any risk or to do long without his +earnings. The system of paying <q>commissions,</q> therefore, is +to be recommended all the more strongly, since it is a combination +of fixed wages with a share in the profits. This system +is very prevalent in North America, where a great deal +has to be confided to the workmen. It is practiced, also, in +the whale fisheries, and on the Greek ships in the Levant engaged +in coasting, where much more depends on the care of +the sailors than on the ability of the captain.<note place='foot'>In the cachelot +fishery, the captain receives one-sixteenth, the master, one twenty-fifth, +the second master, one thirty-fifth, the boatswain, one-sixtieth, each sailor, +one eighty-fifth of the profit. (<hi rend='italic'>Humboldt</hi>, N. Espagne, +IV, 10.) This system is very common in North America. See <hi rend='italic'>Carey</hi> +in <hi rend='italic'>J. S. Mill's</hi> Principles, V, ch. 9, 7. In heathen Iceland, +mariners were always paid a certain quota of the profits. <hi rend='italic'>Leo</hi>, +in <hi rend='italic'>Raumer's</hi> historischem Taschenbuch, 1835, 524. The same +was often the case in China. <hi rend='italic'>McCulloch</hi>, Comm. Diction. v. +Canton. In England, its employment was rendered very difficult by the laws +of partnership, which made each individual, except in great chartered societies, +responsible for all kinds of debts contracted by the rest of the firm. +<hi rend='italic'>J. S. Mill</hi>, B. IV, ch. 7, 5.</note> It presupposes +<pb n='144'/><anchor id='Pg144'/> +good workmen, equal almost to their master in education,<note place='foot'>The +house painter Leclaire, in Paris, obtained very high results in this +respect. <hi rend='italic'>Leclaire</hi>, Répartition des Bénéfices du Travail, +1842. He retained for his own services as contractor the sum of 6,000 francs, and +paid each workman the salary he had hitherto received. What remained was, at the +end of the year, equally divided among all. <hi rend='italic'>Leclaire</hi> assures us +that he was always satisfied with the system. The paying of a proportion of the +general profits to laborers is advisable only in case their ability of surveying +the whole is not much inferior to that of their employers. Where +a special proportion is paid, in special branches of business, it is sufficient +if their supervision extends over that particular branch. But a sharing in +the profits of business always supposes a corresponding supervision of the +business itself, and also the keeping of accounts.</note> +for instance, in the case of overseers of labor; since every better +inducement to the taste for labor which is not only juster +but more complicative, is not only a condition but also the effect +of higher culture. But if the economy of a people is ripe +for share-wages, and masters begin to introduce them in earnest +in individual cases, the work produced will be improved to +such a degree that it can not be long before all others will be +necessitated to follow them.<note place='foot'>A very good remedy +against indigence among the lower classes. (<hi rend='italic'>Umpfenbach</hi>, +National Œkonomie, 1867, 214.) But whether it will ever be possible +to make the remuneration of the navvy or that of a type-setter depend +on the final success of his work, <hi rend='italic'>qnœre</hi>.</note> +</p> + +<p> +If, however, workmen are to enjoy the fruit of their industry, +it is necessary, first of all, that public order should be secure. +Even the most industrious become discouraged where +despotism or anarchy prevails. On the other hand, even the +greatest security is no sufficient incentive to a nation of +fatalists.<note place='foot'><hi rend='italic'>Tournefort</hi>, speaking of +the fatalism of the Turks, says that they always +and everywhere leave the world as they found it. According to their own +proverb, no grass grows again where the Osman has set foot.</note> +</p> + +</div> + +<pb n='145'/><anchor id='Pg145'/> + +<div> +<index index='toc' level1='Section XL. Labor.—Labor-Power Of Individuals.'/> +<index index='pdf' level1='Section XL.'/> +<anchor id="Section_40"/> +<head type='sub'>Section XL.</head> +<head>Labor.—Labor-Power Of Individuals.</head> + +<p> +The average labor-power of individuals varies very much +in different nations.<note place='foot'>The experiments made with the dynamometer +in 1800 ff. show that the average <foreign lang='fr' rend='font-style: italic'>force +manuelle</foreign> of an inhabitant of Van Dieman's Land is to that of an +inhabitant of New Holland, of Timor, of a French marine, and of an English +colonist in Australia, in the ratio of 50, 51, 58, 69, 71 kilogrammes. +<hi rend='italic'>Péron</hi>, Voyage de Découverte aux Terres australes, 2d ed., +II, 417. It was found more recently in the American army, that the average +lifting-power of white soldiers was 314 to 343 -lbs.; of white marines, 307; +students, 308; negroes, 323; mulattos, 348; and Indians, 419. +<hi rend='italic'>Gould</hi>, Investigations in the Military and Anthropolog. +Statistics of American Soldiers, 1869, 458, seq. According to English manufacturers, +an English laborer accomplishes almost as much again as a French one(?), and the +latter in turn more than an Irishman. An English contractor, who had worked in +French manufactories, expressed his opinion concerning the French to this effect: +<q>It cannot be called work they do; it is only looking at it and wishing it done.</q> +<hi rend='italic'>Senior</hi>, Outlines, 149. Thus, for instance, a good English +spinner with a machine of 800 spindles could produce 66 lbs. of yarn, No. 40, while +a Frenchman could produce only 48 lbs. (<hi rend='italic'>M. Mohl</hi>, Reise durch +Frankreich, 535; compare <hi rend='italic'>Dingler</hi>, Polyt. Journal, I, 63 seq.) +That the Americans also are inferior to the English in strength and dexterity is +attested by the American <hi rend='italic'>Hewitt</hi>. See +<hi rend='italic'>Brentano</hi>, Arbeitergilden, II, 231. A Berlin wood-sawyer +accomplished as much in ten days as a West Prussian from Labiau in twenty-seven days. +<hi rend='italic'>J. G. Hoffmann.</hi> English farmers on the Hellespont prefer to +pay Greek laborers £10 per year <q>besides their keep,</q> rather than £3 to Turkish +laborers. (<hi rend='italic'>Lord Carlisle</hi>, Diary in Turkish and Greek Waters, +1854, p. 77 seq.) In Paulo-pinang, the Malayan agricultural laborer receives $2-½ +per month, the Malabar, $4, the Chinese, $6; for which compensation they work +respectively 26, 28 and 30 days. <hi rend='italic'>Ritter</hi>, Erdkunde, v, 54.</note> +The reason of this is, in part, doubtless +a difference in natural endowments. Thus, for instance, no +people surpass the English and Anglo-American in energy, +none the German in intelligence in work or the French in taste. +Where we can assume that the same meaning is attached to the +expression, <q>military capacity,</q> by the different recruiting bureaus, +important conclusions as to the physical labor-power of +different localities may be drawn from the ratio existing between +<pb n='146'/><anchor id='Pg146'/> +the number of those fit for military service and those +who are legally liable to military duty.<note place='foot'>Little light can +be thrown on this subject by a comparison of different countries. Thus, in +France, there are 614 persons in every 1,000 examined fit for military +service; in Bavaria, 705; in Denmark, 523; in Austria, 498; in Prussia, 284; +in Saxony, 259; in England, where the conscription is from among the lowest +classes, 665; and in Württemberg, 490. (<hi rend='italic'>Wappäus</hi>, Allg. +Bevölkerungsstatistik, II, 71, 140.) <hi rend='italic'>Massy</hi>, Remarks on +the Examination of Recruits, 1854. (<hi rend='italic'>Memminger</hi>, Würt. +Jahrb., 1843, 103.) The comparison of different parts of the same state is +much more instructive. Thus, in Saxony, cities afford only 197, and +the flat country only 265 per 1,000 (Sächs. statist. Ztschr., 1856, +No. 4 ff.); and in France there are among those of illegitimate +birth a very large number unfit for military service. (Journ. des Econ., 1850, +XXV, 69.) According to the Austrian Annual of military statistics, there +were in 1870, on an average, throughout the entire monarchy, 211 per 1,000 +of those liable to enter the ranks of the military, fit for service; in the Innsbruck +command, 325; in Lemberg, 179.</note> +</p> + +<p> +But these conclusions are greatly modified by the state of +civilization and that of society. Where the laboring classes +are despised and paid in a manner unworthy of human beings, +the badness of their work will be in keeping with the estimation +in which it is held. The reverse of this, also, is usually +true under different circumstances. (§ 173.) Thus, it has been +noticed in France, that native workmen, provided with as substantial +food as English workmen, are scarcely inferior to the +the latter in the technic value of their labor.<note place='foot'><hi rend='italic'>M. +Chevalier</hi>, Cours, I, 115. <hi rend='italic'>Adam Smith</hi>, B. I, ch. 8, +noticed the great industry of well paid workmen. Among the uneducated, labor must almost +necessarily be repulsive in proportion as it is illy remunerated.</note> A Mecklenburg +day laborer eats almost twice as much as a Thuringian +workman, but then he accomplishes almost twice as much. +Hence, employers gain in the long run by paying their workmen +well. As civilization advances, the same number of workmen +become, not only more industrious and more capable, but the +same quantity and quality of labor becomes, as a rule, cheaper.<note place='foot'>Thus +<hi rend='italic'>A. Young</hi> remarked that wages in Ireland are wretchedly low, while +labor is far from being cheap. In his <q>Evidence in Respect to the Occupation +of Land in Ireland,</q> II, 135, he says that a Scotch day laborer at 1s. per +day is cheaper than an Irish day laborer at ½s. According to +<hi rend='italic'>McCulloch</hi>, <q>Statis. Account of the British Empire,</q> +I, 666, industrial labor in Germany and France is dearer than in England, because +in the former countries there are, <foreign lang='la' rend='font-style: italic'>ceteris +paribus</foreign>, twice as many laborers employed in most manufactures. +See <hi rend='italic'>Senior</hi>, Lectures on Wages, 1830, 11, and the reports of the +committees of parliament, <hi rend='italic'>passim</hi> on French manufactures (1825). +The same has been experienced in the agricultural history of Schleswig-Holstein. +See <hi rend='italic'>Hanssen</hi>, Archiv. der Politisch. Œk. IV, 421. +<foreign lang='fr' rend='font-style: italic'>La main d'œuvre est chère en Russie dès +qu'il s'agit d'une certaine capacité et d'un certain degré d'instruction professionelle, +tandis que celle de l'ouvrier ordinaire n'est nulle part aussi bas.</foreign> +(<hi rend='italic'>Tégoborsky.</hi>)</note> +</p> + +<pb n='147'/><anchor id='Pg147'/> + +<p> +The moral culture of a people exerts the greatest influence +here. In every private undertaking, a great part of the expense +attending it, and in every state, a great part of the expense +of its police system, and of its system of administering +justice, is occasioned only by the dishonesty of men. If all +this expense could be dispensed with, and full confidence placed +in individuals, it would be possible to devote much more time +and energy to positively useful labor.<note place='foot'>Thus even +<hi rend='italic'>Columella</hi>, R. R. I, 9. <hi rend='italic'>J. S. Mill</hi>, +Principles, I, ch. 7, 5.</note> In estimating the labor-power +of different nations or different periods of time, the division +of population according to age is also of importance. +As a rule, the labor-power of males is greatest from the age +of twenty-five to the age of forty-five. The more numerous, +therefore, the class of the population between these ages is, +the more favorably, other things being equal, is it situated as +regards labor.<note place='foot'>Thus, for instance, the Lex Visigoth., VIII, +4, 16, graduates the fine to be paid by the murderer according to the age of +his victim. It increases up to the 20th year in the case of males, and +diminishes after the 50th. In the case of females, the maximum is attained +between the ages of 15 and 40. Similarly even <hi rend='italic'>Moses</hi>, +Book III, 27.</note><note place='foot'>As to what concerns the two sexes, +the <foreign lang='fr' rend='font-style: italic'>force rénale</foreign> of adult +males is twice that of females in the human species. The difference between them in +youth is not so great. The force <foreign lang='fr' +rend='font-style: italic'>manuelle</foreign> of the two sexes at the age of 30 is as +9:5. (<hi rend='italic'>Quételet</hi>, Sur l'Homme II, p. 73 ff.) The numerical +ratio of one sex to the other varies but little among those nations which have attained +a certain degree of civilization. See <hi rend='italic'>infra</hi>, § 245.</note> +But, as a rule, the relative number of full-grown +people is greatest in highly civilized nations. (§ 248.)<note place='foot'><p>It is +of great importance to calculate here the number of days in the year +in which the laborer is compelled to be idle on account of sickness. +<hi rend='italic'>Fenger</hi>, (Quid faciant ætas annique tempus ad frequentiam et +diuturnitatem morborum, Hafniæ 1840), finds the following result: +</p> +<p> +Between 15 and 19 years, 7.2 days. Between 35 and 39 years, 7.8 days.<lb/> +Between 20 and 24 years, 10.3 days. Between 40 and 44 years, 8.3 days.<lb/> +Between 25 and 29 years, 9.5 days. Between 45 and 49 years, 11.6 days.<lb/> +Between 30 and 34 years, 7.6 days. Between 50 and 59 years, 14.1 days. +</p> +<p> +According to <hi rend='italic'>Villermé</hi>, in the Annales d'Hygiène, II, +</p> +<p> +At 60 years, 16 days. At 67 years, 42 days.<lb/> +At 65 years, 31 days. At 70 years, 75 days. +</p> +<p> +The latter table is the result of a comparison made of the tables of seventy +Scotch mutual aid societies. Compare <hi rend='italic'>Digler</hi>, Polyt. Journal, +XXIV, 168.</p></note> +</p> + +</div> + +<pb n='148'/><anchor id='Pg148'/> + +<div> +<index index='toc' level1='Section XLI. Labor.—Effect Of The Esteem In Which It Is +Held.'/> +<index index='pdf' level1='Section XLI.'/> +<anchor id="Section_41"/> +<head type='sub'>Section XLI.</head> +<head>Labor.—Effect Of The Esteem In Which It Is Held.</head> + +<p> +As civilization advances, labor becomes more honorable. +All barbarous nations despise it as slavish. <foreign lang='la' +rend='font-style: italic'>Pigrum et iners videtur sudore +adquirere quod possis sanguine parare</foreign>: has been +the motto of all medieval times. In heathen Iceland, the +owner of a piece of land might be deprived of it by an adversary +who could overpower him in single combat. This mode +of acquisition was considered more honorable than purchase. +It was Thor's own form of investiture. The ideas of the +Romans on rightful acquisition may be inferred from the word +<foreign lang='la' rend='font-style: italic'>mancipium</foreign> +(manu capere).<note place='foot'><hi rend='italic'>Tacit.</hi>, Germ., 14. +<hi rend='italic'>Leo</hi>, in <hi rend='italic'>Raumer's</hi> Taschenbuch, 1835, +418. <foreign lang='la' rend='font-style: italic'>Maxime sua esse credebant, quæ: +ex hostibus cepissent.</foreign> (<hi rend='italic'>Gajus</hi> IV, 16.) Roman auction +<hi rend='italic'>sub hasta</hi>! Similar views obtained among the Thracians. See +<hi rend='italic'>Herodot.</hi>, V, 6. In Sparta, even in the time of Agesilaus, +economic labor was considered unworthy of a free man, (<hi rend='italic'>Plutarch</hi>, +Ages, 26); while the Athenians, from the time of Solon, punished idleness, and +from that of Pericles <q>knew no other festival but attending to their business.</q> +<hi rend='italic'>Thucyd.</hi>, I. 70. For some happy observations on this subject, +see <hi rend='italic'>Riehl</hi>, Die deutsche Arbeit, 1861.</note> Pure Christianity, +on the other hand, preached the honorableness of labor from the first +(Thess. 4, 11; II. Thess. 3, 8 seq.; Eph. 4, 28). And so in +the time of the Reformation,<note place='foot'>Compare <hi rend='italic'>Erasmus</hi> +Colloq. (ed. <hi rend='italic'>Stallb.</hi>), 21 ff., 213 ff., 392 ff.</note> +when Christendom was returning +to its primitive purity. +</p> + +<p> +In keeping with this is the fact, that the most cultivated +<pb n='149'/><anchor id='Pg149'/> +nations, and the same may be said of individuals, value time +most highly. <q>Time is money.</q> (<hi rend='italic'>Benjamin Franklin.</hi>) An +English proverb calls time the stuff of which life is made.<note place='foot'><hi +rend='italic'>Temple</hi> learned from the Dutch of his own age that the time of +industrious men is the greatest home commodity of a country. (Works I, 129.) <q>A +trader's time is his bread.</q> (<hi rend='italic'>Sir M. Decker</hi>, Essay on the +Decline etc., 1744, 24.) <hi rend='italic'>Walpole</hi>, in his Testament politique +II, 385, speaks of the inferiority of the Roman Church in this respect. I would +allude to the medieaval prohibition <q>to sell time</q> as one of the chief grounds +of the prohibition of usury. (See <hi rend='italic'>Roscher</hi>, Gesch. der N. Œk. +in Deutschland, 7.) <hi rend='italic'>Economia di tempo equivale a prolungamento di +esistenza.</hi> (<hi rend='italic'>Soialeja.</hi>)</note> +While in negro nations, individuals do not even know their +own age; while in Russia, there are very few clocks to +strike the hours, even in the towers of churches, in England, +a watch is considered an indispensable article of apparel, even +for very young people and for some of the lower orders of +society.<note place='foot'><hi rend='italic'>Douville</hi>, Voyage au Congo I, +239. See <hi rend='italic'>v. Haxthausen</hi>, Studien, II, 439; +<hi rend='italic'>W. Jacob</hi>, Production and Consumption of the precious +Metals, II, 209. The division of the day into hours dates from the time of +the sun dials of Alexandria. It was not known in Rome until after the year of +the city 491. (<hi rend='italic'>Mommsen</hi>, Römische Geschichte, I. 301.)</note> +Railroads operate in this respect as a kind of national +clock. The introduction of machinery and the more +minute division of labor, make punctuality a necessity. While +South Americans and West Indians are frightfully careless in +their every movement, a carelessness which betrays itself even +in their drawling speech,<note place='foot'><hi rend='italic'>Pinckard</hi>, Notes +on the West Indies, 1806, II, 107. In Spain it looks as if no one in the streets +was in a hurry. What a contrast between the <hi rend='italic'>sans souci</hi> gait +of persons at bathing places and the resorts of pilgrims and the precipitate haste +in commercial centres!</note> the life of a New Englander has +been compared to the rush of a locomotive. In the markets +of Central Asia, nothing strikes the European with so much +surprise as the little value put upon time by the merchants of +India and Bucharia, who are fully satisfied when, after endless +waiting, they succeed in obtaining a somewhat higher price +for their wares.<note place='foot'><hi rend='italic'>Meyendorff</hi>, Voyage +à Boukhara, 246.</note> +</p> + +</div> + +<pb n='150'/><anchor id='Pg150'/> + +<div> +<index index='toc' level1="Section XLII. Of Capital.—The Classes Of Goods Of Which A +Nation's Capital Is Made Up."/> +<index index='pdf' level1='Section XLII.'/> +<head type='sub'>Section XLII.</head> +<head>Of Capital.—The Classes Of Goods Of Which A +Nation's Capital Is Made Up.</head> + +<p> +Capital<note place='foot'>The history of this idea affords a remarkable example of the +confusion produced by the employment of scientific terminology in daily life. Until +within a short time every possible meaning of the word <hi rend='italic'>capital</hi> +was to be found in the dictionary of the French Academy, its scientific +politico-economical meaning alone excepted. During the middle ages, the Latin +<foreign lang='la' rend='font-style: italic'>capitale</foreign> was used to signify both +loaned money and cattle. (<hi rend='italic'>Ducange</hi>, s.v.) When culture was at its +highest in Greece, <hi rend='italic'>Demosthenes</hi> entertained very good +ideas of the nature of capital which he sometimes calls ἀφορμὴ, sometimes ἔρανος, the +meaning of which he extends also to the incorporeal capital of a good reputation. +(Adv. Mid., 574; pro Phorm, 947.) The same may be said of the Roman in conception of +<foreign lang='la' rend='font-style: italic'>peculium</foreign>. See +<hi rend='italic'>Hildebrand's</hi> Jahrbb., 1866, I. 338. On the beginnings of the +present idea of capital among the later schoolmen, see <hi rend='italic'>Funck</hi>, +Tübinger Ztschr., 1869, 149. The diary of <hi rend='italic'>Lucas Rems</hi>, 1491-1541 +(ed. <hi rend='italic'>Greiff</hi>, 1861), calls commercial capital, in most instances, +the chief good (<foreign lang='de' rend='font-style: italic'>Hauptgut</foreign>) p. 37; +also <hi rend='italic'>Cavedal</hi>. The words money and capital, interest and the price +of money are now confounded in daily life, as they were formerly by most writers. In +the 17th century, <hi rend='italic'>Child</hi> and <hi rend='italic'>Locke</hi> may be +mentioned as instances. <hi rend='italic'>Hobbes</hi> had some faint notion of the +productive power of capital. See <hi rend='italic'>Roscher</hi>, Zur Geschichte der +englischen Volkswirthschaftslehre, 49, 60, 102. Thus, also, in the 18th century, +<hi rend='italic'>Law</hi>, Sur l'Usage des Monnaies, 697; Trade and money (1705) 117; +<hi rend='italic'>Mélon</hi>, Essai politique sur le Commerce, 1734, ch. 22; +<hi rend='italic'>Galiani</hi>, Della Moneta, IV, 1, 3; <hi +rend='italic'>Blackstone</hi>, Commentaries, 1764, II, 456; <hi +rend='italic'>Genovesi</hi>, Economia civile, II, 2, 18, 13; <hi +rend='italic'>Stewart</hi>, Principles, IV, 1, ch. IV; <hi rend='italic'>Verri</hi>, +Meditazioni, XIV; <hi rend='italic'>Büsch</hi>, Geldumlauf, V. 14; <hi rend='italic'>A. +Young</hi>, Political Arithmetics (1774), 1, ch. 7. <hi rend='italic'>Hume</hi>, on the +other hand, Discourses (1752), No. 4 (on interest), shows, that the rate of interest is +dependent, not as <hi rend='italic'>Locke</hi> supposed, on the abundance or scarcity +of money, but on the state of profit and on the relation between the demand and supply +of capital. Similarly, <hi rend='italic'>J. Massie</hi>, An Essay on the governing +Causes of the Rate of Interest (1750). <hi rend='italic'>Quesnay</hi>, Dialogue sur +le Commerce, 173 (ed. Daire), shows that he had a very clear conception of the operation, +and of the principal component parts of capital. <hi rend='italic'>Turgot</hi>, Sur la +Formation et la Distribution des Richesses, § 14, 54-79, came very near the truth, and yet +missed it. He recognized the necessity of advances which, as a rule, are the +result of saving, in every case of production. He also distinguishes in the +product of the soil, besides the <foreign lang='fr' rend='font-style: italic'>produit +net</foreign> and the <foreign lang='fr' rend='font-style: italic'>subsistance du +laboureur</foreign>, the <hi rend='italic'>profit</hi> of the latter. He likewise +points out a great number of differences between the <q>price of money</q> considered +in its relation to trade, and in its relation to loans. He explains the interest on +capital, as <hi rend='italic'>Schröder</hi>, in his Schatz-und Rentkammer, 231, and +<hi rend='italic'>Benjamin Franklin</hi>, in his Inquiry into the Nature of a Paper +Currency (1729) had done before, by the fact that the owner of capital can purchase a +piece of land with his capital, and thus draw an income without working. Money, he +said, was indeed not productive, but neither was any other thing that could be loaned +or leased, with the exception of land and cattle. <hi rend='italic'>Adam Smith</hi> +deserves the greatest credit for his analysis of the idea of capital, although he +opposes <q>capital</q> to what the Germans call capital-in-use, the <q>stock for +immediate consumption.</q> When <hi rend='italic'>Canard</hi>, Principes d'Economie +politique (1801) and <hi rend='italic'>J. B. Say</hi>, Cours pratique, 1828, I, 285, +included man's power of labor in capital, they took a retrograde step. <q>Labour is +Capital, primary and fundamental.</q> <hi rend='italic'>Colton</hi>, 275. Every +grown-up individual, says <hi rend='italic'>McCulloch</hi>, Principles, 1825, II, ch. +2, may be looked upon as a machine which has cost several years of continued +care and a considerable sum for its construction. It is only another +side of this same perversity, when <hi rend='italic'>McCulloch</hi> seeks to force +the results produced by animals and machines into the definition of labor. +<hi rend='italic'>Schlozer</hi>, Anfangsgründe (1805), I, 21, goes so far as to +call the soul, raw material, which receives productive power from the +labor of the teacher! For a calculation of the money value of man in +the different ages of life, see Statis. Journ. XVI, 43 ff. See, on +the other hand, <hi rend='italic'>Malthus</hi>, Definitions, ch. 7; +and <hi rend='italic'>Rossi</hi>, in the Journal des Economistes, VI, 113. +Nor does the view of <hi rend='italic'>Ganilh</hi>, Systèmes d'Economie politique +(1809), I, 243; of <hi rend='italic'>Ad. Müller</hi>, Concordia, 93 ff., 211; of +<hi rend='italic'>Hermann</hi>, <q>Staatswirth</q> Untersuchungen, No. 3; of +<hi rend='italic'>Dunoyer</hi>, Liberté du Travail, L. VI; of +<hi rend='italic'>Bastiat</hi>, <hi rend='italic'>Carey</hi> and others, who +include pieces of land in themselves under the head of capital, seem to be +better founded. <hi rend='italic'>Hermann</hi> defines capital the durable basis +of every utility possessed of value in exchange. <hi rend='italic'>Schäffle</hi> +reckons land as nature offers it to us, among <emph>free</emph> goods. From the +moment that labor and capital are spent upon it, it becomes immovable capital, +but he concedes that it still preserves many essential points which distinguish +it from other capital. (N. Œk. Theorie der ausschliessenden Absatzverhältnisse, 1867, +65 ff., 89 ff.) These differences appear to me to be still more important than that +which land and capital have in common; especially as the historic development of +their relations proceeds for the most part in opposite directions. Thus, for +instance, as civilization advances, land is wont to become dearer and capital +cheaper. How difficult would it be to introduce clearness into the ideas of +<emph>intensive</emph> and <emph>extensive</emph> agriculture, if land were accounted +capital! And it is not only always theoretically, but also very often, in practice, +possible to separate the value of a given piece of land from the most durable +capital-improvements (<foreign lang='de' +rend='font-style: italic'>Kapitalmeliorationen</foreign>) made on it. It is only +necessary to call to mind the area of buildings.</note> we call every product laid +by for purposes of further production. (§ 220).<note place='foot'><hi +rend='italic'>Marx</hi> makes a very arbitrary assertion when he says that only the +capital operating in trade, and even only that operating in trade where money is +used as the instrument of exchange, can properly be called capital; and that, +therefore, the modern biography of capital dates only from the 16th century, +(Das Kapital I, 106 ff.)</note> +</p> + +<pb n='151'/><anchor id='Pg151'/> + +<p> +Hence, the capital of a nation consists especially of the following +classes of goods: +</p> + +<pb n='152'/><anchor id='Pg152'/> + +<p> +A. <hi rend='italic'>Soil-improvements</hi>, for instance, drainage and irrigation +works, dikes, hedges etc., which are, indeed, sometimes so far +part of the land itself that it is difficult to distinguish them +from it.<note place='foot'>See, on the other hand, <hi rend='italic'>Wolkoff</hi>, +Lectures d'Economie politique rationelle, 167.</note> +To this class belong all permanent plantations. +</p> + +<p> +B. <hi rend='italic'>Buildings</hi>, which embrace workshops and storehouses +as well as dwellings; also artificial roads of all kinds. +</p> + +<p> +C. <hi rend='italic'>Tools, machines and utensils</hi> of every +description;<note place='foot'><hi rend='italic'>Hermann</hi> (II ed., 238 ff.) +distinguishes especially <hi rend='italic'>preparatory contrivances</hi> auxiliary to +labor, such as stationary structures etc., vessels, tools, machines and instruments for +measuring etc.</note> the +latter especially for personal service, and for the preservation +and transportation of other goods. A machine is distinguished +from a tool in that the moving power of the former is not communicated +to it immediately by the human body, which only +directs it; while the latter serves as a species of equipment, or +as a better substitute for some member of man's body.<note place='foot'>Thus, for +instance, the plow and the gun are machines, the spade and the +blow-pipe are tools. A hammer may be considered as a hard, insensible fist; +the bellows as a pair of very strong and durable lungs. Tongs take the +place of fingers, just as a spoon does of the empty hand, and the knife the +place of the teeth. A great number of machines, on the other hand, may +be compared to a complete workman. Thus, the action of the mill which +grinds grain has very little resemblance to the blowing of the wind or the +running of the water, whereas the rising and falling of the pestle in the +small mortar for throwing grenades corresponds to the motion of the arm. +(<hi rend='italic'>Rau</hi>, Lehrbuch I, § 125.) The infinite number of +functions of which our members are capable is related to their inability +to attain alone the greater number of their ends. Hence animals which +require no tools can undertake to achieve very few things. <q>Man is a +tool-making animal.</q> (<hi rend='italic'>B. Franklin.</hi>)</note> To +be of advantage, these three kinds of capital must save more +labor or fatigue than it has cost to produce them. Tools are, +however, older than machines. The aborigines of Australia +used only a lance and a club in hunting; the somewhat more +civilized American Indians, the bow and arrow; Europeans +use firearms: in all of which a gradual progress is observable. +Of the blind forces which communicate motion to machines, +water was the first used, then the wind, and last of all, +steam.<note place='foot'>This is seen most clearly in the history of +the grinding of corn. In the time of Moses, and even of Homer, +there were only hand-mills, and originally only mortars. +Later, mills set in motion by horse-power were employed. +Shortly after Cicero's time, mills driven by water-power came into use. +<hi rend='italic'>Brunck</hi>, Analecta, II, 119, Ep. 39. Mills built +on pontoons do not date farther back than the time of Belisarius. +Wind-mills have been known since the ninth century; Dutch wind-mills, +only since the middle of the 16th century. See <hi rend='italic'>Beckman</hi>, +Beiträge zur Geschichte der Erfindungen II, I ff.</note> +</p> + +<pb n='153'/><anchor id='Pg153'/> + +<p> +D. <hi rend='italic'>Useful and laboring animals</hi>, in so far as they are raised, +fed and developed by human care. +</p> + +<p> +E. <hi rend='italic'>Materials for transformation</hi> (<foreign lang='de' +rend='italic'>Verwandlungsstoffe</foreign>): either +the principal material which constitutes the essential substance +of a new product, the yarn of the weaver for instance, the +raw wool, silk or cotton of the spinner; or the secondary material +which, indeed, enters into the work, but only for purposes +of ornamentation, as gold-leaf, lac, colors etc. +</p> + +<p> +F. <hi rend='italic'>Auxiliary substances</hi>, which are consumed in production, +but do not constitute a visible part of the raw product,<note place='foot'>Compare +<hi rend='italic'>Plato</hi>, Polit., 280.</note> as coal +in a smithy, powder in the chase or in mining, muriatic acid, +in the preparation of gelatin, chlorine in bleaching etc. +</p> + +<p> +G. <hi rend='italic'>Means of subsistence</hi> for the producers, which are advanced +to them until production is complete. +</p> + +<p> +H. <hi rend='italic'>Commercial stock</hi>, which the merchant keeps always on +hand to meet the wants of his customers. +</p> + +<p> +I. <hi rend='italic'>Money</hi> as the principal tool in every trade that is made. +</p> + +<p> +K. There is also what may be called <hi rend='italic'>incorporeal capital</hi> +(quasi-capital according to <hi rend='italic'>Schmitthenner</hi>), which is as much the +result of production as any other capital, and is used in production, +<pb n='154'/><anchor id='Pg154'/> +but which, for the most part, is not exhausted by use. +There are species of this kind of capital which may be transferred, +as for instance, the good will of a well-established firm. +Others are as inseparably connected with human capacity for +labor as soil-improvements with a piece of land; e.g., the +greater dexterity acquired by a workman through scientific +study, or the greater confidence he has acquired by long trial.<note place='foot'>Thus, +<hi rend='italic'>Ganilh</hi>, Théorie de l'Economie politique I, 133, calls the +knowledge, talents and probity of merchants, as well as their reputation, valuable +parts of their capital in trade. See, also, <hi rend='italic'>Möser</hi>, Patriot. Ph. +II, 26. See some happy observations on the intellectual capital of nations, as consisting +of <q>known and unknown preparatory labor through their history,</q> in +<hi rend='italic'>Lotze</hi>, Mikrokosomos II, 353 seq.</note> +The state itself is the most important incorporeal capital of +every nation, since it is clearly indispensable, at least indirectly, +to economic production.<note place='foot'>Compare <hi rend='italic'>Dietzel</hi>, +System der Staatsanleihen (1856), 71 ff. And, earlier yet, <hi rend='italic'>Ad. +Müller</hi> had looked upon taxes not in the light of an insurance premium, +but as <q>the interest of the invisible and yet absolutely necessary intellectual +capital of the nation.</q> (Elemente, III, 75.) Of course, the State is much more +than a species of capital; just as a Gothic cathedral is something more than a +piece of masonry, but does not on that account cease to be a piece of masonry.</note> +</p> + +<p> +The greater portion of the national capital is in a state of +constant transformation. It is being continually destroyed and +reproduced. But from the stand-point of private economy, +as well as from that of the whole people, we say that capital +is preserved, increased or diminished according as its value is +preserved, increased or diminished.<note place='foot'><hi rend='italic'>J. B. Say</hi>, +Traité d'Economie Politique I, ch. 10. Only think of what +is known in physiology as the change or transformation of matter +(<foreign lang='de' rend='font-style: italic'>Stoffwechsel!</foreign>).</note> +<foreign lang='la' rend='font-style: italic'>Pretium succedit in locum +roi et res in locum pretii.</foreign> <q>The greater part in value of +the wealth now existing in England, has been produced by human +hands within the last twelve months. A very small proportion +indeed of that large aggregate was in existence ten +years ago; of the present productive capital of the country, +scarcely any part except farm-houses and a few ships and machines; +<pb n='155'/><anchor id='Pg155'/> +and even these would not, in most cases, have survived +so long, if fresh labor had not been employed within +that period in putting them into repair.... Capital is kept +in existence from age to age like population, not by preservation, +but by reproduction.</q> (<hi rend='italic'>J. S. Mill</hi>.) +</p> + +</div> + +<div> +<index index='toc' level1='Section XLIII. Capital.—Productive Capital.'/> +<index index='pdf' level1='Section XLIII.'/> +<anchor id="Section_43"/> +<head type='sub'>Section XLIII.</head> +<head>Capital.—Productive Capital.</head> + +<p> +Capital, according to the employment that can be given it, +may be divided into such as affects the production of material +goods, and such as affects personal goods or useful relations. +The former, under the name of productive capital, is, in recent +politico-economical literature, usually opposed to capital in +use.<note place='foot'>Productive capital has been rendered into German by the word +<foreign lang='de' rend='font-style: italic'>Erwerbstamm</foreign>, by the author of +<q>Staatswirthschaft nach Naturgesetzen,</q> 1819. <hi rend='italic'>Malthus</hi>, +Definitions, ch. 10, and <hi rend='italic'>Rau</hi>, Lehrbuch, I, § 51, call productive +capital alone, capital. According to <hi rend='italic'>M. Chevalier</hi>, goods lose +their quality of capital as soon as they come into the hands of a consumer. +<hi rend='italic'>Schäffle</hi>, N. Œk., II, aufl., 59, calls capital in use +<foreign lang='de' rend='font-style: italic'>Genussvermögen</foreign> (resources intended +for enjoyment) and productive capital, <foreign lang='de' +rend='font-style: italic'>Kapitalvermögen</foreign> (capital-resources). On the other +hand, <hi rend='italic'>J. B. Say</hi>, Traité, I, 13; <hi rend='italic'>McCulloch</hi>, +Principles, II, 2, 3, <hi rend='italic'>Hermann</hi>, Staatswirthschaft. Untersuchungen, +p. 60 ff., and <hi rend='italic'>v. Mangoldt</hi>, Volkswirthschaftslehre, 122, divide +capital into capital in use and productive capital, according as it provides the +possessor with that which he may turn to account directly or indirectly by becoming the +owner of goods through its means. <hi rend='italic'>Aristotle</hi> distinguishes between +ὄργανα and κτήματα, the former relating to ποίησις; for instance, a shuttle; the latter +to πράξις, as, for instance, bedding and articles of dress. (Polit., I, 2, 5.)</note> +Evidently any one of the two kinds of capital mentioned +above, may be used for both purposes.<note place='foot'>Thus, for instance, class A +embraces parks and forests; B, theaters, churches, manufactories, arsenals, granaries, +public walks and roads. Walks can, besides, be used for the cultivation of fruit, and +roads for pleasure trips.</note> Indeed, the two +classes are, in many respects, coincident. Thus, a livery-stable +carriage or a circulating library is productive capital to its +proprietor, and capital in use<note place='foot'>Translated <q>capital de +consommation</q> by Wolowski, p. 96 of his Roscher's +Principles.—<hi rend='italic'>Translator's note.</hi></note> +(<foreign lang='de' rend='font-style: italic'>Gebrauchskapital</foreign>) to the nation +<pb n='156'/><anchor id='Pg156'/> +in general; although the circulating library from which an +Arkwright obtains technic information, or the livery-stable +vehicle which carries a Borsig to his counting-room, has certainly +been used in the production of material goods. Almost +all capital in use may be converted into productive capital, +and hence, the former might be called quiescent capital, and +the latter working capital.<note place='foot'>Dead, or better, dormant +capital is such productive capital as, for the time being, +remains unused, and which, therefore, does not yield even personal enjoyment. +The sum total of this kind of capital is very much diminished by +the agency of savings banks. Loaned capital which has been employed unproductively +evidently constitutes no longer a part of the wealth of a people. +See <hi rend='italic'>infra</hi>, § 189.</note> One of the principal differences +between productive capital and capital in use is, that the former, +even when most judiciously employed, does not so immediately +replace itself, as the latter, by its returns.<note place='foot'><hi +rend='italic'>Wolkoff</hi> is so far right, when in his Lectures, p. 142, +he calls the return of capital in use not <foreign lang='fr' +rend='font-style: italic'>revenu</foreign>, but <foreign lang='fr' +rend='font-style: italic'>déstruction graduelle</foreign>. <hi +rend='italic'>Schäffle</hi> is right, too, and entirely so, when he says +that only such an increase of the property, intended for +enjoyment simply, is anti-economic, as does not make the personal +capacities of labor (<foreign lang='de' +rend='font-style: italic'>Arbeitsvermögen</foreign>) as much more productive than +they would otherwise be. N. Œk., II, aufl., 224.</note> On the other +hand, the real dividing line between capital in use, and objects +consumed which are not capital, is, and it is in complete harmony +with our definition of capital, that the latter are subject +not only to a more speedy destruction and one which is always +contemplated, while in the case of the former, its destruction +is only the unintended reverse-side of its use. +</p> + +<p> +Among a highly civilized people, a great amount of capital +in use, as compared with the productive capital of the country, +may be considered a sure sign of great wealth. When this +is the case, the people, without losing the desire of further acquisition, +think that they have enough to richly enjoy the +present. I need only call to mind the munificence displayed +by the middle classes in England, in their silver plate and +other domestic utensils. But the people of Russia, and Mexico +also, can make no mean display of silverware.<note place='foot'><hi +rend='italic'>Humboldt</hi>, N. Espange, II, ch. 17; <hi rend='italic'>v. +Schlözer</hi>, Anfangsgründe, II, 109. Ausland, 140, No. 313. On the +extraordinary wealth of even Russian peasant women in pearls, see +<hi rend='italic'>v. Haxthausen</hi>, Studien, 87, 309.</note> Here luxury +<pb n='157'/><anchor id='Pg157'/> +is only a symptom of the disinclination or inability of the +inhabitants of the country to use their capital in the production +of wealth. How much richer would Spain be to-day, if it had +employed the idle capital spent in the ornamentation of its +churches in constructing roads and canals!<note place='foot'><hi +rend='italic'>Townsend</hi>, Journey in Spain, I, 115, 310. In the patriarchal age of the +Jews, there was a relatively very large quantity of ornamental objects in +gold and silver: <hi rend='italic'>Michælis</hi>, De Pretiis Rerum apud Hebræos, in +the Comm. Soc. Götting., III, 151 ff., 160. Conservative Sparta, in the middle age of its +history, was certainly not rich, and yet it had more gold and silver than any +other Grecian state: <hi rend='italic'>Plato</hi>, Alcib., I, 123. According to +<hi rend='italic'>St. John</hi>, The Hellenes, III, 142, the ancients +had relatively much more of the precious metals in the form of +objects for ornament than the moderns. The Romans, with their usual +good sense, did not make use of silver as an article of luxury +until they had attained great wealth. See <hi rend='italic'>Cato</hi>, R. +R., ch. 23, and <hi rend='italic'>Seneca</hi>, De Vita beata, +ch. 21. Then the Carthaginian ambassadors railed at +their hosts because they found the same pieces of table silver in all the houses +to which they were invited. The younger Scipio, even, did not possess more +relatively than 32 pounds of silver ware. <hi rend='italic'>Mommsen</hi>, +Römische Geschichte, II, 383. The relatively great importance of the +stores for domestic use, nevertheless, runs through the whole of +Roman history. The title <hi rend='italic'>de penu legato</hi>, +in the Pandects (Digest, XXIII, 9), points to this, during the reign of the +emperors, and in earlier times, the derivation of <foreign lang='la' +rend='font-style: italic'>penates</foreign> from <foreign lang='la' +rend='font-style: italic'>penu</foreign>. See <hi rend='italic'>Rodbertus</hi>, +in <hi rend='italic'>Hildebrand's</hi> Jahrbuch, 1870, I, 365. Immense importance of the +ring in the old north countries: <hi rend='italic'>Weinhold</hi>, Altnord. Leben, +184 ff. The age of chivalry was very rich in silver plate, cups, basins, etc. +<hi rend='italic'>Büsching</hi>, Ritterzeit und Ritterwesen, II, 137. +<hi rend='italic'>Anderson</hi>, Origin of Commerce, a. 1386. <hi rend='italic'>Lord +Burleigh</hi>, in the age of queen Elizabeth, left after him between fourteen and +fifteen thousand pounds sterling in silver ware; that is almost as much as +the rest of his whole estate; and, it would seem, that for a man of his rank, +even this was not considered a great deal. <hi rend='italic'>Collins'</hi> +Life of B., 44. According to <hi rend='italic'>Giustiniani</hi>, cardinal Wolsey +owned articles of silver to the value of 1,500,000 ducats, and the greater number +of the lords of the time were equally well provided with them.</note> Most nations in +a low state of civilization suffer from the absence of legal guarantees. +Each one is compelled to turn his property into a +shape in which it can be most easily transferred from one +place to another and hidden. This is the principal reason why +<pb n='158'/><anchor id='Pg158'/> +the Orientals possess, relatively speaking, so many precious +stones and so much of the precious metals. The same cause +accounts for the simplicity of their dwellings.<note place='foot'>The Bedouins +are fond of decorating their wives and children with all +the jewels that they possess, both on holidays and other days, so that they +sometimes have four or six bracelets on each arm and fifteen ear-rings in +each ear. <hi rend='italic'>Burckhardt</hi>, Bemerkungen, 188. +<hi rend='italic'>Wellsted</hi> (Roederer's translation), +I, 224. In Asia Minor, girls wear their whole dowry in the shape of personal +ornaments. <hi rend='italic'>Belgiojoso</hi>, Revue des deux Mondes, Feb. 1, 1855. In +East India even the most wretched towns have their silver workers. The +emirs of Scinde, with an annual income of £300,000, had a treasure worth +£20,000,000, nearly £7,000,000 of which were in jewels. +<hi rend='italic'>Ritter</hi>, Erdkunde VII, p. 185. +On the upper Ganges more jewels and other ornaments are +worn than on the lower, where the wealthy prefer to spend their capital on +landed estates. <hi rend='italic'>Ritter</hi>, VI, 1143.</note> On the other +hand, productive capital is to be found in the greatest proportion +among civilized nations which are making very rapid strides +towards wealth, the people of the United States, for instance. +</p> + +</div> + +<div> +<index index='toc' level1='Section XLIV. Capital.—Fixed Capital, And Circulating +Capital.'/> +<index index='pdf' level1='Section XLIV.'/> +<head type='sub'>Section XLIV.</head> +<head>Capital.—Fixed Capital, And Circulating Capital.</head> + +<p> +Capital, according as it is employed, is divided into fixed +capital and circulating capital. Fixed capital may be used +many times in production by its owner; circulating capital +only once. The value of the latter kind of capital passes +wholly into the value of the new product. In the case of the +former kind of capital, only the value of its use passes into the +new product. (<hi rend='italic'>Hermann.</hi>) Hence, the farmer's beasts of +burthen belong to his fixed capital; their food, and his cattle +intended for the slaughter, to his circulating capital. In a +manufactory of machines, a boiler intended for sale is circulating +capital; while a similar one, held in reserve for the machines +used in production, is fixed capital. Ricardo attributes +a somewhat different meaning to these two terms: he calls +fixed capital that which is slowly consumed, and circulating, +<pb n='159'/><anchor id='Pg159'/> +that which disappears rapidly.<note place='foot'>The first beginnings of this +division are to be found in <hi rend='italic'>Quesnay</hi> (Analyse du Tableau +économique, 1758), in which he develops the difference between <foreign lang='fr' +rend='font-style: italic'>avances primitives</foreign> and <foreign lang='fr' +rend='font-style: italic'>avances annuelles</foreign>. See also <hi rend='italic'>Adam +Smith</hi>, W. of N., II, ch. 1, who, however, reduces the difference between them +mainly to the relations of possession, and hence includes grain and seed in fixed +capital. <hi rend='italic'>Hermann</hi>, Staatsw. Untersuch., 269 ff.; +<hi rend='italic'>Ricardo</hi>, Principles, ch. 1, sec. 2; +<hi rend='italic'>Schmitt-henner</hi>, Staatswissenschaften, I, 387, divides capital +into I, <hi rend='italic'>infungible</hi>, that is, 1, fixed in the strict sense of +the word; 2, transportation-capital; II, <hi rend='italic'>fungible</hi>, +1, transformable capital; a, material (raw material, auxiliary material etc.), +b, formed products; 2, circulating capital; a, wares; b, money. +<hi rend='italic'>A. Walker</hi>, S. of W., 57, calls circulating capital that which +may be easily transferred from one branch of production to another; fixed, that which +can be used with advantage only for the purpose for which it was originally +intended.</note> Fixed capital is, indeed, produced +and preserved by circulating capital; but it is, for the +most part, transformed again into circulating capital.<note place='foot'>Old wood-work +is burned; old iron utensils sold; also houses when pulled +down. <hi rend='italic'>Emminghaus</hi>, Allg. Gewerbelehre, 1868, 175.</note> Besides, +it is only by means of the latter, that the former can be +productively employed.<note place='foot'>If the Mongols, for instance, should +despoil China of all its moveable property with the exception of its buried money, +its immovable property would become productive only from the time that that money would +be used to secure other moveable articles. In any case, the production would be +proportioned only to the borrowed seed, cattle, etc. (<hi rend='italic'>Sismondi</hi>, +Richesses commerciale, 1803, I, p. 61.)</note> The relative importance of fixed +and circulating capital to a country depends upon whether the +country is an advanced or only an advancing one. A people +with very much and very fixed capital are indeed very rich; +but run the risk of offering many vulnerable points to an +aggressive enemy, and of thus turning the easily jeopardized +mammon into an idol. To make a passing sacrifice of the +country that the people and the state may be saved, as did the +Scythians against Darius, the Athenians against Xerxes, and +the Russians against Napoleon, becomes difficult, in proportion +as the nation has become richer in fixed capital.<note place='foot'>That the +Athenians left everything in the lurch to oppose Xerxes, much +more readily than under Pericles, even, the flat country of Attica. +<hi rend='italic'>Büchsenschütz</hi> (Besitz und Erwerb im griech. Alterthum, 589) +explains by the fact that in the interval between the two periods, +fixed capital increased largely. In rude ages under the appellation of +a community or nation was understood a number of men; and the state, +while its members remained, was accounted entire. With polished and mercantile +states, the case is sometimes reverted. The nation is a territory cultivated and +improved by its owners; destroy the possession even while the master remains, the +state is undone. <hi rend='italic'>Ferguson</hi>, Hist. of civil Society, V, 4; +<hi rend='italic'>v. Mangoldt</hi>, Volkswirthschaftslehre, 159. Fixed capital is +not so sure of being completely used up as circulating. On this point see +<hi rend='italic'>Schäffle</hi>, N. Œk., 53.</note> But, as +<pb n='160'/><anchor id='Pg160'/> +the destination of the latter is changed with much greater difficulty +than that of circulating capital, highly cultivated nations +would find it very hard to satisfy new wants, if they +could not always appropriate the results of additional savings +to the production of new fixed capital. +</p> + +</div> + +<div> +<index index='toc' level1='Section XLV. Capital.—How It Originates.'/> +<index index='pdf' level1='Section XLV.'/> +<anchor id="Section_45"/> +<head type='sub'>Section XLV.</head> +<head>Capital.—How It Originates.</head> + +<p> +Capital is mainly the result of saving which withdraws new +products from the immediate enjoyment-consumption of their +possessor, and preserves them, or at least their value, to serve +as the basis of a lasting use.<note place='foot'>If the aggregate productive +activity of man be designated by the word labor (just as everything +produced on a piece of land is inaccurately called its product), +then all capital may be considered as the unconsumed result of +labor. The recent socialistic theory that considers capital as the wages +which have been earned but not paid, is a gross misconception of this truth. +This is the origin only of the capital of oppressors and deceivers, and of theirs +only in part. See <hi rend='italic'>infra</hi>, § 189.</note> As capital represents the +solidarity of the economic past, present and future, it, as a rule, +reaches back into the past and forward into the future, through +a period of time longer in proportion as its amount and efficiency +are greater.<note place='foot'><q>While we are clothed in our winter garments, the +spring stuffs are already in the shops of retail dealers; the light material of next +summer's wear is already manufacturing, and the wool for our next winter's clothing +spun.</q> Think of the study in advance which the physician must have gone through, +whom we summon to us at a moment's notice! <hi rend='italic'>Menger</hi>, Grundsätze, +I, § 33. seq.</note> Those producers, too, whose products perish +rapidly may, also, effect savings by exchanging their products +<pb n='161'/><anchor id='Pg161'/> +and capitalizing their counter-value. Thus, the actor, whose +playing leaves after it nothing but a memory, may use the +wheat received by him from a farmer who came to listen to +him, in the employment of an iron-worker, and invest the +product permanently in a railroad. The transformation may +be effected by means of money, bonds etc., but it is none the +less real on that account. Order, foresight and self-restraint +are the intellectual conditions precedent of saving and capital. +The childish and hail-fellow-well-met disposition which cares +only for the present is inimical to it. True, the desire of saving +can be developed only where there are legal guarantees to +ownership;<note place='foot'>Thus in dangerous callings, as for instance, among soldiers +and sailors, there is very little saving. The same may be said of times of plague. See +<hi rend='italic'>J. Rae</hi>, New Principles on the Subject of Political Economy, +1834.</note> guarantees which are both the conditions precedent +and the effect of all economic civilization.<note place='foot'>That we keep our +property under lock and key, while it was customary in Plato's time to seal it up, is +in itself a great advance. See <hi rend='italic'>Becker</hi>, Charicles, I, 202 seq. +Earlier yet, artificial knots were used. <hi rend='italic'>Homer</hi>, Odyss. +VII, 443.</note> The Indians, +Esquimaux etc., had to be taught for the first time by the missionaries +and merchants—and it was with the greatest difficulty +it was done—to save their booty, and spare the natural sources +of their acquisition. Originally, they were, in the heat and +excitement of their wild hunting and fishing, wont to destroy +on the spot what they could not enjoy in the moment.<note place='foot'>Compare +<hi rend='italic'>Hearne</hi>, Reise, nach Prinzwalesfort, 43, 58, 119. +<hi rend='italic'>Barrow von Sprengel</hi>, 282. <hi rend='italic'>Humboldt</hi>, +Relation historique, II, 245. Ausland, 1844, No. 359; 1845, No. 84. +<hi rend='italic'>Stein-Wappüus</hi>, Handbuch der Geographie, I, 310. For proof that +the clergy by preaching self denial contributed largely to the creation +of capital in the earlier part of medieval history, see <hi rend='italic'>Guórard</hi>, +Polyptiques d'Irminon Préf., 13.</note> In the +lowest stages of civilization, the first saving of capital of any +importance is effected frequently through robbery or in the +way of slavery.<note place='foot'>On the inevitableness of slavery, where capital +is needed, and no one cares to save, see <hi rend='italic'>de Metz Noblet</hi>, +Phénomènes économiques, I, 306.</note> In both cases, it is the stronger who compel +the weaker to consume less than they produce. See <hi rend='italic'>infra</hi>, +<pb n='162'/><anchor id='Pg162'/> +§ <ref target="Section_68">68</ref>. Where civilization is at its highest, the inclination +to save, as a rule, is very marked.<note place='foot'>The origination of capital by +<q>social connexions</q> (<foreign lang='de' rend='font-style: italic'>gesellschaftliche +Zusammenhänge</foreign>) <hi rend='italic'>Lassalle</hi> (Bastiat-Schultze, 92, 98) +exaggerates into the absurdity that no capital was ever saved. This is in part related +to his confounding land with capital (103 seq.). On the other hand, +<hi rend='italic'>P. L.</hi> (<hi rend='italic'>v. Lilienfeld</hi>), Gedanken +über die Staatswissenschaft der Zukunft (1873), distinguishes between +the external and internal creation of capital in human society; the latter based +on the condition of every organic being, by virtue of which the present is +generated by the past, and generates the future. The intercellular substance +of plants, the honey-comb of bees, and the blood in the animal body, correspond +to the capital of a nation.</note> It begins to decline where +a people are themselves declining in civilization, and especially +where legal guarantees have lost their force. +</p> + +<p> +But capital may be increased even without personal sacrifice; +as for instance, by mere occupation, as of certain goods, +not hitherto recognized as such. Thus, also, by the establishment +of valuable relations, the advantages of which either become +the common good of all; or which, because at the +exclusive command of one individual, obtain value in exchange. +The progress of civilization itself may increase the +value of existing capital. Thus, for instance, a house, considered +as capital, may double in value if a frequented street be +opened in its neighborhood. To this category belong all improvements +in the arts which enable existing capital to achieve +more than it could before. The invention of the compass increased +the value of the capital employed in the merchant +marine to an extent that cannot be calculated.<note place='foot'><hi +rend='italic'>Hermann</hi>, St. Untersuchungen, 289 ff.; <hi rend='italic'>List</hi>, +System der politischen Œkonomie, I, 325 ff. Thus, for instance, capitalization among a +race of hunters may be continued longest by the creation of herds; that of a race of +shepherds by the building of houses, and by land-improvements; that of an +agricultural people by the establishment of trades, artificial roads, etc. As +to how, in general the accumulation of goods to any great extent, supposes +exchange, and as to how, first of all, with exchange through the existence of +a superabundance wealth may originate, see <hi rend='italic'>Hermann</hi>, loc. cit., +II, Aufl., 25 ff.</note> The increase +of capital effected by saving soon finds a limit unless such +limit is widened by the progress of civilization.<note place='foot'>The annual increase +of the capital of France during the later years of +Louis Philippe's reign, was estimated at from 200 to 300 million of francs; +during the best years of Napoleon III's reign, at 600 million. Journal des +Econ., Nov., 1861, 170. The capital of the British empire, judging from the +statistics of the income tax, increased from 1843 to 1853, in Great Britain +alone, at least £42,000,000 yearly; from 1854 to 1860, in the whole empire, at +least £114,000,000; and in 1863 alone by £130,000,000. London Statis. Journal, +1864, 118 ff. A war carried on on English soil would doubtless be more +destructive of capital than one waged in Russia; but Russia would recover +from one like that of 1854-55 with much greater difficulty because of the +small tendency of its people to amass capital. In countries in which the +middle classes preponderate, the influence of the amassing of capital on foreign +politics is one that favors peace. In despotic or democratic countries, it +may as readily favor war.</note><note place='foot'>The <q>absolute formation</q> of +capital above described is, of course, the only +one in the general economy of mankind. In the economy of individuals, we +frequently meet with another which is only <q>relative,</q> as when the increase +of one's resources is attended by as great or even greater decrease of another's. +This is the case, for instance, where privileges or monopolies are granted. +The same phenomenon is found also in the intercourse of economies of different +nations. <hi rend='italic'>Supra</hi>, § <ref target="Section_64">64</ref>.</note> +</p> + +</div> + +</div> + +<pb n='163'/><anchor id='Pg163'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter II. Co-Operation Of The Factors.'/> +<index index='pdf' level1='Chapter II.'/> +<head type='sub'>Chapter II.</head> +<head>Co-Operation Of The Factors.</head> + +<div> +<index index='toc' level1='Section XLVI. The Productive Coöperation Of The Three +Factors.'/> +<index index='pdf' level1='Section XLVI.'/> +<head type='sub'>Section XLVI.</head> +<head>The Productive Coöperation Of The Three Factors.</head> + +<p> +All economic production generally demands the coöperation +of the three factors: external nature, labor and capital. +But with the political economist, labor is the principal thing; +and not merely because all capital presupposes labor, nor because +every combination of the three factors is an act of labor; +<pb n='164'/><anchor id='Pg164'/> +but, in general, because <q>the human mind's idea of means and +ends makes all goods goods for the first time.</q> (<hi rend='italic'>Hufeland.</hi>) +</p> + +<p> +Leaving the free forces of nature, surrounded by which we +live and work, out of consideration, and also the fact that all +raw material is due to nature, land is the indispensable foundation +of all economy. But how little can unassisted nature do +to satisfy human wants! How much less to produce goods +possessed of value in exchange! A virgin forest, for instance, +sold in its natural state, has, indeed, value in exchange, but +only because it is taken into account that it can be cleared, +and that there are means of transportation already existing.<note place='foot'>Thus +<hi rend='italic'>Cicero</hi>, De Off., II, 3, 4. Nature may indeed produce mere value +in use without the coöperation of labor, in the narrow sense of the word; as, for +instance, a forest which protects a district from avalanches etc. But <q>everything +which has been transformed into goods tends constantly to return to its +natural state, and to withdraw itself from the life of goods.</q> +<hi rend='italic'>Stein</hi>, Lehrbuch.</note> +The greater part of the forces of nature are latent to nomads +and nations of hunters. When labor develops, they are set +free to assist it.<note place='foot'>Compare <hi rend='italic'>List</hi>, System +der Polit. Œkon. But see also the very fine discussion +of <hi rend='italic'>J. S. Mill</hi>, Principles, IV, ch. VI, 2, on the dreariness of +nature, when taken exclusive possession of by man; <q>with every rood of land +brought into cultivation which is capable of growing food for human beings; +every flowery waste or natural pasture plowed up; all quadrupeds or birds +which are not domesticated for man's use, exterminated as his rivals for food; +every hedgerow or superfluous tree rooted out, and scarcely a place left where +a wild shrub or flower could grow, without being eradicated as a weed, in the +name of improved agriculture.</q></note> It is very seldom that any thing can be produced +without capital. Even the poorest gatherer of wild berries +needs a basket and must be clothed.<note place='foot'>In Paris, in 1820, the necessary +tools of a rag-gatherer cost 6-¼ francs. +<hi rend='italic'>Garnier</hi>, Elements d'Econ.-polit., 43.</note> Were there no +capital, every individual would have to begin at the very beginning +every moment. Life would be possible only in a +tropical climate. No man, since the days of Adam, has been +able to labor, except on the condition that a considerable advance +of capital had been made upon him. There is not a +nail in all England, says Senior, which cannot directly or indirectly +<pb n='165'/><anchor id='Pg165'/> +directly be traced back to savings made before the Norman +conquest.<note place='foot'>It is not to be overlooked that all labor expended for a +distant end also falls under the head of capital. See <hi rend='italic'>Droz</hi>, +Economie politique, 1829, I, 6.</note> +</p> + +</div> + +<div> +<index index='toc' level1="Section XLVII. Productive Co-Operation Of The Three Factors. +The Three Great Periods Of A Nation's Economy."/> +<index index='pdf' level1='Section XLVII.'/> +<anchor id="Section_47"/> +<head type='sub'>Section XLVII.</head> +<head>Productive Co-Operation Of The Three Factors. +The Three Great Periods Of A Nation's Economy.</head> + +<p> +The relation of the three factors to one another is necessarily +very different in different branches of production. For instance, +in the case of cattle-raising on a prairie, labor does +very little, land almost everything. Hence an extensive, thinly +populated country is best adapted to this species of production. +But where land is scarce, as in wealthy and populous +cities, human activity should be directed into those branches +of industry which need capital and labor, as manufactures and +the trades. (§ 198.)<note place='foot'>For a good exposition as +to how England has need of more agricultural products, +the East Indies of more capital, and the West Indies of more labor, +see <hi rend='italic'>Fawcett</hi>, Manual of P. E., 110.</note> +</p> + +<p> +Looked at from this point of view, the history of the development +of the public economy of every people may be +divided into three great periods. In the earliest period, nature +is the element that predominates everywhere. The woods, +waters and meadows afford food almost spontaneously to a +scanty population. This is the Saturnian or golden age of +which the sagas tell. Wealth, properly speaking, does not +exist here, and those who do not possess a piece of land run +the risk of becoming completely dependent on, or even the +slave of a land owner. In the second period, that through +which all modern nations have passed since the later part of +the middle ages, the element, labor, acquires an ever increasing +importance. Labor favors the origin and development of +cities as well as exclusive rights, the rights of boroughs and +guilds by means of which labor is, so to speak, capitalized. A +<pb n='166'/><anchor id='Pg166'/> +middle class is formed intermediate between the serfs and the +owners of the soil. In the third period, capital, if we may so +speak, gives tone to everything. The value of land is vastly +increased by the expenditure of capital on it, and in manufactures, +machine labor preponderates over the labor of the human +hand.<note place='foot'>It is a very significant fact, that, at present, in certain +European countries, in Germany for instance, the laborer is called a +<hi rend='italic'>taker</hi>, and the capitalist a <hi rend='italic'>giver</hi> of work. +The expressions employed by <hi rend='italic'>Canard</hi>, <hi rend='italic'>Say</hi> +and <hi rend='italic'>Hermann</hi>, teach a similar lesson.</note> +The national wealth undergoes a daily increase; +and it is the <q>capitalism</q> which first gives an independent +existence to the economic activity of man; just in the same +way that law is, as it were, emancipated from land-ownership, +from the church and the family only in the constitutional +state (<foreign lang='de' +rend='font-style: italic'>Rechtsstaat</foreign>).<note place='foot'><hi +rend='italic'>Schäffle</hi>, Kapitalismus und Socialismus, 124 seq.</note> +But, during this period, the +middle class with its moderate ease and solid culture may decrease +in numbers, and colossal wealth be confronted with the +most abject misery.<note place='foot'>It is evident, that, absolutely considered, +the predominating factor of an +earlier period may continue to increase during the following: and, as a rule, +it does continue to increase.</note> Although these three periods may be +shown to exist in the history of all highly civilized countries, +the nations of antiquity, relatively speaking, never advanced +far beyond the second, even in their palmiest days. A great +part of that which is accomplished among us by means of capital +and of machines, the Greeks and Romans performed by +the labor of slaves. Leaving Christianity out of the question, +nearly all the minor differences between the public economy of +the ancients and that of the moderns may be reduced to this +fundamental distinction.<note place='foot'>I need cite only the instance of the +slaves, who called out the hours, thus performing the functions of a clock: +<hi rend='italic'>Martial</hi>, VIII. 67; <hi rend='italic'>Juvenal</hi>, X. 216; +<hi rend='italic'>Petron.</hi> 26; of the turning of water wheels, in Egypt and +Babylon, by human hands. <hi rend='italic'>Strabo</hi>, XVI. 738, XVII., 807. +Among the ancients, it required one shepherd, and shepherd boys besides, to take +care of twenty sheep. (<hi rend='italic'>Geopon.</hi> XVIII, 1.) In highly cultivated +regions, the number ran up to fifty. (<hi rend='italic'>Demosth.</hi>, adv. Euerg. +et Mnes., 1155.) It seldom passed eighty (<hi rend='italic'>Varro</hi>, De re rust., +II. 10, 10. 2, 20), or one hundred (<hi rend='italic'>Cato</hi>, R.R. c. 10); +while, recently, five men are sufficient to take care of eighteen hundred sheep. +See <hi rend='italic'>Roscher's</hi> discourse on the relation of Political Economy +to classical antiquity, in the reports of the Royal Saxon Science Association, May, 1849. +Also <hi rend='italic'>D. Hume</hi>, Discourses, No. 10.</note><note place='foot'>The +productive power of each of the factors of production has been over-estimated +by some schools. After <hi rend='italic'>Gratian</hi> (c. i, C. XIII. qu. i), had clearly +recognized the necessary coöperation of the three elements, there was in the +one-sidedness with which the Reformers emphasized God's blessing as the +only source of wealth, a great over-estimation of the factor nature. The +Mercantile System over-estimated the factor capital, in one of its most obvious +component parts, money. In later times again: <q><foreign lang='fr' +rend='font-style: italic'>La terre est la source ou la matière d'où l'on tire la +ichesse; le travail de l'homme est la forme qui la produit. Tous les hommes d'un +état subsistent et s'enrichissent aux dépens des propriétaires des terres.</foreign></q> +(<hi rend='italic'>Cantillon</hi>, Sur la Nature du Commerce, 1755, I. 33, +55.) <hi rend='italic'>La terre est l'unique source des richesses.</hi> +(<hi rend='italic'>Quesnay</hi>, Maximes générales de Gouvernement, 1758, ch. 3.) +In another place, indeed, the same writer says: <foreign lang='fr' +rend='font-style: italic'>les revenus sont le produit des terres et des hommes +(Grains</foreign>, p. 276, Daire), and <hi rend='italic'>Mirabeau</hi> frequently laid +stress on the necessary coöperation of labor and capital. (Landwirthschaftsphilosophie, +translation by <hi rend='italic'>Wichmann,</hi> I, 5.) <hi rend='italic'>Turgot</hi>, +Sur la Formation et Distribution des Richesses, § 7. For an excellent refutation of +this <q>Physiocratic</q> one-sidedness, which, if all men are endowed by nature with +equal rights, leads to socialism, see <hi rend='italic'>Canard</hi>, Principes, 6. +According to <hi rend='italic'>Gioja</hi>, N. Prospetto, I. 35, the part played by labor, +in the production of <hi rend='italic'>Parmesan</hi> cheese, is a thousand times as +great as that played by the soil; and in the production of a Dutch tulip, a hundred +thousand times as great. The English are wont, similarly, to over-estimate +the relative power of labor. (<hi rend='italic'>Ponocratie</hi>, after +<hi rend='italic'>Ancillon</hi>, Essais philosophiques, 1817, II. 327.) <q>Commerce +and trade first spring from the labour of men.</q> (<hi rend='italic'>North</hi>, +Discourses upon Trade, 112.) Thus, <hi rend='italic'>Locke</hi> (1690), Of Civil +Government, II, 5, 40 ff., is of opinion, that, at least 9/10 of the value of the +products of the soil, useful to man, are to be ascribed to labor, and, in the +case of most, even 99/100. And so, <hi rend='italic'>Berkeley</hi> (1735), Querist, +No. 38 seq. This view is advocated in its boldest form,—a thing unusual in the +case of the independent disciples of a great master—by +<hi rend='italic'>McCulloch</hi>, Principles, II, ch. i, that it is to labor, and to +labor alone, that man owes everything that possesses any value in exchange. Similarly, +<hi rend='italic'>J. Mill</hi>, Elements (1824), III, 2. The +consequences which socialism might draw from these premises are self-evident. +<hi rend='italic'>Karl Marx's</hi> whole system, for instance, rests, without any +attempt at demonstration, on the assumption that the Ricardo school is right. Much +more moderate views are met with earlier. Thus, <hi rend='italic'>Hobbes</hi>, De Cive, +XIII, 14, and <hi rend='italic'>Leviath</hi>., 24 (1642 and 1651), calls +<foreign lang='la' rend='font-style: italic'>labor et parsimonia</foreign> necessary +sources of wealth; <foreign lang='la' rend='font-style: italic'>proventus terræ et +aquæ</foreign> useful ones; and <hi rend='italic'>Petty</hi>, On Taxes (1679), 47, +says: <q>Labour is the father and active principle of wealth, as lands are the mother. +Land and labour together are the sources of all wealth; without a competency of lands +there would be no subsistence, and but a very poor one without labour.</q> +<hi rend='italic'>Harris</hi>, Upon Money and Coins, 1757, P.I. <hi rend='italic'>Adam +Smith</hi>, also, in spite of the well known passage at the beginning +of his work, very frequently lays stress on <q>the annual produce of +land and labour.</q> (See the passages collected in <hi rend='italic'>Leser</hi>, +Begriff des Reichthums bei A.S., 97.) According to <hi rend='italic'>Leibniz, regionis +potentia consistit in terra, rebus, hominibus</hi>. (ed. Dutens, IV. 2, 531.) +<hi rend='italic'>Ricardo's</hi> school is wont to bring capital under the head of +labor, as saved-up labor. This is about as correct as to say, that all that a grown man +does, his parents had done. (<hi rend='italic'>Umpfenbach</hi>, Nat. Œk., 64.) There +is only one way in which labor, and even then the expression is not exactly correct, can +be looked upon as the only factor in production; and that is to presuppose the forces of +nature as matters of course (<foreign lang='de' rend='font-style: italic'>als sich von +selbst verstehend</foreign>), and to call the aggregate use made of them by the human +mind, labor. Or we might say with old <hi rend='italic'>Epicharmos</hi>, that the gods +sell all goods for labor. (<hi rend='italic'>Xenoph</hi>., Memor. II. 1.) +Moreover, even in purely intellectual productions, in poetical productions for +instance, nature, labor and experience, the culture inherited from former +ages (a kind of intellectual capital) uniformly coöperate. But how almost +completely valueless in literature are all entirely pure (empty!) productions +of the fancy!</note> +</p> + +</div> + +<pb n='167'/><anchor id='Pg167'/> + +<div> +<index index='toc' level1='Section XLVIII. Critical History Of The Idea Of +Productiveness.'/> +<index index='pdf' level1='Section XLVIII.'/> +<anchor id="Section_48"/> +<head type='sub'>Section XLVIII.</head> +<head>Critical History Of The Idea Of Productiveness.</head> + +<p> +In this chapter, the dogma-historical (<foreign lang='de' +rend='font-style: italic'>dogmengeschichtliche</foreign>) +part is of the utmost importance, because it treats of the connection +<pb n='168'/><anchor id='Pg168'/> +between the deepest fundamental notions and the principal +branches of practical life. It is clear that every political +economist must construct his exposition of productiveness on +his prior notions of goods and value. We must, therefore, +draw a distinction between expositions which are logical but +altogether too narrow, and wholly erroneous ones.<note place='foot'>Before +the predominance of the Mercantile System, <hi rend='italic'>Montchrétien</hi> very +cleverly called all trades: <foreign lang='fr' rend='font-style: italic'>parcelles et +fragments de cette sagesse divine que Dieu nous communique par le moyen de la +raisen</foreign>. By means of the three estates; <foreign lang='fr' +rend='font-style: italic'>labourers, artisans, merchands, tout état est nourri; par eux +tout profit se fait. L'utilité règle les rangs des arts</foreign>. (Traité, 12, 45, +66.) The teaching of <hi rend='italic'>P. Gregorius Tolosanos</hi> (ob. 1597) on the +different classes of society and the different callings of men, is still more in keeping +with the present doctrine of production; only, in the moralizing tone of the time, he +speaks rather of their dignity than of their influence in creating wealth: De Rep. I, +195. See, also, the earlier views of <hi rend='italic'>Franc. Patricius</hi> (ob. +1494), De Rep. I, 4, 7, 8.</note> +</p> + +<pb n='169'/><anchor id='Pg169'/> + +<p> +Thus, the Mercantile System admits every mode of applying +the three factors of production, but considers them +really productive only in so far as they increase the quantity +of the precious metals possessed by the nation, either through +the agency of mining at home, or by means of foreign trade. +This view stands and falls with the altogether too limited idea +of national wealth before mentioned (§ <ref target="Section_9">9</ref>), which this system +advocated.<note place='foot'>Compare <hi rend='italic'>A. Serra</hi>, Breve Trattato +delle Cause che possono far abbondare i Regni d'Oro d'Argento, 1613. +<hi rend='italic'>Th. Mun</hi>, England's Treasure by foreign Trade, 1664. +<hi rend='italic'>Ch. King</hi>, British Merchant or Commerce Preserved, 1721. +But, particularly, <hi rend='italic'>A.C. Leib</hi>, Von Verbesserung Land und Leuten +etc. (1708), who, from the point of view of the Mercantile System, draws a very clear +distinction between the productive and unproductive classes. See, also, +<hi rend='italic'>infra</hi>, § <ref target="Section_116">116</ref>. First thoroughly +refuted by <hi rend='italic'>W. Petty</hi>, Political Anatomy of Ireland, 67, 82. +Quantulumcunque concerning Money (1682). <hi rend='italic'>D. North</hi>, +Discourses upon trade (1691). See <hi rend='italic'>Roscher's</hi> Geschichte der +englischen Volkswirthschaftslehre, 77, 88, 138. And later, especially, +<hi rend='italic'>Ad. Smith</hi>, W. of N. IV., ch. 1 ff. <hi rend='italic'>Adam +Smith's</hi> doctrine of productive and unproductive labor is to be found already, in +this period, in <hi rend='italic'>Petty</hi>, Several Essays, 127 ff. Political Anatomy, +185 ff; also, in the anonymous work, A Discourse of Trade, Coyn and Paper Credit, +London (1697), 44, 159.</note> The majority of the followers of the Mercantile +System ascribe more power to industry to attract gold and silver +from foreign parts, than to agriculture, and to the finer +kinds of industry than to the coarser; to active and direct +trade, more than to passive and indirect trade. +</p> + +</div> + +<pb n='170'/><anchor id='Pg170'/> + +<div> +<index index='toc' level1='Section XLIX. Critical History Of The Idea Of +Productiveness.—The Doctrine Of The Physiocrates.'/> +<index index='pdf' level1='Section XLIX.'/> +<head type='sub'>Section XLIX.</head> +<head>Critical History Of The Idea Of Productiveness.—The +Doctrine Of The Physiocrates.</head> + +<p> +The doctrine of the Physiocrates is to be explained in part +by a very natural reaction from the narrow-heartedness of the +Mercantile System, and at the same time, by a presentiment, +misunderstood, of the true theory of rent. (§ 150 ff.). Of +the six classes of labor mentioned above (§ <ref target="Section_38">38</ref>), +those only are called productive which increase the quantity of raw material +useful for human ends. All the other classes, it matters not +how useful, are called sterile, salaried, because they draw their +income only from the superabundance of land-owners and the +workers of the soil. Tradesmen, in the narrower sense of the +term, produce only a change in the form of the material, the +higher value of which depends on the quantity of other material +consumed for the purposes of the tradesman's labor. If +any of this material is saved, the value of their products +sinks, although to the advantage of the economy of the whole +nation. In any case, industry could create no wealth, but only +make existing wealth more lasting. It might, so to speak, accumulate +the value of the quantity of food consumed during +the building of a house in the house itself.<note place='foot'><hi +rend='italic'>Quesnay</hi>, Dialogue sur les Travaux des Artisans, 210 ff.; 289 éd. Daire; +<hi rend='italic'>Turgot</hi>, Sur la Formation etc., § 8; <hi rend='italic'>Dupont</hi>, +Correspondence avec J.B. Say, 400, éd. Daire. <hi rend='italic'>B. Franklin</hi>, Letter +to Dr. Evans (1768), and Positions Concerning National Wealth (1769), Works ed. Sparks, +VII and II. Similarly even <hi rend='italic'>Aristotle</hi>, Oec., I, 2, says, that +commerce, wage-labor and war win from men, with or without their will; but that only +agriculture obtains booty from nature. And so <hi rend='italic'>Cicero</hi> says of +merchants: <foreign lang='la' rend='font-style: italic'>nihil proficiunt, nisi admodum +mentiantur</foreign>. De Off., I, 42. The same view seems to have prevailed during +the middle ages. See <hi rend='italic'>Thom. Aquin.</hi>, De Rebus publicis, II, 3, 5 +seq. <hi rend='italic'>Luther</hi> entertained a like notion (Vom Kaufhandel und Wucher, +1524). He prefers agriculture to the trades. See the Irmischer edition of his works, +XXII, 284; XXXVI, 172; LXI, 352. <hi rend='italic'>Calvin</hi> considered commerce both +useful and honorable; so that <foreign lang='la' rend='font-style: italic'>ex ipsius +mercatoris diligentia atque industria</foreign>, its profit may be greater than that of +agriculture. (Opp. ed. Amstelod, 1664, IX, 223.) <hi rend='italic'>Asgill</hi>, Several +Assertions proved in order to create another Species of Money than Gold (1691): <q>what +we call commodities is nothing but land severed from the soil; man deals in nothing but +earth.</q> Concerning <hi rend='italic'>Cantillon</hi>, compare § 47, note 4. How +violent an innovation the Physiocratic theory was in its time may be inferred from what +<hi rend='italic'>Zincke</hi> writes in the Leipzig Sammlungen, X, 551 ff. (1753), p. +20, XIII, 861.</note> +</p> + +<pb n='171'/><anchor id='Pg171'/> + +<p> +But if tradesmen really earned, in the value of their products, +only what they had consumed during their labor, it would +be difficult for them to find employers to provide them with +capital. Everyone will acknowledge, that a Thorwaldsen and +an ordinary stone-cutter, with the same block of marble, the +same implements, the same food, would necessarily, after the +same time, turn out exceedingly different values.<note place='foot'><hi +rend='italic'>Quesnay</hi>, l. c., 189, does not ignore that many workmen earn more than +the cost of their necessary subsistence; but he claimed that this was a result +of a natural or legal monopoly of the same. The dearer labor was, the more +productive it seemed. Per contra, see <hi rend='italic'>Dohm</hi> on the +Physiocratic system, in the Deutsch. Museum, 1778, II, 313 ff.</note> And, even +in the case that industry should add to the raw material only +precisely the same amount of value as had been consumed by +the workmen, can it be said that the work ceases to be productive +simply because it is consumed by the workmen themselves? +If that were so, agriculture even, would, in most +countries with a low civilization, be unproductive.<note place='foot'><hi +rend='italic'>Gournay</hi> (compare <hi rend='italic'>Turgot</hi>, Eloge de G., in +Guillaumin's edition, I, 266, 271 ff.), as well as <hi rend='italic'>Raynal</hi>, +Histoire des Indes, vol. X, Livre 19, spite of the +similarity of their and Quesnay's views, acknowledged on this account, the +productiveness of industry. For some remarkable examples illustrative of +how it may increase the value in exchange of raw material, see the anonymous +work, Paying Old Debts without New Taxes, London, 1723. See also +<hi rend='italic'>Algarotti</hi> (ob. 1794), 318, in <hi rend='italic'>Custodi</hi>, +Economisti classici italiani, Parte moderna, +I. Thus a cwt. of coarse cast iron is converted, in a Berlin manufactory, +into 88,440 shirt buttons worth 6-⅔ silver groschens each. Hence the value is +raised from 1-2 thalers to 19,653 thalers. The increase of the value in use +by industrial labor is self-evident.</note> +</p> + +<p> +Commerce, according to the theory of the Physiocrates, +only transfers already existing wealth from one hand to another. +What the merchants gain by it is at the cost of +the nation. Hence, it is desirable that this loss should be as +<pb n='172'/><anchor id='Pg172'/> +small as possible. Hence sterility!<note place='foot'><hi rend='italic'>Quesnay</hi>, +Dialogue sur le Commerce.</note> But, the more important +branches of business, especially wholesale trade, are connected +with a transportation of goods (<hi rend='italic'>Verri</hi>), either from one place +or from one period of time, into another. Here the genuine +merchant speculates essentially on the difference of the values +in use which are afterwards greater than before.<note place='foot'>Recognized +very early by <hi rend='italic'>Ad. Contzen</hi>, Politicorum, Lib. VIII, C. 10 +(1629).</note> The ice +shipped yearly from Boston to tropical lands met a much +more urgent and wide-spread want there than it would if it +had remained at home. And thus the storage of grain in +large quantities after a bountiful harvest withdraws, indeed, +an object of enjoyment from the consumption of the people; +but its sale, after a bad harvest, undoubtedly increases their +enjoyment in a much greater degree than it was before diminished. +Besides, the condition of both parties to the contract +is usually improved in all normal trade. (<hi rend='italic'>Condillac.</hi>)<note +place='foot'>This did not escape the notice of Frederick II. <hi rend='italic'>Von +Raumer</hi>, Hohenstaufen, III, 535.</note> No one +parts with exchangeable goods unless they are of less use to +him than the ones he receives in return.<note place='foot'><hi +rend='italic'>Condillac</hi> acknowledges the productive power both of industry and of +commerce; and that the service rendered by the state is at least economically +indispensable. (Le Commerce et le Gouvernment, 1776, I, 6, 7, 10.) <hi +rend='italic'>Beccaria</hi>, Economia pubblica (1769 ff.), IV, 4, 24. +<hi rend='italic'>Boisguillebert</hi> (ob. 1714), Sur la Nature +des Richesses, illustrated the utility of commerce by the picture of a number +of men bound to pillars, one hundred steps apart, one with a superabundance +of food but naked, a second with a superabundance of fuel, a third with a +superabundance of clothing etc.; all of whom perish, because unable to exchange +their respective surpluses with one another. According to <hi rend='italic'>Lotz</hi>, +Revision, I, 217, <q>buying dear,</q> apart from real fraud, means only a decrease of +possible gain.</note> And so, the value in +use of a nation's resources is really increased by commerce. To +the other attributes of goods it adds one of the principal conditions +of all use, accessibility (<hi rend='italic'>Kudler</hi>), with which it either +newly endows them, or which it increases in degree. To this +end, the merchant makes use of tools, just as the manufacturer +<pb n='173'/><anchor id='Pg173'/> +does. What spinning-wheels, looms and workshops are to the +latter, ships, warehouses, cranes etc., are to the former. If +production be not complete until the thing produced is made +fit for its last end, consumption, commerce may be looked upon +as the last link in the chain of productive labor. It, at the +same time, constitutes a series of intermediate links; as without +it no division of labor is possible, and without a division +of labor, no higher economic productiveness.<note place='foot'><hi +rend='italic'>Verri</hi>, Meditazioni, XXIV, instead of calling the merchant productive, +calls him a mediator between producers and consumers. It would be just +as reasonable to call the shoemaker a mediator between the production and +consumption of leather; or the cloth merchant, who cuts the material from +the piece, an assistant preparatory to the tailor. The labor of commerce is +especially like that of the fisherman or the turf digger, because they produce +only in so far as they transfer goods from inaccessible to accessible places. +See, however, <hi rend='italic'>Rau</hi>, Lehrbuch, I, § 103. See the demonstration of +the productive power of commerce in general, as well as of what is, by way of preference, +called industry, in <hi rend='italic'>Ad. Smith</hi>, W. of N., IV, ch. 9. A much more +fundamental refutation of the Physiocratic Principle is to be found in +<hi rend='italic'>Jacob</hi>, N. Œk., 204 ff.</note> How commerce +may increase the value in exchange of goods, and without +in any way injuring the purchaser, needs no further illustration.<note place='foot'>In +1843, about 55,000 tons of ice were shipped from Boston. Less than +25 cents per ton was paid for the ice in the first instance. When packed on +board ship, it was worth $2.55 per ton. The ultimate sale brought $3,575,000. +Ausland, 1844, No. 278. The ancients were acquainted with a similar +production of ice, the value in exchange of which might be almost entirely +reduced to the labor of commerce. See <hi rend='italic'>Xenoph.</hi>, Memor., II, +I, 30; Athen. III 97: Proverbs of Solomon, 25, 13.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section L. The Same Subject Continued.'/> +<index index='pdf' level1='Section L.'/> +<head type='sub'>Section L.</head> +<head>The Same Subject Continued.</head> + +<p> +Even Adam Smith called services, in the narrower sense of +the term (§ <ref target="Section_3">3</ref>), the grave and important ones of +the statesman, clergyman and physician, as well as the <q>frivolous</q> ones of +the opera singer, ballet-dancer and buffoon, unproductive. +The labor of none of these can be fixed or incorporated in any +<pb n='174'/><anchor id='Pg174'/> +particular object.<note place='foot'>W. of N., ch. 3. See, however, +<hi rend='italic'>Garnier's</hi> French translation of Ad. Smith, Préf. p. IX and +V, note 20. Similarly, <hi rend='italic'>Malthus</hi>, Principles, ch. 1, +Lect. 21. Definitions, ch. 7, 10.</note><note place='foot'><hi rend='italic'>Bacon</hi> +had already said of the nobility, clergy and literateurs: <foreign lang='la' +rend='font-style: italic'>sorti reipublicæ nihil addunt</foreign> (Serm., 15, 29); in +opposition to which, <hi rend='italic'>Hobbes</hi> justly remarks, that even human labor +may, like other things, be exchanged against goods of all sorts. (Leviathan, 24.) In +the work, Discourse of Trade, Coyn and Credit, p. 44 ff., and p. 156, the absolute +necessity of <q>head-work</q> as well as bodily labor, is conceded; but it is insisted +that physicians, clergymen and jurists can never enrich a country, and that a +relatively large number of them would even conduce to national poverty. (See +<hi rend='italic'>Roscher</hi>, Geschichte der englischen Volkswirthschaftslehre, 138.) +<hi rend='italic'>David Hume</hi> considers merchants as productive, but says that a +doctor or lawyer can grow rich only at the expense of some one else. (Discourses, No. +4, On Interest.) <hi rend='italic'>Ferguson</hi> very cleverly compares such a valuation +of national wealth to that of a miser. Hist. of Civil Society, VI, I.</note> +But how strange it is that the labor of +a violin-maker is called productive, while that of the violin-player +is called unproductive; although the product of the +former has no other object than to be played on by the latter? +(<hi rend='italic'>Garnier</hi>.) Is it not strange that the hog-raiser should be +called productive, and the educator of man unproductive +(<hi rend='italic'>List</hi>); the apothecary, who prepares a salve which alleviates +for the moment, productive, the physician, unproductive, spite +of the fact that his prescription in relation to diet, or his surgical +operation, may radically cure the severest disease? +</p> + +<p> +If the productiveness of an employment of the factors of +production be made to depend on whether it is attended by a +material result, no one will deny that the labor of the plowman, +for instance, is productive; and no one, of Adam Smith's +school, at least, that that of the clerk, who orders the raw +material for the owner of the manufactory, is. They have +participated indirectly in the production. But, has not the +servant of the state, who protects the property of its citizens, +or the physician, who preserves the health of the producer, an +equally mediate but indispensable share in it? The field-guard +who keeps the crows away, every one calls productive; +why, not, then, the soldier, who keeps away a far worse +<pb n='175'/><anchor id='Pg175'/> +enemy from the whole land? (<hi rend='italic'>McCulloch.</hi>) But the entire +division of business into two branches, the one directly, and +the other indirectly productive, can be defended only as respects +certain kinds of goods. (<hi rend='italic'>Schmitthenner.</hi>) The labor of +the judge, for instance, is only indirectly productive in the +manufacture of shoes, inasmuch as he guarantees the payment +of the shoemaker's account. On the other hand, the shoemaker +contributes only very indirectly to the general security +which the law affords, by protecting the judge's foot.<note place='foot'>Similarly +<hi rend='italic'>Lauderdale</hi>, Inquiry, 355; <hi rend='italic'>Lotz</hi>, Handbuch +der Staätswirthschaft, I, § 39, and <hi rend='italic'>Rau</hi>, Lehrbuch I, § 195, +concede only indirect productiveness to commerce. It may be shown, in a great many +instances, that such productiveness exists side by side with direct productiveness, on +account of the thousand ways in which all economic threads are interwoven with one +another. Thus <hi rend='italic'>Paley</hi> remarks in his work on the Principles of +Morals and Politics, that a tobacco manufacturer even may contribute indirectly to the +cultivation of grain; an actor, to industry etc.</note> +</p> + +<p> +Nor can any effectual inferiority of service be claimed, +simply because the productive power of one branch of business +is, measured by the duration of its results, greater than +another.<note place='foot'>Thus <hi rend='italic'>Sismondi</hi>, Nouveaux Principes, +II, ch. 1, and, earlier, <hi rend='italic'>Mengotti</hi> Colbertismo, +317. (Cust.) See, on the other hand, <hi rend='italic'>Hermann</hi>, Staatsw. +Untersuchungen, 34 ff. Even <hi rend='italic'>J.B. Say</hi> does no manner of justice, +in this respect, to personal services. He speaks <foreign lang='fr' +rend='font-style: italic'>of produits qui ne s'attachent à rien qui s'évanouissent +à mésure qu'ils naissent, qu'il est impossible d'accumuler, qui n'ajoutent +rein à la richesse nationale</foreign>. Compare Catéchisme (3d ed.) 52 ff., 174 ff. +On the other hand <hi rend='italic'>Dunoyer</hi>, Libertê du Travail, L.V., remarks that +here labor and its result are made to change places; the former like all labor +is very perishable, the latter as lasting as in the case of other kinds of labor. +In the one case the utility is fixed in things, in the other in persons. +<hi rend='italic'>Ad. Müller</hi>, Elemente der Staatskunst passim, calls special +attention to how the kinds of labor, called unproductive by <hi rend='italic'>Adam +Smith</hi>, preserve the state, and in that way, all individual exchangeable goods. +Similarly, <hi rend='italic'>Storch</hi>, Handbuch, I, 347; +<hi rend='italic'>Steinlein</hi>, Handbuch, I, 460. <hi rend='italic'>Lauderdale</hi> +(443), however, is correct when he says, that the continued duration of the product of +labor depends, usually, more on the caprice of consumers than on the nature of the +labor.</note> What is more perishable than a loaf of bread +bought for dinner? What more imperishable than the <foreign lang='la' +rend='font-style: italic'>monumentum ære perennius</foreign> of a Horace? The labor +expended on persons and on relations (<foreign lang='de' +rend='font-style: italic'>Verhältnissen</foreign>) is, both as to the extent +<pb n='176'/><anchor id='Pg176'/> +and duration of its results, much less capable of being +estimated than any other; but its capacity of accumulation +and its power of propagation are greater than any other. It +is in the domain of the <q>immaterial,</q> that man is most <q>creative.</q> +(<hi rend='italic'>Lueder.</hi>)<note place='foot'><hi rend='italic'>Garnier</hi> +calls attention to the fact, that there is a great quantity of material +products, such as laces, perfumes etc., that can scarcely be ever used in +further production, and, generally speaking, one's resources for the most part +are not kept in lasting goods, but are preserved by the change of technic forms +in production. <hi rend='italic'>Hermann</hi>, I, Aufl., 115.</note> +Finally, neither should the greater indispensableness +of the more material branches of business be too +generally asserted. Agriculture produces grain which is indispensable, +and tobacco which is not; industry, cloth, as well as +lace; commerce draws from the same part of the world rhubarb +and edible bird's-nests; and so, to <emph>services</emph> belong the indispensable +ones of the educator and judge, as well as those +of the rope-dancer and bear-leader, which can be dispensed +with.<note place='foot'>When <hi rend='italic'>Schön</hi>, Nat. Œkonomie, 33, +ridicules the idea of the productiveness of personal +services, by citing the instance of prostitution carried on as +a trade, he forgets that many material goods also may conduce to the moral +damage of the purchaser of them. It is said that there are in France 3,500 +retailers and colporteurs of immoral writings and pictures, who sell yearly +nine million numbers or pieces, at a cost of six million francs! (Moniteur, 9 +Avril, 1853.)</note> Indeed, the dividing line between material and intellectual +production cannot, by any means, be closely drawn.<note place='foot'>Compare +<hi rend='italic'>Schäffle</hi>, Theorie der ausschliessenden Absatzverhältnise, 1867, +135. seq.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LI. The Same Subject Continued.'/> +<index index='pdf' level1='Section LI.'/> +<head type='sub'>Section LI.</head> +<head>The Same Subject Continued.</head> + +<p> +The greater number of recent writers<note place='foot'>Many of the socialists take a +retrograde step in this respect, in as much as they consider only manual labor +productive. <hi rend='italic'>Fourier's</hi> school particularly, +declaim passionately against the unproductiveness of commerce and +of most personal services. Compare <hi rend='italic'>V. Considérant</hi>, +Destinée sociale, 1851, I, 44.</note> have, therefore, come +to be of the opinion that every useful business which ministers +<pb n='177'/><anchor id='Pg177'/> +to the whole people's requirement of external goods possesses +economic productiveness.<note place='foot'>Besides the above, see +<hi rend='italic'>Gioja</hi>, N. Prospetto, I, 246 ff.; <hi rend='italic'>Scialoja</hi>, +42; <hi rend='italic'>J. B. Say</hi>, Traité, I, ch. 2; <hi rend='italic'>Hufeland</hi>, +N. Grundlegung, I, 42, 54; <hi rend='italic'>Gr. Soden</hi>, Nat. Œkonomie, I, 142 ff. +<hi rend='italic'>Hermann</hi>, St. Untersuchungen, 20 ff., distinguishes +three politico-economical points of view; that of the producer, that of the +consumer, and that of the whole nation's economy. The producer calls his +labor productive, in case he receives back his outlay of capital with the rate +of profit usual in the trade of the country. To this point of view, therefore, +every service which is paid for, according to wish, seems productive. +On the other hand, the consumer ascribes productiveness to all those kinds +of labor the achievements of which he may use, and which he can obtain at +a convenient price. Whenever, therefore, he pays for a service voluntarily, +he acknowledges its productiveness. Lastly, from a national-economical +point of view, all labor is considered productive which increases the quantity +of goods exposed for sale in the market; and this, personal services do. +The technic productiveness, which depends on the execution of the technic +ideas floating before the mind of the workman, must be distinguished from this +economic productiveness. It is possible that, technically labor may be very +productive, and yet cause economic loss; for instance, the fine arts and the +so-called master pieces of the trades! See <hi rend='italic'>Seneca</hi>, De Benef., +II, 33. <hi rend='italic'>H.</hi> (33) furnishes a very good refutation of the +doctrine that a great deal depends on whether the labor has been paid from capital +or from income. <hi rend='italic'>Eiselen</hi>, Volkswirthschaft (1843), 27 ff., +remarks, that the laborer, for instance, who grows corn, must besides look +after his health and the preservation of his house; this is a +part of his necessary aggregate labor. Why, then, should +it be called unproductive when such secondary labor is performed by particular +persons? Otherwise the farmer would have no time whatever for his +principal business! Edinburgh Review, 1804, IV, 343 ff.; +<hi rend='italic'>Wakefield</hi>, An Essay upon Political Economy, 1804, +who is concerned mainly with the theory of the productiveness +of labor. <hi rend='italic'>L. Lauderdale</hi> says, that when the +nation's wealth is estimated according to its value in use, all useful labor is +productive; and that when estimated according to its value in exchange, all +labor that is paid is productive. (Inquiry, ch. 3.) <hi rend='italic'>Stein</hi> +(Lehrbuch, 68; Tüb. Zeitschr., 1868, 230) conditions the notion of productiveness by the +presence of a superfluity of values. But, it may be asked, does a family, +which does no more than support itself, labor unproductively? (Compare, however, +§ <ref target="Section_30">30</ref>.) <hi rend='italic'>J. S. Mill</hi> took a +surprisingly retrograde step in the doctrine on this point, in his Principles, +I, ch. 3. Compare his Essays on some unsettled Questions of Political Economy, +No. 3. A still more surprising exaggeration in <hi rend='italic'>de Augustinis</hi> +Instituzzioni di Economia sociale (Napoli 1837), who goes so far as to call a +person guilty of arson a productive person because he has produced for himself +<q>the pleasure of destruction</q>! More recently, <hi rend='italic'>von Mangoldt</hi> +distinguishes between economic labor and the labor +of culture: the latter is incorporated into the man himself, the former one +employed on the external world, in order to transform it in a way corresponding +to human wants. Viewed from the stand-point of Political Economy, +the latter only is productive. (Volkswirthschaftslehre, 1865, 26 ff.)</note> +But it makes a great difference +to science, whether a view is considered true because +no one has suggested a doubt of its correctness, or because +all doubts as to its truth have been triumphantly removed. +</p> + +</div> + +<pb n='178'/><anchor id='Pg178'/> + +<div> +<index index='toc' level1='Section LII. Idea Of Productiveness.'/> +<index index='pdf' level1='Section LII.'/> +<head type='sub'>Section LII.</head> +<head>Idea Of Productiveness.</head> + +<p> +It should never be lost sight of, that the public economy of +a people should be considered an organism, which, when its +growth is healthy, always develops more varied organs, but +always in a due proportion, which are not only carried by the +body, but also in turn serve to carry it. The aggregate of +the wants of the entire public economy etc., is satisfied by the +aggregate activity of the people. Every individual who employs +his lands, labor or capital for the whole, receives his +share of the aggregate produce, whether he contributed or +not to the creation of the kind of produce in which he is paid. +Thus, in a pin-manufactory, the workman who is occupied +solely in making the heads of pins is not paid in pins or pin-heads, +but in a part of the aggregate result of the manufacture, +in money. Every department of business, therefore, +for the achievements of which there is a rational demand, and +which are remunerated in proportion to their deserts, has +labored productively. It is unproductive only when no one +will need what it has brought forth, or when no one will pay +for it; but, in this case, what is true of the writer without +readers—that he is unproductive—and of the singer without +hearers, is equally true of the peasant whose corn rots in +his granary, because he can find no sale for it.<note place='foot'>We +might, indeed, compare original production, that which preceded all +other, to eating; the trades, to digestion; commerce, to the movements of the +several members of the body; personal services to inspiration, and yet +all are equally necessary to the life of the body! Thus, +<hi rend='italic'>Gamilh</hi> compares agriculture to the root of a tree of which the +service rendered by the state is the top. The growth of the latter contributes, as well as +that of the former, to the nutrition of the whole, and is far removed +from exhausting the tree. Théorie de l' E.P., II, 46 ff. <q>Natural production</q> +would, indeed, accomplish very little without the legal protection +guaranteed by the state, or without the tools furnished by industry +etc. But it is, besides, in most instances, a distortion of the truth to +speak of productive and unproductive men or classes of men. These +expressions are proper only when applied to individual kinds of +labor. See <hi rend='italic'>Murhard</hi>, Ideen über Nat. Œk., 88 ff. +Persons seriously ill are temporarily unproductive, and children who die early, +are unproductive for their whole life.</note> +</p> + +</div> + +<pb n='179'/><anchor id='Pg179'/> + +<div> +<index index='toc' level1='Section LIII. The Same Subject Continued.'/> +<index index='pdf' level1='Section LIII.'/> +<head type='sub'>Section LIII.</head> +<head>The Same Subject Continued.</head> + +<p> +In this matter, again, there is an important difference to be +observed between private or individual economy and economy +in its widest sense, in the sense of a world-economy. The +productiveness of labor is estimated in the case of the former, +according to the value in exchange of its result; in the +case of the latter, according to its value in use. There is a +great number of employments which are very remunerative +to private individuals, but which are entirely unproductive, +and even injurious, so far as mankind is concerned; for the +reason that they take from others as much as, or even more +than they procure to those engaged in them. Here belong, +besides formal crimes against property, games of chance,<note place='foot'>Not, +however, in the case in which the loser estimates the pleasure of the +play higher than the loss.</note> +usurious speculations (§ <ref target="Section_113">113</ref>) +and measures taken to entice customers +away from other competitors. Again, scientific experiments, +means of communication etc., may be entirely unproductive +in the individual economy of the undertaker, and +yet be of more profit to mankind in general, than they have +<pb n='180'/><anchor id='Pg180'/> +cost the former.<note place='foot'><hi rend='italic'>J. B. Say</hi>, +Traité, I. ch. 1.</note> In this respect the nation's economy holds +a middle place between individual economy and the world's +economy.<note place='foot'><hi rend='italic'>v. Cancrin</hi>, Œkonomie der +menschlichen Gesellschaften, 1845, 10, speaks, in this case, of privative +production. Among the Socialists, <hi rend='italic'>Bazard's</hi> expression +<foreign lang='fr' rend='font-style: italic'>l'exploitation de l'homme par +l'homme</foreign>, has found loud echo; instead of which only <foreign lang='fr' +rend='font-style: italic'>l'exploitation du globe par l'homme</foreign> should +be allowed to obtain. (Exposition de la Doctrine de St. Simon, 24.) But +<hi rend='italic'>von Schröder</hi> had already warned the world of <q>imagined +food</q> which led only to idleness. (F. Schatz- und Rentkammer, 191, 363.)</note> +Strictly speaking, only those employments should +be called productive which increase the world's resources. +Hence, the work of government should be called so, only in +so far as its expenses are covered by the taxes paid willingly +by the more reasonable portion of the citizens; and also only +in so far as its work is really necessary to the attainment of +its end.<note place='foot'>Therefore, there should not be too +many nor too highly salaried offices. See <hi rend='italic'>Storch</hi>, +Nationaleinkommen, 33 ff.</note> The productiveness of an employment supposes, +also, that it is not carried on at the cost of other employments +which it is more difficult to do without. In a healthy nation +we may, in this matter, rely, to a certain extent, on the judgment +of public opinion, which knows how to appreciate, at +their just value, professional gamblers, pettifoggers and the +luxury of soldiers. The greater, freer and more cultivated a +nation is, the more probable is it that the productiveness of +private economy is also national-economical productiveness, +and that national-economical productiveness is world-economical +productiveness.<note place='foot'>See <hi rend='italic'>v. Mangoldt</hi>, +Volkswirthschaftslehre, 29 ff.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LIV. Importance Of A Due Proportion In The Different +Branches Of Productiveness.'/> +<index index='pdf' level1='Section LIV.'/> +<head type='sub'>Section LIV.</head> +<head>Importance Of A Due Proportion In The Different +Branches Of Productiveness.</head> + +<p> +Much always depends on the due proportion of the different +branches of productiveness to one another. Thus, Spain, +for instance, has remained poor under the most advantageous +<pb n='181'/><anchor id='Pg181'/> +circumstances in the world,<note place='foot'><emph>Remained</emph>, and not +<emph>become</emph>, poor, as is generally supposed; for the enormous +wealth of Spain, under Ferdinand and Isabella, as well as during the +early period of Charles V. is only a <hi rend='italic'>fable convenue</hi>. +Charles V. said: France has a superabundance of everything, and Spain is +in want of everything. See also the embassy report of +<hi rend='italic'>Navagero</hi> (1526), Viaggio fatto in Spagna e +in Francia (Venet., 1563), and <hi rend='italic'>Ranke</hi>, Fürsten und +Volker, I, 393 ff.</note> because it allowed a disproportionate +preponderance of personal services. The character of +the Spanish people has always given them a leaning towards +aristocratic pride and economic idleness. Tradesmen, in that +country, sought, as a rule, to amass merely enough to enable +them to live on the interest of their capital; after which they, +by way of preference, removed it into some other province, +where they might be considered as among the nobility; or +they withdrew into a monastery. Even in 1781, the Madrid +Academy thought it incumbent on it to propose a prize for the +best essay in support of the thesis: <q>The useful trades in no +way detract from personal honor.</q><note place='foot'>The prize +was won by <hi rend='italic'>Arreta de Monteseguro</hi>. The author of the history +of Portuguese Asia, translated by <hi rend='italic'>Stevens</hi>, is +of opinion (III, ch. 6), that commerce is not a proper subject for +serious history to treat.</note> During the century in +which the country was in its greatest glory, the whole people +were bent on being to all Europe what nobles, officers and officials +are to a single nation. <q>Whoever wishes to make his +fortune,</q> said Cervantes, <q>let him seek the church, the sea (i.e., +go as an adventurer to America) or the king's palace.</q> Under +Philip III., there were in Spain nine hundred and eighty-eight +nunneries, and thirty-two thousand mendicant friars. +The number of monasteries trebled between 1574 and 1624, +and the number of monks increased in a yet greater ratio. A +great many of its manufactories, much of its commerce, and not +a few of its most important farms were controlled by foreigners, +especially by Italians. There were, it seems, in 1610, one +hundred and sixty thousand foreign tradesmen living in Castile. +In 1787, there were still 188,625 priests, monks, nuns, +etc.; 280,092 servants; 480,589 nobles; 964,571 day laborers; +987,187 peasants; 310,739 mechanics and manufacturers; +<pb n='182'/><anchor id='Pg182'/> +34,339 merchants.<note place='foot'>There is a very fine description of this +spirit in <hi rend='italic'>Clenard</hi>, Epist. I. ad Latomum +(1535 ff.) Compare <hi rend='italic'>Juvellanos</hi>, in +<hi rend='italic'>Laborde</hi>, Itinéraire déscriptif, IV, 176. +<hi rend='italic'>Townsend</hi>, Journey through Spain, II, 207, 117. +<hi rend='italic'>Buckle</hi>, History of Civilization, II, ch. I. The +census of 1788 gave the number of priests and monks, soldiers, mariners, +nobles, lawyers, tax-gatherers, authors, students and domestics, at 1,221,000, +in a total of 3,800,000 men; from which number there was a multitude of +beggars, vagrants etc. to be deducted. <hi rend='italic'>Laborde</hi>, +Itinéraire, II, 32 ff. The seventeen universities and the numberless small +Latin schools, with their gratuitous instruction, and their many scholarships, +misled a disproportionately large number to engage in study. At the beginning +of this century, there were at least 200,000 priests, nuns +(<hi rend='italic'>Geistliche</hi>), etc., in a population of from three to +three and a half millions only. (<hi rend='italic'>Ebeling</hi>, Erdbeschreibung +von Portugal, 66.) <hi rend='italic'>Senior</hi> shows that the poverty of +the Osman is caused by too many state employees, tax-farmers and retail +merchants. (Journal kept in Turkey and Greece, 1857-58.) Thus, also, +<hi rend='italic'>J. Tucker</hi>, Four Tracts, 1774, 18, contrasts men engaged +in industry with rich idlers, whose increase, possibly by immigration, would make +the people a nation of <q>gentlemen and ladies, footmen, grooms, laundresses etc.</q> +<hi rend='italic'>Schmitthener</hi>, N. Œk., 656, calls a condition such as that +of Spain, <q>national-economical phthisis.</q></note> As a counterpart to this, the +United States had, in 1840, about 77.5 per cent. of its population engaged +in agriculture, 16.8 in manufactures and mining, 4.2 in shipping +and commerce, 1.3 in the learned professions.<note place='foot'><p><hi +rend='italic'>Tucker</hi>, Progress of the U.S., 137. The following data also will +serve for a comparison: In Belgium, in 1856, it was estimated that, leaving persons +<hi rend='italic'>sans profession</hi> out of consideration, 45.6 per cent. were +agriculturists, 37.2 industrials, 6.7 in commerce, 2.8 in the liberal professions, +1.5 <foreign lang='fr' rend='font-style: italic'>force publique</foreign>, 2.1 +<foreign lang='fr' rend='font-style: italic'>propriétaires, rentiers, +pensionnés</foreign>, 3.7 <foreign lang='fr' +rend='font-style: italic'>domesticité</foreign>. In Prussia, in 1871, of the +entire male population, 28.6 per cent. were engaged in agriculture, forest-culture, +hunting and fishing: 32.3 per cent. in mining, industry, building, and in +founderies: 8.56 in trade and commerce; 20.3 in personal services and handiwork +not belonging to any of the groups above mentioned; 2.3 in the army +and navy; 3.7 in other callings; 2.7 were renters, pensioners, and persons who +lived by selling or renting houses, reserving lodgings for themselves therein, +and persons who gave no account of their calling. (Preuss. statisc. Zeitschr., 1875, +32. ff.) It is, however, surprising that <hi rend='italic'>Engel's</hi> Amtl. Jahrbuch, +III, 1867, gives only 48 per cent. as belonging to the first category, and 25 to +the second. In the kingdom of Saxony in 1861, 25.1 per cent. of the population +were agriculturists and foresters; 56.1 were engaged in industry; 7.7 in trade +and commerce; 6.8 in art, science, the service of the state and of private persons; +while 4.1 per cent were without any particular calling, or returned none. +Bavaria, in 1852, had 67.9 per cent. of its population engaged in agriculture; +22.7 in the trades and in manufactures; 5.5 per cent., persons living on the +interest of their money, and by performing the higher class of personal services; +1.9 in the army; and 2 per cent. of listed poor. In <hi rend='italic'>Hermann</hi>, +Beiträge zur Statistik des Königreichs Bayern. In France, according to the official +reports, there were: +</p> +<p> +<foreign lang='fr' rend='font-style: italic'>Agriculteurs</foreign> 61.46 per cent. in +1851, 51.49 per cent. in 1866;<lb/> +<foreign lang='fr' rend='font-style: italic'>Industriels et commerçants</foreign> 25.95 +per cent. in 1851, 32.78 per cent. in 1866;<lb/> +<foreign lang='fr' rend='font-style: italic'>Professions libérales</foreign> 9.73 per +cent. in 1851, 9.48 per cent. in 1866. +</p> +<p> +To which it must be added, that, in 1851, there were 2.86 <foreign lang='fr' +rend='font-style: italic'>sans profession ou dont les professions n'ont pu être +constatées</foreign>; and that, in 1866, on the other hand, there were 2.87 per +cent. in <foreign lang='fr' rend='font-style: italic'>professions se rattachant à +l'agriculture, industrie et commerce. (Legoyt.)</foreign> In England and Wales, +leaving the domestic class out of consideration (women without an independent means of +employment, school children, servant girls etc.), and also the <q>indefinite class,</q> +there were, in 1861, 25.3 per cent. of the population engaged in agricultural +pursuits; 60.7 in industrial; 7.8 in commercial; and 6.06 in professional pursuits. +In Italy, omitting housewives, children and infirm persons, there +were, in 1862, 57.4 per cent. of the population engaged in agriculture; 22.9 +in industrial pursuits; 4 in commerce; and 3.9 per cent. in the army and in +the liberal professions. (Annali univ. di Statistica, Febbr., 1866.) On Holland, +in the middle of the 17th century, see <hi rend='italic'>J. de Wit</hi>, Mémoires, +34 seq.</p></note> +</p> + +<pb n='183'/><anchor id='Pg183'/> + +<p> +We might be tempted, in view of this contrast, to return +once more to the unproductiveness of personal services. It is +not, however, the direction given to the forces of production, +but the squandering of them, that is injurious. When the +Magyar, through mere vanity, drives a yoke of from four +to six horses where two are enough; or when, as in 1831, +Irish agriculture employed 1,131,715 workmen to produce a +value of thirty-six million pounds sterling, while that of Great +Britain<note place='foot'><hi rend='italic'>Csaplovics</hi>, Gemälde von +Ungarn II, 1. <hi rend='italic'>Torrens</hi>, The Budget: On commercial +and colonial Policy, 106 ff.</note> produced one hundred and fifty millions a year, and +employed only 1,055,982 workmen, these causes are as sure to +impoverish the country, as the waste of the Spaniards in supporting +such an army of clergy and servants. Of course, the +temptation to waste wealth on parks is greater than to waste +it in vegetable gardens! The probability that a man will ruin +himself by keeping too many servants is greater than that he +<pb n='184'/><anchor id='Pg184'/> +will do the same by employing too many operatives.<note place='foot'>Precisely +as there are more people ruined by spirituous liquors than by +bread. Time thieving is also more frequent among servants. There is +scarcely anything in agriculture analogous to the lazzaroni who wait all day +to help a gondola to land, to unload a coach, etc. There is more in the +chase, in the fisheries, or in the cattle raising.</note> And +all the more, as there are many and especially important services +which regulate their own remuneration: thus, as a rule, +those of the statesman, those of the military in times of war, +and those of the priest in the age of superstition.<note place='foot'>Compare +<hi rend='italic'>Bastiat</hi>, Harmonies économiques, ch. 17. Hence +<hi rend='italic'>Sismondi</hi> accounts it one of the chief merits of the +constitutional state, that in it, the <foreign lang='fr' +rend='font-style: italic'>population gardienne</foreign> does not regulate its +own remuneration. (N.P., I, 144.) <hi rend='italic'>Saint Simon</hi>, indeed, +says that the French members of the <hi rend='italic'>Chambre</hi>, in his +time, drew a revenue from the state, three times as large as from their own +resources, and were, therefore, deeply interested in increasing the budget. +(Vues sur la Propriété et la Législation, 1818.) I would call attention also to +the national over-estimation and over-crowding of learned callings from +which Germany suffered, even as far back as the time of Louis XIV. (<hi rend='italic'>v. +Schröder</hi>, Fürstl. Schatz-und Rentkammer, 302 ff.); to the disproportionate +number of keepers of public houses, which is related to the system of popular +assemblies, and is a regular attendant upon Democracy (<hi rend='italic'>Bronner</hi>, +Der C. Aargau, I, 451.) Taxation-legislation may here become a good means of +popular education.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LV. The Degree Of Productiveness.'/> +<index index='pdf' level1='Section LV.'/> +<head type='sub'>Section LV.</head> +<head>The Degree Of Productiveness.</head> + +<p> +Concerning the degree of productiveness, it may be remarked +that that application of the factors of production is +most productive, which, with the least expenditure of means, +satisfies the greatest want in the economy of a people. Here, +there is a continual change, corresponding precisely to the +change in wants and faculties. After a bad harvest, for instance, +the labor which procures grain from foreign countries +or the supplies of former years, is most productive; and, after +an earthquake which has destroyed a large city, the labor of +the builder. Agriculture is, as a rule, the more productive +<pb n='185'/><anchor id='Pg185'/> +labor of undeveloped nations, and industry of highly developed +nations.<note place='foot'>This was recognized very early by <hi rend='italic'>Gregor. +Tolsan</hi>, l.c. <hi rend='italic'>Ad. Müller</hi>, Elemente, II, 255. +<hi rend='italic'>Storch</hi>, Handbuch, II, 229 ff. +(<hi rend='italic'>Schleiermacher</hi>, Christ. Sitte, 668.) <hi rend='italic'>A. +Smith,</hi> W. of N., II, ch. 5, ascribed greater productiveness to agricultural +than to industrial labor; in the former case, not only human labor +was put in operation, but the forces of nature were compelled to coöperate +with them. Similarly, <hi rend='italic'>Malthus</hi>, Additions (1817) to the +Essay on the Principle of Population, B. III, ch. 8-12. Principles of P. E., 217 ff. +Both thus explain the rent of land, and so far as products, which have only value in +exchange are concerned, they are right. Hence it is all the more surprising +that <hi rend='italic'>Carey</hi>, the zealous advocate of a protective tariff and +opponent of rent, comes back in this to Adam Smith. Principles of Social Science, 1858, +II, 35, and passim. Compare also <hi rend='italic'>J. B. Say</hi>, Traité, II, ch. 8; +<hi rend='italic'>Sismondi</hi>, N. P., II, ch. 5. For the best refutation of this +view, see <hi rend='italic'>Ricardo</hi>, Principles, ch. 2, 3. Does not all labor put +the force of nature in operation? <foreign lang='la' rend='font-style: italic'>Ad opera +nihil aliud potest homo, quam ut corpora naturalia admoveat, reliqua natura intus +transigit.</foreign> (<hi rend='italic'>Bacon.</hi>) Similarly, +<hi rend='italic'>Verri</hi>, Meditazioni, III, 1. An expression escapes even +<hi rend='italic'>Ricardo</hi> himself (ch. 7), to the effect, that capitalists are the +producing class.</note><note place='foot'>Relying on very superficial statistics of +England and France, <hi rend='italic'>Ganilh</hi> advocates a theory of the productive +forces of the several branches of economy the very reverse of <hi rend='italic'>Adam +Smith's</hi>. He places foreign trade first; then follow wholesale trade, industry and +agriculture. (Théorie, I, 240 seq.)</note> +</p> + +</div> + +</div> + +<pb n='186'/><anchor id='Pg186'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter III. The Organization Of Labor.'/> +<index index='pdf' level1='Chapter III.'/> +<head type='sub'>Chapter III.</head> +<head>The Organization Of Labor.</head> + +<div> +<index index='toc' level1='Section LVI. Development Of The Division Of Labor.'/> +<index index='pdf' level1='Section LVI.'/> +<anchor id="Section_56"/> +<head type='sub'>Section LVI.</head> +<head>Development Of The Division Of Labor.</head> + +<p> +The larger a tree grows to be, the more boughs and +branches does it put forth. The more perfect any species of +animal is, the more does it stand in need of a special organ for +each special purpose. And thus the division of labor has developed +and kept pace with the development of human society. +While Crusoe was obliged to provide for all his wants by his +own labor, we find that in the wildest Indian family the male is +employed in war, the chase, in fishing, in the manufacture of +arms and boats, and in the transportation of the latter during +long marches; the female, on the other hand, in the preparation +of food, in the hewing of wood, the curing of skins, the +sewing of clothes, in the building and preservation of the wig-wam, +the care of children, and the carriage of baggage when +on the march.<note place='foot'>Ausland, 1846, No. 54. Expressions still used in +Europe, such as <foreign lang='de' rend='font-style: italic'>Spindelmagen</foreign> +(spindle-relation), <foreign lang='de' rend='font-style: italic'>Kunkellehen</foreign> +(apron-string-hold) etc., for instance, suggest this +most ancient and purely family division of labor. The lower +classes of the population, even in the most civilized countries, are wont to +preserve some of the peculiar customs of very primitive times. Hence it is +that among proletarians, the division of labor between males and females is +still very small. The employments usual at different stages of life among +men, and the costumes worn by them are much more uniform than among +the higher classes. See <hi rend='italic'>Riehl</hi>, Die Familie, 1855, +passim.</note> These occupations, at first entirely domestic, +<pb n='187'/><anchor id='Pg187'/> +became, by degrees, separate industries, which are constantly +subject to further subdivision.<note place='foot'>As <hi rend='italic'>Dankwardt</hi> +shows, the <foreign lang='la' rend='font-style: italic'>jus civile</foreign> of the +earliest Roman time is based on the condition of isolated labor, the later +<foreign lang='la' rend='font-style: italic'>jus gentium</foreign>, on the division of +labor. N. Œk. und Jurisprudenz, 1857, Heft. I.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LVII. Development Of The Division Of Labor.—Its +Extent At Different Periods.'/> +<index index='pdf' level1='Section LVII.'/> +<head type='sub'>Section LVII.</head> +<head>Development Of The Division Of Labor.—Its Extent +At Different Periods.</head> + +<p> +In the middle age of a people, the division of labor is not +carried to any great extent. The courtiers of King Frotho +III. advised him to marry, <q>since otherwise his majesty's ragged +linen would never be mended.</q> Saint Dunstan, although +he occupied a high position in politics and in the Church, was +an excellent blacksmith, bell-founder and designer of ladies' +robes. Chriemhild in the Nibelungenlied was an industrious +and skillful milliner. In the corresponding period of Grecian +and Roman history, we find Penelope and Lucretia at +the loom, Nausicaa, a laundress, the daughter of the king of +the Lestrigons, fetching water from the spring, Odysseus, a +carpenter, a queen of Macedonia as a cook, and finally the +distaff of Tanaquil.<note place='foot'><hi rend='italic'>Saxo Gramm.</hi>, Hist. Dan. +V, 101. <hi rend='italic'>Turner</hi>, Hist. of the A. Saxons B. +VII, ch. 11. Nibel., 351 ff. There is a French proverb: <foreign lang='fr' +rend='font-style: italic'>du temps que la reine Berthe filait</foreign>. Queen Bertha +was a mythic daughter of Charlemagne. It may be that the character meant is the +old German spinning goddess Berchta. Concerning the daughter of Otto the Great, see +<hi rend='italic'>Dithmar</hi>, Merseb. II. <hi rend='italic'>Homer</hi>, Od. V, +31 ff.; X, 106; XXIII, 189 ff. <hi rend='italic'>Herodot.</hi>, VIII, 137. +<hi rend='italic'>Livy</hi>, I. 57.</note> In the highlands of Scotland, in 1797, +there were a great many peasants all of whose clothing was +home-made, with the exception of their caps; nothing coming +from abroad except the tailor, his needles and iron tools generally. +But the peasant himself was the weaver, fuller, dyer, +tanner, shoemaker etc. of his own family:<note place='foot'><hi rend='italic'>Eden</hi>, +State of the Poor I, 558 ff. In the interior of Peru, the priest is also usually a +shop-keeper (<hi rend='italic'>Pöppig</hi>, Reise, II, 365); in Canada, as in many of +the villages of the Alps which are not often visited, a hotel keeper. In countries +with an unadvanced civilization, the little division of labor that exists +is also very awkwardly regulated. Thus in Russia, weak children are very +frequently put to work on farms, while powerful men are found in the city +offering all kinds of eatables and the pictures of saints for sale. +(<hi rend='italic'>Storch</hi>, Gemälde des russischen Reichs II, 364. +<hi rend='italic'>v. Haxthausen</hi>, Studien I, 335.)</note> every man jack of +all trades.<note place='foot'><hi rend='italic'>Babbage</hi>, Economy of Machinery, +1833, 201. <hi rend='italic'>L. Faucher</hi>, Angleterre II, Ch. +<q><hi rend='italic'>la Ville des Serruriers</hi>.</q> The industrial statistics +of Paris, furnished by <hi rend='italic'>H. Say</hi> in 1847 and 1848, show that +in that city alone there are 325 different branches of +industry, 17 of which are concerned with the production of food; +21 with building; 32 with the manufacture of furniture; 21 with that of +clothing; 36 with that of thread and tissues; 7 with skins and leathers; 14 +with vehicles, saddlery, and military equipment; 33 with chemicals and +pottery; 33 with working in metal, glass etc.; 35 in that of the precious +metals and jewels; 27 with printing, engraving and paper; 15 with that +of wooden-ware and wicker-ware; 34 with <foreign lang='fr' +rend='font-style: italic'>articles de Paris</foreign>. Journal des +Economistes, Janv., 1853, 107. According to the industrial almanac of +Birmingham, there are in that city manufacturers of buttons in gold, silver, +metal, mother-of-pearl etc.; manufacturers of hammers, ink-stands, coffin-nails, +dog-collars, tooth-picks, stirrups, fish-hooks, spurs, pack-needles etc.</note> +</p> + +<pb n='188'/><anchor id='Pg188'/> + +<p> +In present England, on the other hand, the manufacture of +watches is divided into one hundred and two branches which +have to be specially learned; only the so-called <q>watch-finisher</q> +carries on other branches besides. In Wolverhampton, it may +happen that a man, employed in the manufacture of keys, +may not be able to make a whole key after an apprenticeship +of ten years, for the reason that during all that time he may +have been engaged only in filing.<note place='foot'>And so with +the subdivisions. Flannel is manufactured almost exclusively +in Halifax, woolen blankets between Leeds and Huddersfield etc.</note> +In English agriculture +there are, according to German notions, very few complete +wholes. A well-marked distinction exists there between the +cultivators of corn and breeders of cattle; and the latter +are again divided into breeders of young cattle, into fatteners +of cattle etc. Its industries are, in large part, separated +into provinces. Thus, linen manufactures are confined +almost exclusively to Leeds and Dundee, woolen manufactures, +to Leeds,<note place='foot'>The same division of labor was +developed among the Dutch in the 17th century, and excited +then the wonder of the English. See <hi rend='italic'>Sir W. Temple,</hi> +Observations upon the U. Provinces, 1672, ch. 3. Works, I, 128, 143. In +1615, <hi rend='italic'>Montchrêtien</hi> held up the Flemish as a model +to the French, in this respect.</note> cotton manufactures, to Manchester, +<pb n='189'/><anchor id='Pg189'/> +and Glasgow, pottery to Stafford, coarse iron to South Wales, +hardwares to Birmingham, cutlery to Sheffield. And so in +the different quarters of the city. Thus, in large towns, the +banks, stores, offices etc., are found in one portion, with +scarcely any intervening dwelling houses. +</p> + +<p> +On the division of labor depends all differences of estate +and class, and all human culture. It cannot be claimed that a +division of labor does not exist among animals;<note place='foot'>On the bees, +see <hi rend='italic'>Virgil, Georg.</hi> IV, 158.</note> but those animals +among which something analogous to a division of labor +among men exists, are raised far above all others by their human-like +economy and the relative importance of their achievements.<note place='foot'>The +principle of the division of labor was known to the ancients: +<hi rend='italic'>Xenophon</hi>, Cyri Discipl., VIII, 2, 5. +<hi rend='italic'>Plato</hi>, de Rep., II, 369, III, 394, IV, 443; +<hi rend='italic'>Isocrat</hi>., Busir., 8. <hi rend='italic'>Aristot</hi>., +Polit., II, 8, 8. Among the more modern writers, compare <hi rend='italic'>Thomas +Aquin</hi>., De Reg. pr., I, 1, II, 3. <hi rend='italic'>Luther</hi> (Works by Walch, +I, 388), in his Commentary on Genesis, 3, 19. <hi rend='italic'>Petty</hi>, +Several Essays, 1682, p. 113. Considerations upon the East India Trade, London, +1701. <hi rend='italic'>Roscher</hi>, Geschichte der englischen +Volkswirthschaftslehre, 118. <hi rend='italic'>Mandeville</hi>, The Fable of the +Bees, enlarged edition of 1723, p. 411. <hi rend='italic'>Berkeley</hi>, Querist, 1735, +No. 415, 430, 520 ff., 586: <q>What is everybody's business is nobody's.</q> +<hi rend='italic'>Harris</hi>, on Money and Coins (1757), I, 16. +<hi rend='italic'>J. J. Rousseau</hi>, Emile (1762), L. III. +<hi rend='italic'>Turgot</hi>, Sur la Formation et la Distribution des Richesses, § +3, p. 50, 62, 66. <hi rend='italic'>Diderot</hi>, Encyclopédie de l'Art, s. v. Art. +<hi rend='italic'>J. Tucker</hi>, Four Tracts (1774), p. 25 ff. +<hi rend='italic'>Boccaria</hi>, Economia pubblica, I, 1, 9. But the author to +whom we owe most on this score is undoubtedly <hi rend='italic'>Adam Smith</hi>. To him we +are indebted almost entirely for our knowledge of the natural laws developed +in § <ref target="Section_59">59</ref> seq.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LVIII. Advantages Of The Division Of Labor.'/> +<index index='pdf' level1='Section LVIII.'/> +<head type='sub'>Section LVIII.</head> +<head>Advantages Of The Division Of Labor.</head> + +<p> +The advantages of all suitable division of labor, consequent +upon the natural differences of human faculties and dispositions, +are the following: +</p> + +<pb n='190'/><anchor id='Pg190'/> + +<p> +A. <hi rend='italic'>The greater skill of the workman.</hi> Even physically, +many capacities are, by an indefinite number of repetitions of +the same operation, enhanced to an extraordinary degree; +which, however, renders the performance of other operations +more difficult. Thus, the man who has developed his muscles +and hardened his hands working in a smithy, renders +himself incapable of becoming a violin-player or an operating +oculist.<note place='foot'>According to <hi rend='italic'>Adam Smith</hi>, a nailer +can make 2,300 nails (<hi rend='italic'>Rau</hi> says 3,000 shoemaker's tacks in +the Odenwalde) per day; a smith who is only occasionally employed in the manufacture, +from 800 to 1,000; and smiths who never made nails before, from 200 to 300. A +clever filer makes 200 strokes in a minute; a skilled comb-maker can make in a +day from 60 to 70 combs of such fineness that there are from 40 to 48 teeth to the +inch in them; eight Liege brick-makers, working together, produce 4,800 bricks per +day; children employed in a needle manufactory, in making the eyes of needles, grow so +skillful at it that they can make a small hole in the finest hair and draw another +hair through it. <hi rend='italic'>Rau</hi>, Lehrbuch I, § 115. The old proverb, +<q>practice makes perfect,</q> is followed even by thieves in their great division of +labor. See <hi rend='italic'>Thiele</hi>, Die jüdischen Gauner I, 87. +<hi rend='italic'>Fregier</hi>, Des Classes Dangéreuses.</note> +Here belongs especially the possibility of turning +every kind of labor-power to greatest account. Even children<note place='foot'>Children, +with their thinner fingers, can point twice as many needles in +the same time as a grown person.</note> +and old men may be made, in this way, to play a part +in the production of goods. It becomes practicable, too, to +relieve men endowed with superior faculties from common +labor, and allow them to devote themselves exclusively to the +development of the peculiar powers with which nature has +gifted them.<note place='foot'>The manufacture of English needles demands, on the part +of workmen, degrees of skill so different that their pay varies from 6 pence to 20 +shillings per day. If the most skillful workman were to manufacture whole needles +alone, he would partly be obliged to be satisfied with one-fortieth of what he +might otherwise receive. <hi rend='italic'>Babbage</hi>, loc. cit.</note> +</p> + +<p> +B. <hi rend='italic'>A great saving of time and trouble.</hi> The simpler the +operation performed by a single workman, the more easily +is it learned; the smaller is the price paid or apprenticeship, +which depends on this, at least, that beginners perform poorer +work and are paid more poorly. <q>The shortest way to the +<pb n='191'/><anchor id='Pg191'/> +end is most easily found when the end itself is near, and can +be kept continually in view.</q> (<hi rend='italic'>J. B. Say</hi>.) Where the same +workman combines different operations, a great deal of time +is lost in changing tools etc. Besides, it always takes some +time for a workman to get rightly under way of his work. +The person who changes thus frequently becomes more easily +indolent. Lastly, there is a great number of operations which +demand the same aggregate amount of effort, no matter what +the number of objects on which they are performed. It is +thus, for instance, with shepherds, mail-carriers etc.<note place='foot'>In +the case of machines and in the chemical branches of industry, the labor +increases in a much smaller ratio than the material used in production.</note> The +post carries a thousand letters with almost as much ease as +one; and the entire life of a wholesale dealer would scarcely +suffice to carry all the letters which he mails in a single day, +to their place of destination. During the middle ages, every +man was obliged to watch over his own personal safety and +the maintenance of his own rights; while in 1850, in Great +Britain, twenty-one million people are protected in their persons +and property, in an infinitely more effectual manner, and +at less cost, by fifteen thousand soldiers, and by a much smaller +number of policemen, whose place it is to preserve public +order. (<hi rend='italic'>Senior</hi>.) Something similar takes place among merchants, +and it may be admitted as correct in principle, that +every new intermediary, freely recognized by both sides in +commerce,<note place='foot'>In opposition to monopolies, and to practical constraint +which has its source in ignorance etc.</note> makes labor better or less expensive. +</p> + +<p> +C. As the land of a country is, in a sense, the natural extension +of the national body, <hi rend='italic'>the international division of labor</hi> +affords an indirect means, but frequently an indispensable one, +of procuring the products of foreign countries and climates.<note place='foot'>Hence +<hi rend='italic'>Torrens</hi> calls foreign trade the <q>territorial division of +labour.</q> (Essay on the Production of Wealth (1821), 155 ff.)</note> +If the English people wished to obtain themselves, and without +having recourse to any intermediary, the quantity of tea +<pb n='192'/><anchor id='Pg192'/> +which they annually consume, it is possible that its whole agricultural +population would not suffice to procure it; while, at +present, it is obtained by the labor of forty-five thousand industrial +workmen. (<hi rend='italic'>Senior</hi>.) Moreover, the division of labor +increases not only the aptitude of the workman but also his +incentive to productive labor, since it guarantees to every one +the certainty of being able, by means of exchange, to enjoy +the productions of every other person.<note place='foot'>See +<hi rend='italic'>Bastiat</hi>, Harmonies, ch. 1, for a very beautiful exposition of the +doctrine that each man receives much more from society than he accomplishes +on his part, for it.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LIX. Conditions Of The Division Of Labor.'/> +<index index='pdf' level1='Section LIX.'/> +<anchor id="Section_59"/> +<head type='sub'>Section LIX.</head> +<head>Conditions Of The Division Of Labor.</head> + +<p> +It is by its division, that labor, considered as a factor of production, +is raised to the highest degree of efficiency. Its results +in any given industry are, therefore, more important in +proportion as the element labor predominates in it. Hence, +these results are much smaller, in agriculture, for instance, than +in the trades, or in personal services.<note place='foot'>The +working together of a great number of persons is often carried on +to the detriment of agriculture, for each then waits for all the others to +work, throws all the blame on them etc. (<hi rend='italic'>Columella</hi>, I, 9.) As +many a housekeeper must have observed, two seamstresses or ironers accomplish, +in a day, less than one, in two days. Of course, this rule does not apply in +the case of work which cannot be performed by one man, under any circumstances, +or the magnitude of which would easily discourage him, and in +which mutual aid is easily obtained; as in the raising of heavy loads, the +construction of roads, dikes etc.</note> The most expert sower or +harvester cannot be employed the whole year through in sowing +or harvesting. Some kind of rotation of crops, some kind of +combination of tillage and stock-raising is necessary to every +agriculturist. On this depends the importance of the technic +secondary industries of agriculture, which are, in principle, +<pb n='193'/><anchor id='Pg193'/> +opposed to the division of labor. Hence, too, almost any person +engaged in a trade, no matter of what kind, supposes a +greater number of customers than a tiller of the land of the +same rank. +</p> + +<p> +The more labor is divided, the greater is the amount of capital +necessary to it.<note place='foot'><hi rend='italic'>Ad. Smith</hi>, +B., II, Introd. <hi rend='italic'>Hufeland</hi>, Neue Grundlegung, I, 215. In many +instances, a division of labor, of course, favors the saving of capital. If every +workman needed all the tools necessary to the work in which he participates, +three-fourths of them would have to lie idle at present. <hi rend='italic'>J. Rae</hi>, +New Principles on the Subject of Political Economy, 164.</note> +It may be even said, that all preparatory +labor becomes capital in its relation to subsequent labor. If +ten isolated workmen can produce ten dozen articles of any +kind, daily, and, after the introduction of a more efficient division +of labor, fifty dozen, the employer must provide them, in +the latter case, not only with five times as much capital, but +probably with fifty times as much, as then, five hundred dozen +are making continually. +</p> + +</div> + +<div> +<index index='toc' level1='Section LX. Influence Of The Extent Of The Market On The +Division Of Labor.'/> +<index index='pdf' level1='Section LX.'/> +<head type='sub'>Section LX.</head> +<head>Influence Of The Extent Of The Market On The Division +Of Labor.</head> + +<p> +But it is the extent of the market especially which determines +the limits of the division of labor; for there is a direct +and necessary relation between the division of labor and the +exchange of its surplus. Hence, the division of labor may be +carried farthest in the case of those products which are most +easily transported from place to place, and which, at the same +time, possess the utility that is most widely recognized. The +smallness of the market may depend upon the scantiness of +the population, or upon its scattered condition;<note place='foot'>This +necessity is observable, although in a peculiar form, even where +what has been called the <q>despotic organization of labor</q> prevails, instead +of freedom.</note> upon their +<pb n='194'/><anchor id='Pg194'/> +smaller ability to pay, or upon the bad means of communication +at their disposal.<note place='foot'>In the highlands of Scotland, in Adam Smith's +time, there were no smiths who manufactured nails only; for the reason that no smith +had a market for more than 1,000 nails a year, that is not for so many as might be +manufactured in a single day.</note> Hence it is, that in villages, small cities, and +still more on isolated farms, many branches of business are +carried on by one person, which are divided among many in +larger cities; and this is especially true in the case of businesses +which have a chiefly local demand.<note place='foot'>It is of course very different when +there is question of a foreign market, even if it be only indirectly. Thus, for +instance, there are in the Hartz mountains, persons who are simply post-makers, +trough-makers, chess-wood-makers, block-hewers, shingle-makers etc.</note> +While, in small places, +the barber is also frequently the physician, in larger ones there +are dentists, oculists, accoucheurs, surgeons etc.<note place='foot'>Too much should +not be inferred from the existence among the Egyptians of physicians, specialists +for the several members of the body. <hi rend='italic'>Herodot.</hi>, II, +84. Something analogous is to be found even among barbarous nations; but +it is accounted for entirely by the superstition of the people. See +<hi rend='italic'>Klemm</hi>, Kulturgeschichte, I, 266.</note>; and while, in +the former, the tavern keeper is both dry goods merchant and +grocer, there are, in the latter, tea merchants, cigar-dealers, +dealers in mourning goods (in London childbed-linen warehouses) +etc., and hotels for all the different classes of travelers. +There can be a distinct class of porters, hack-men etc., only +where commerce is very active.<note place='foot'>In the whole of Hesse, there were under +Philip the Magnanimous, only two apothecaries, one at Cassel and one at Marburg. +<hi rend='italic'>Rommel</hi>, Gesch. v. Hessen, IV, p. 419, note. And there were no +bakers among the Romans before the time of the war with Perseus. All the bread needed +by the family was baked by the wife or by female domestics. +<hi rend='italic'>Plin.</hi>, H. N. XVIII, 28. The +common oven in new towns marks the period of transition. Even yet, in +the central part of France, there are localities where each family bakes its +own bread for a whole month in advance; and, in the Alpine departments for +even a year in advance. <hi rend='italic'>M. Chevalier</hi>, Cours II, 366.</note> +And even in cities like Paris, +where the costly industries that minister to luxury, that of the +jeweler, for instance, admit of only a limited division of labor, +this effect depends on the smallness of the market; a market, indeed, +<pb n='195'/><anchor id='Pg195'/> +which geographically may extend over the whole earth, +but which, in an economic sense, must always remain small, +on account of the small number of customers who have the +ability to pay for their products. The real wonders produced +by the division of labor and the employment of machinery we +must look for in the manufacture of the cheapest and commonest +commodities.<note place='foot'>It is obvious from the foregoing that, in decaying +nations, in which the market contracts and capital decreases, the division of labor +also must grow less.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXI. The Division Of Labor—Means Of Increasing +It.'/> +<index index='pdf' level1='Section LXI.'/> +<head type='sub'>Section LXI.</head> +<head>The Division Of Labor—Means Of Increasing It.</head> + +<p> +Whoever, therefore, would increase the division of labor +among the people, must, first of all, extend their market; and +this is done most efficiently by improving the means of communication. +Even in our day, it is over the water-highroads +that the heaviest articles are carried with the least +expenditure of force;<note place='foot'>According to <hi rend='italic'>Arago</hi>, +a horse uses the same amount of force to draw 20 +cwt. along an ordinary road that he does to draw 200 over a railroad track, +or 1,200 on a canal. He could carry scarcely 2 or 3 on his back! Moniteur, +1838, No. 116. It is, however, certain that the introduction of our railroads +has somewhat detracted from the advantages of coasts.</note> +but where civilization is not advanced, +these highroads possess still greater advantages, because +of their safety, convenience and priority. And here is +the explanation of the intimate connection of the beginnings of +all civilizations with the existence, near the scene of such beginnings, +of good natural water-roads. <q>Even the wildest inhabitant +of the sea coast very soon obtains the idea of distance, +which is altogether wanting to the inhabitant of the primeval +forest. No sooner does he catch sight of the far-off island than +his yearning after the distant assumes a well-defined character. +Bits of wood floating past him suggest to his mind the +<pb n='196'/><anchor id='Pg196'/> +best material to buoy himself up upon the water, and a fish +the best form for his craft.</q> (<hi rend='italic'>Klemm.</hi>) Hence the Mediterranean +sea, especially the eastern portion, with the various +peoples and products of its coasts, with its numerous +islands, peninsulas and bays, its easy navigation, but little influenced +by the tides or by ocean currents, was the principal +seat of ancient civilization.<note place='foot'>Compare +<hi rend='italic'>Humboldt</hi>, Essai politique sur l'Ile de Cuba, II, 205.</note> +The literal meaning of Attica is +coast-land. (<hi rend='italic'>Strabo.</hi>) The colonization of a new country is +wont, where possible, to begin on the coast, especially on islands +near the coast; and to follow the course of rivers into the interior. +Even whole continents occupy, for the most part, in +the history of the world, the position assigned them by their +coast-development.<note place='foot'><hi rend='italic'>Strabo</hi>, II, 121 ff. +In Europe, there is one mile of coast to every 31 square +miles in the interior; in North America, to 56; in South America, 91; in +Asia, 100; in Africa, 142. (<hi rend='italic'>Humboldt.</hi>)</note> +While it is hard to determine whether, +in the case of the European continent, its limbs predominate +or its trunk, Africa may be said to be a trunk without members. +Its islands, most of them insignificant in themselves, +are almost entirely cut off from it by ocean currents. This explains +why Madagascar had not, by any means, the influence +on African civilization which Crete, Sicily and Britain +have had on the civilization of Europe. Asia occupies, in this +respect, about a middle position between Europe and Africa. +The trunk of that continent bears to its members about the +proportion of 670,000 to 150,000 square miles. And what is +worst of all, the middle of the whole is an almost insurmountable +wall between north, south, east and west Asia. Hence +the tenacious peculiarity and isolated development of the +Chinese, Malayan, Indian and Arabic civilizations; while the +three peninsulas of southern Europe, for instance, have affected +one another so largely, and in so many different ways.<note place='foot'>If the +original connection of the Caspian sea and the sea of Aral with +the Frozen Ocean were still in existence, it is probable that an Asiatic Scandinavia +would have been formed in consequence.</note> +The northern hemisphere compared with the southern, presents +<pb n='197'/><anchor id='Pg197'/> +a contrast similar to that between Europe and Africa, or +of the rich coast-groups of the Atlantic compared with the +poor ones of the Pacific.<note place='foot'>What is true of the sea in this respect +may be claimed, also, though in a less degree, for the streams that carry the +civilizing fruits of the coasts far into the interior. Nearly all large cities not +situated on the harbors of coasts derive their importance from rivers; especially when +they have been built on spots adapted by nature to the transhipment of merchandise. That +Venice finally eclipsed Genoa is to be ascribed, in greatest part, to its control +of an important stream, the Po. The economic importance of Holland, of +Hamburg and Bremen will, in the long run, bear the same relation to one +another as the geographical importance of the valleys of the Rhine, Elbe +and Weser. As nothing is more disastrous to a nation than the loss of its +coast (we need only cite the efforts of the Lybian kings and, later, of Philip +of Macedon to conquer the Greek colonies on their coasts; and in more recent +times, of Russia before Peter the Great, or of the Zollverein without +the shores of the German sea), so, also, the economic and political influence +of a stream increases as one approaches its mouth. Hence the justification +of the great interest taken by Germany and Austria in the question +of the Danubian principalities. The United States recognized this fact when +they purchased Louisiana for 80,000,000 francs. <hi rend='italic'>Bignon</hi>, Hist. de +France III, 111 seq. Readers of history are familiar with the important part played +by the three Asiatic Mesopotamias: that between the Euphrates and the +Tigris; that between the Ganges and the Brahmapootra; that between the +Hoang-Ho and the Yang-tse-Kiang, to which finally the Punjab might be +added. This relation is recognized by popular consciousness, in the case of +the Ganges, by the belief in the sacredness of the stream. No river has had +so much influence on civilization as the Nile: its periodical risings have +made the labor of agriculture extraordinarily easy; their extent and regularity +favored the progress of astronomy; the flooding over of the land led to +geodesy; the hydraulic labors necessitated by the rising of the waters produced +a school of architecture to which the river furnished an excellent means of +transportation for the enormous masses to be moved. <hi rend='italic'>K. Ritter</hi>, +Erdkunde, I, p. 880 seq; VI, p. 1,168 seq. In this matter, also, America and +Europe have the advantage over Asia and Africa. While the Danube is, +in places, scarcely three German miles from the Rhine—which, however, +flows in an almost opposite direction—in Asia, the eastern streams are separated +from the western, and the northern from the southern, by a strip of +land difficult to be traveled, and about 300 German miles in extent. Besides, +the principal streams of northern Asia have their exit into the Frozen Ocean, +a fact which diminishes their importance greatly. The source of the Missouri +is only about one mile distant from the Columbia river, although the +two flow towards opposite seas.</note> But it is most especially, large, +well-watered plains that are best adapted to the construction +of roads, and thus to facilitate the division of labor. And +while we find, in many countries, that the mountainous regions +reached a certain stage of development earlier than any +others, because they were more easily protected by military +force, we find, too, that even here, plains, have, for the most +part, had the largest share of power and of civilization (northern +Italy, northern France, the plains of Switzerland and +<pb n='198'/><anchor id='Pg198'/> +north Germany). See § <ref target="Section_36">36</ref>.<note place='foot'>The +law governing the march of civilization from the mountain to the plain and to +coast lands was observed even by <hi rend='italic'>Strabo</hi>, XIII, 592, and partly +by <hi rend='italic'>Plato</hi>, De Leg., 677 ff.</note> We must not, however, fail to +consider the reverse side of the picture of the great highways +of the world. The same reasons that raise them to the dignity +of lines of commerce, make them lines of war; and even +the contagion of great plagues and of the ruling vices follows, +as a rule, the avenues of trade. +</p> + +</div> + +<div> +<index index='toc' level1='Section LXII. The Reverse, Or Dark Side Of The Division Of +Labor.'/> +<index index='pdf' level1='Section LXII.'/> +<anchor id="Section_62"/> +<head type='sub'>Section LXII.</head> +<head>The Reverse, Or Dark Side Of The Division Of Labor.</head> + +<p> +There are hardships often attending the highly developed +division of labor, the dark and bright sides of which are most +strikingly observable only in large cities. However, when it +is charged with adding to the natural inequality of men, the +accusation can be met only by the answer, that, without the +division of labor, we should be all equally poor and equally +coarse; for each one would be absorbed by the necessity of +providing for his lower wants, and no one would be in a way +to develop his higher faculties. Even the poorest man has +more enjoyment in consequence of the division of labor, than +he could have living in a state of isolation from his fellow men. +The most wretched among us, the invalid without property +of any kind, the father of a family with more children than +he can support, would simply starve in the primeval forest. +</p> + +<pb n='199'/><anchor id='Pg199'/> + +<p> +Those socialists who never tire of preaching <q>association,</q> +overlook for the most part, the great, free association which +our needs, wants or tastes are ever changing, and which is +given us, as of course, by the division of labor.<note place='foot'>Thus, for instance, +that all the customers of a shoemaker together form a shoe-association etc. +<hi rend='italic'>Dunoyer</hi>, Liberté du Travail, L. IV, ch. 10.</note> Yet the skill +produced by the division of labor is unavoidably connected +with a corresponding one-sidedness. The Russians, for instance, +are exceedingly apt, but they rarely distinguish themselves +in any thing.<note place='foot'><hi rend='italic'>Storch</hi>, Handbuch, III, 188 ff. +The Dutch traveler, <hi rend='italic'>Usselinx</hi>, speaks in a similar way of the +imitativeness and many-sidedness of the Swedes (Argonautica Gustavica, 20). Chilian +servants (<hi rend='italic'>peones</hi>) are a good combination of the cook, the +muleteer, builder, courier etc. Once they have passed over a road, they never forget +it. A knife stands them in stead of most tools, and pieces of leather in stead of +nails. <hi rend='italic'>Pöppig</hi>, Reise, I, 171 ff.</note> Love of his avocation, +or pride in it, is a thing unknown to the Russian workman. He shirks all continuous +labor.<note place='foot'><hi rend='italic'>von Haxthausen</hi>, Studien, I, 63, 113. +In 1827, a Russian hatter got 12 rubles for a hat, a German one 35 +(<hi rend='italic'>Schön</hi>, N. Œkonomie, 78).</note> Experience has +shown that the Neapolitans and Italians, in general, exhibit great skill when they work +alone; but that when a great many of them work together, +they become rapidly confused. The English, on the other +hand, are slow to learn anything new, or to overcome unlooked +for difficulties; but they have no equals as workmen in organized +industries.<note place='foot'>See the report of a large manufacturer in +<hi rend='italic'>Kohl</hi>, England und Wales, p. 332 seq.</note> +The difficulty experienced in seeking a new +calling, where a high division of labor obtains, arises as much +from the fact that each person here has received a more one-sided +training, as from the necessity he is under of competing +from the first with only consummate workers. Rousseau's +school has laid too much stress on the tendency of higher civilization +to diminish individual independence. <foreign lang='fr' rend='font-style: italic'>Quand +on sait creuser un canot, battre l'ennemi, construire une cabane, vivre de +peu, faire cent lieues dans les forêts sans autre guide que le vent +et le soleil, sans autre provision qu'un arc et des flêches; c'est +<pb n='200'/><anchor id='Pg200'/> +alors qu'on est un homme!</foreign><note place='foot'><hi rend='italic'>Raynal</hi>, +Histoire des Indes (1780), L. XV. And so <hi rend='italic'>Rousseau</hi>, Discours +sur l'Inegalité (1754), who also declaims against all kinds of capital; were +there no ladders, men would climb better; and throw a stone better if they +had no slings. There is certainly a misunderstood truth in this saying. It +is assuredly very salutary, in the actual state of society, in which every one's +business is transacted for him by some one else, that a time should occasionally +come when no one can take our place, and a man can only call upon +himself. And herein lies the immense value which just war, when not much +prolonged, but which is brought to a happy termination, sometimes has upon +the life of a people.</note> We might reply that to build a +steamship or a palace, and to travel around the world are far +better. (<hi rend='italic'>Dunoyer.</hi>) Even physically, civilized man is superior +to the savage, as might be inferred from the greater +average duration of life of the former. Of course, extremes +should not be compared, nor should we contrast the frame of +a weaver or student with that of a savage chief.<note place='foot'>The American savages +are, on an average, weaker than the whites. In a fist-fight the Kentuckians and +Virginians showed themselves far superior to the Indians. See +<hi rend='italic'>Lawrence</hi>, Lectures, 403, <hi rend='italic'>supra</hi>, § +<ref target="Section_40">40</ref>.</note> +</p> + +<p> +In a similar way, the one-sidedness of the international +division of labor may be pregnant with great danger to national +independence. +</p> + +</div> + +<div> +<index index='toc' level1='Section LXIII. Dark Side Of The Division Of Labor.—Its +Gain And Loss.'/> +<index index='pdf' level1='Section LXIII.'/> +<head type='sub'>Section LXIII.</head> +<head>Dark Side Of The Division Of Labor.—Its Gain And +Loss.</head> + +<p> +Where, indeed, the one-sidedness produced by the division +of labor goes so far as to cause the degeneration<note place='foot'>For a very +unprejudiced estimate of the dark and bright sides of the division <emph>of +labor</emph>, even before Adam Smith's time, see <hi rend='italic'>Ferguson</hi>, +History of of Civil Society (1767), IV, I, V, 3 ff. Also <hi rend='italic'>Garve</hi>, +Versuche, III, 41. <hi rend='italic'>Adam Smith</hi> was not blind to the dark side of +the division <emph>of</emph> labor, which, in part, he would remove by popular +instruction at the expense of the state, and by a species of compulsory education. W. +of N., V, ch. 1, 3, art. 2. One of the chief peculiarities of <hi rend='italic'>J. +Möser's</hi> Political Economy is his great opposition to all highly developed +division of labor. Patr. Ph., I, 2, 21, III, 32, 34.</note> of the workman's +personality, the human loss of the nation is greater than +<pb n='201'/><anchor id='Pg201'/> +the material gain purchased by it. Thus the occupation of +polishing metals or gilding, when continued for a long time +without interruption, invariably ruins the health. What must +be the aspect of the soul of a workman who, for forty years has +done nothing but watch the moment when silver has reached +the degree of fusion which precedes vaporization! who is blind to all else, but +receives a good fat salary for his services.<note place='foot'><hi rend='italic'>von +Ledebur</hi>, Reise in Altai, I, 384. The working together of wife and +child, introduced recently by manufacturers, cannot be considered as a higher +grade of the division of labor, but only as a very unfavorable change in the +kind of it; inasmuch as it were better to employ the women in their domestic +avocations and to leave children to their studies and their sports. Among +the higher classes, it should be made the part of female education, to counterbalance, +in the family, the effects of the ever increasing division of labor +among the male portion, by the development of that which is universally +human—art, sociability, house-keeping etc.</note> +Schleiermacher rightly declared all human action which is +purely mechanical, through which man becomes a living tool +(slave!) immoral. When the division of labor has reached +this point, machines should take the place of men. The morality +of a profession may be measured by the degree in which it corresponds with the universal +calling of the race.<note place='foot'><hi rend='italic'>Schleiermacher</hi>, +Christliche Sitte, 465 ff., 676 ff., 154 ff. From a similar +feeling, although much exaggerated, the Greeks of the classic age proper +considered all callings followed for gain dishonorable, not excepting even +those of the physician and of the teacher. <hi rend='italic'>Plato</hi>, de Rep., +I, 347 ff. <hi rend='italic'>Aristot.</hi>, +Rhet., I, 9, 27: μηδεμίαν ἐργάζεσθαι βὰναυσον τέχνην, ἐλευθέρον +γάρ τὸ μὴ πρὸς ἄλλον ζην.</note> It is +not, therefore, a piece of inconsistency but rather a deeply felt +want, when, where civilization is at its highest, so many demands +are made that the division of labor should take a retrograde +path. The practice of gymnastic exercises by the +sedentary classes, universal military duty, the participation of +citizens in municipal government and in political affairs, of laymen +in the government of the church, of the wealthy in the +administration of charity; all these things are, from a materialistic +stand-point, considered a great squandering of time. It +may be, that, if the division of labor were more rigidly carried +<pb n='202'/><anchor id='Pg202'/> +out, we might, by its means, obtain more perfect results +with less economic expense. But the whole man is of more +importance than the sum of his achievements and enjoyments. +(Luke, 9:25.) Wo to the nation where only jurists have a +developed sense of the right, where political judgment and +cultivated patriotism are the portion of only officials and placemen, +where only the standing army has warlike courage, and +the clergy only conscious religiousness; where parents leave +all care for education to the teachers of the various branches +of learning, and where physical vigor is to be found only +among the proletarians. Hence there is nothing more ruinous +than premature one-sided education in a single trade or +profession—a thing which often happens from poverty before +the foundations of the general education becoming a human +being have been laid. The higher a man's position, the +more should he, so to speak, be a representative of the whole +human race. Who, for instance, would wish to see a ruler +brought up as men are to a special branch of science or to a +special profession?<note place='foot'>As, for instance, the superintendent of a +manufactory must have a better general training, but can get along with less of a +special, than his workmen.</note><note place='foot'><hi rend='italic'>Thucydides</hi> +says of the contemporaries of Pericles: <q>The same men +devote themselves, among us, in part to domestic and political business; +in part, others who busy themselves with agriculture and industry have +no mean knowledge of the affairs of state. We call those who take no part +in the former not people loving their ease, but useless men.</q> (II, 40.) +During the succeeding period, Athens was destroyed mainly by the ever +increasing division of labor between citizens and soldiers. For, <q>to separate +the arts which form the citizen and the statesman, the arts of policy and +war, is an attempt to dismember the human character, and to destroy those +very arts we mean to improve.</q> (<hi rend='italic'>Ferguson.</hi>) We know from +<hi rend='italic'>Valerius Maximus</hi>, that the Roman soldiers from the time of Marius +had, doubtless, a better technic training than their ancestors who who defeated Hannibal; +but was it in a military or political sense that they were thus better trained? +The beautiful definition of Cato intimates something of the same nature; +the good orator was <foreign lang='la' rend='font-style: italic'>vir bonus dicendi +peritus</foreign>. (<hi rend='italic'>Quintilian</hi>, XII, I.) And so +<hi rend='italic'>Garve</hi>, Versuche, IV, 51 ff., expects from the political elevation +of citizenship, of those possessed of the right of citizens, not only usefulness in a +particular direction but the development of the whole man, a thing hitherto expected +only of the nobility.</note> The best corrective for the one-sidedness +<pb n='203'/><anchor id='Pg203'/> +produced by a high division of labor consists in the extension +and many-sided employment of leisure time, both of +which are made more easy by the same high civilization which +always accompanies the division of labor.<note place='foot'>As one's +peculiar calling does not take up all his life, we must draw a +clear distinction between the one-sidedness of labor and the one-sidedness of life, +(<hi rend='italic'>von Mangoldt</hi>, Volkswirthschaftslehre, 227.) Only the last is to +be avoided at all hazards; and we find it in the middle ages, with its limited divisions +of labor, perhaps more frequently than where civilization has attained +a higher stage. During the middle ages, it was not unusual to make +feelings which every one should cultivate at times, if only temporarily, the +lasting calling of some. Thus one prayed his whole life long, or was engaged +in contemplation, and relieved others of the necessity of performing +these duties. The consequence was, that the latter sank as deeply in worldliness +and want of the interior spirit as the former were plunged in idleness +and hypocrisy. But, on the other hand, when, in our day, the printer relieves +the writer of a portion of the labor which might be his, the personal +development of neither suffers.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXIV. The Co-Operation Of Labor.'/> +<index index='pdf' level1='Section LXIV.'/> +<anchor id="Section_64"/> +<head type='sub'>Section LXIV.</head> +<head>The Co-Operation Of Labor.</head> + +<p> +The coöperation or combination<note place='foot'><foreign lang='it' +rend='font-style: italic'>L'uomo è un' tal potenza, che unita all' altra non fa un +eguale alla somma, ma al quadrato della somma.</foreign> +(<hi rend='italic'>Genovesi.</hi>) As to how the action of every individual +man is a species of division and union of different kinds of labor, see +<hi rend='italic'>Stein</hi>, Lehrbuch, 24.</note> of labor must, however, +always correspond to the division of labor. Both are but different +sides of the one idea of social labor; the separation of +different kinds of labor, in so far as they would disturb one +another, and the union or combination of them so far as they +help one another.<note place='foot'>Compare <hi rend='italic'>Ad. Müller</hi>, Elemente +der Staatskunst, III, 1809. <hi rend='italic'>Fr. List</hi>, System der polit. +Œkonomie, 222 ff., 409 ff. <hi rend='italic'>Wakefield</hi>, in his edition of Adam +Smith, distinguishes two degrees of coöperation, simple and complex. In +the case of simple labor, the same sort of work is performed at the same +time and place by several individuals, as, for instance, by a lot of hod-carriers +in building. In the other case, there are different kinds of work performed +at different times and places, but all intended for the one greater end. Agriculture +affords room for the first especially, and it is known also to a great +number of animal species.</note> The vintner or grower of flax would necessarily +<pb n='204'/><anchor id='Pg204'/> +die of hunger if he could not certainly count on the grower +of corn. The workman in a pin-factory, who prepares only +the heads of pins, must be sure of his colleagues who sharpen +the points, if his labor would not be entirely in vain. The labor +of the merchant is not even thinkable without that of the +different producers between whom he mediates. Where the +production of a certain article depends on the services of six +different kinds of labor, one of which, however, demands thrice +the time, and another twice the time of the rest, it is clear, +that, in order that the business may be properly carried on, so +many workmen should be employed that their number divided +by 9 should leave no remainder. (<hi rend='italic'>Rau.</hi>) The union or combination +of different kinds of labor is most perfect when the +workmen live nearest together; when, therefore, they are not +separated by great difficulties of transportation; or in different +countries, in which case, a war might tear all to pieces. +</p> + +</div> + +<div> +<index index='toc' level1='Section LXV. The Principle Of Stability, Or Of The Continuity +Of Work.'/> +<index index='pdf' level1='Section LXV.'/> +<head type='sub'>Section LXV.</head> +<head>The Principle Of Stability, Or Of The Continuity +Of Work.</head> + +<p> +Coöperation in time is of equal importance: the principle of +the stability, or of the continuity of labor. When a workman +dies, it is necessary to be able to calculate on a substitute. It +is well known that it is much harder to begin a business, than +it is, afterwards, to improve and enlarge it; and this, the more +complicated it is. A new enterprise will take root easily, only +where there are several similar ones already in existence; a +new manufacturing establishment, for instance, where by the +existence of other such establishments, the requisite habits of +the workmen, of capitalists and of the public in general, have +been previously developed. The skill of workmen is propagated +especially by observation and the personal emulation of +<pb n='205'/><anchor id='Pg205'/> +the young; whence it is, that the introduction of new industries +is best made by the immigration of skilled workmen.<note place='foot'>Flemish weavers +in England, French refugees in Protestant countries; +German miners in Spain, Scandinavia, Hungary and America.</note> +Hence the baleful influence of such interruptions, as for instance, +the repeal of the edict of Nantes. Hence too, it is, +that despotism and the reign of the populace are so unfavorable +to the economy of a country, where there can be no guarantee +of a consistent observance and development of the laws. +To the best applications of the principle of the continuity +of labor belong the church-building of the middle ages, the +national canals, the street and fortification systems of modern +times; all of which have been created only by the coöperation +of several generations to the same end.<note place='foot'>This, +so very largely developed in Egypt and India, where the principle +of caste obtains, is very little developed in the despotisms of Asia. The great +princes, in the latter countries, build largely from vanity only. Hence their +successors seldom complete their works, and scarcely repair them. Nowhere +else are there so many half completed and yet decaying buildings. +<hi rend='italic'>Klemm</hi>, Kulturgeschichte, VIII, 86. <hi rend='italic'>Riedel</hi>, +N. Œkonomie I, 259, very correctly remarks +that such kinds of coöperation as contribute most to the propagation +of skill, both in commerce and manual labor, have less real division of labor, +and vice versa.</note> The most striking +means by which such a coöperation has been advanced in +modern times is public credit, <q>a draft on posterity;</q> yet, all +saving is, in principle, the same. The most powerful element +in the coöperation in time of labor is the economy in common +of the family, although it differs in degree, according to the +different kinds of family inheritance. Where, as among the +English middle classes, it is customary to secure the business +property of the family to one child by will, and to entrust the +conduct of the business, during the life of the father, to the +devisee, to provide for the other children by insurance, by savings +etc., made from the surplus of the business, there may be +old firms which remain always new, however; because they +combine the experience of age with the energy of youth, and +are never broken up by a division of the inheritance. But the +<pb n='206'/><anchor id='Pg206'/> +compulsory equality of heirs, which actually obtains in France, +compels almost every new generation to begin with a new +firm. (See § <ref target="Section_85">85</ref> seq.)<note place='foot'>Compare +<hi rend='italic'>Leplay</hi>, La Réforme sociale en France (1864).</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXVI. Advantage Of Large Enterprises.'/> +<index index='pdf' level1='Section LXVI.'/> +<head type='sub'>Section LXVI.</head> +<head>Advantage Of Large Enterprises.</head> + +<p> +On the results of the division and coöperation of labor rests +the superior advantage of all great undertakings, and they are, +therefore, smaller in agriculture than in industry. <q>It is +harder to acquire the first thousand than the second million.</q> +Abstraction made of the conditions of capital and of the market, +the limit up to which the growing magnitude of an enterprise +becomes more advantageous, lies in the increasing difficulty +of superintendence. Numberless commercial improvements, +such as the post-office, railroads, telegraphs, exchange, banks +etc., have operated powerfully to extend these limits. It is +frequently possible, even in small enterprises, to secure the advantages +of large enterprises, by association among those concerned. +They must, of course, possess the necessary capital. +If they have not got it, as property, they must borrow it. It +is, of course, peculiarly difficult here to preserve the necessary +unity, without which the coöperation of labor becomes +the confusion of labor. The more moral and intelligent the +participants are and the simpler the business, the more extensive +may it become, and the more probable will be its success. +(§ <ref target="Section_90">90</ref>.)<note place='foot'>Concerning association in +general, see <hi rend='italic'>M. Chevalier</hi>, Cours, III, Leçon, +24, 25. On this subject so much talked of in our day, see, more in detail, concerning +its application to agriculture, my work, Nationalökonomik des +Ackerbaues, 4, § 39, 47 ff.; 68, 133 ff.; on its application to industry, especially +where there is question of the relation of handiwork and manufactures to large +factories; see <hi rend='italic'>Roscher</hi>, Ansichten der Volkswirthschaft, II, +Aufl., 1861, Abhandlung, IV, V.</note><note place='foot'><hi rend='italic'>Adam +Smith</hi> remarked that the laws of the division of labor obtain also in +intellectual works; and indeed, among all nations in a very low grade of +civilization, the germs of all art and science are found connected with theology; +and later, the germs of all poetry and history with the epic. The expression: +<foreign lang='la' rend='font-style: italic'>non defuit homini, sed scientiæ, quod +nescivit Salmasius</foreign>, is a clear +proof of the insignificance of the science of the time. Think of the increase +during the last hundred years of the branches of study in our German universities. +There are now thirty-four regular professors in the Leipzig +philosophical faculty, where then there were only nine. But here also the +principle proves true, that an excessive division of labor, where the broader +connection and the deeper foundation of all sciences disappear from the consciousness, +undermines intellectual health and freedom. And the injury here is +greater and more irreparable than in the domain of mere physical labor. See +<hi rend='italic'>Hufeland</hi>, N. Grundlegung, I, 207 ff. If we have just become +Alexandrians, we have, however, no Aristotle to hope for. <foreign lang='la' +rend='font-style: italic'>Jurisprudentia est divinarum atque humanarum rerum notitia, +justi atque injusti scientia</foreign> (<hi rend='italic'>Ulpian</hi>). It is remarkable +that nations who possess no real national literature of their own, +when they once get beyond the bounds of utter barbarism, learn foreign languages +etc., most easily.</note><note place='foot'>The socialistic utopia of +<hi rend='italic'>Ch. Fourier</hi> (Théorie des quatre Mouvements, +1808. Théorie de l'Unité universelle, 1822. Le nouveau Monde industriel +et sociétaire, 1829) are based upon the following fundamental ideas. A. The +present civilization is that of a topsy-turvy world, especially in so far as it +ascribes a <q>moral</q> (a word always used by him in an ironical sense) self-government +to man. In Fourier's world, on the other hand, every man is supposed, at all times, to +give free rein to every <foreign lang='fr' rend='font-style: italic'>passion</foreign>; +and the play of these gratifications constitutes the <foreign lang='fr' +rend='font-style: italic'>harmonie</foreign>, in which the poorest find more +enjoyment than do kings at the present time. (See § 207 of this work.) B. +The main thing to further this is a radical reform in the division and cooperation +of labor as they exist at present. Instead of the present villages +and cities, we should have only phalansteries, each with 2,000 inhabitants, and +situated in the center of the land cultivated by them. Instead of the present +nations and states, we should have a universal confederate republic, hierarchically +graded, with French as the universal language. According to the demands +of the <foreign lang='fr' rend='font-style: italic'>passion papillonne</foreign>, +each one should carry on the most different kinds of business side by side, and +each one of them at most two hours per day; i.e., every one should be a dilettante, no +one a master, and everything should be done as badly as possible. +<hi rend='italic'>Proudhon</hi>, Contradictions économiques, +ch. 3, objects to this, that a workman must, in some way, be held responsible +for his work. <hi rend='italic'>Fourier</hi> himself calculates that, in his +<foreign lang='fr' rend='font-style: italic'>harmonie</foreign> all pleasures +are productive labor; and that by this constant change, one might be +satisfied with from 4-½ to 5-½ hours of sleep, and that even children 2-½ years +old might take part in the work. Thus, there would be a great rivalry between +apple-growers and pear-growers, so great <q>that more intrigues in attack +and defense [<foreign lang='fr' rend='font-style: italic'>passion cabaliste</foreign>] +would arise there than in all the cabinets of Europe,</q> in the settling of which the +growers of quinces would act as intermediaries. +There are, in addition to all this, wonderful aids; a fructifying +crown of light rises over the north pole; oranges bloom in Siberia; the sea +becomes as delicious as lemonade; dangerous animals die, and in their stead +anti-lions and anti-whales come into being, animals useful to man, which +draw his ships for him during calms. These ideas are by no means retracted +in <hi rend='italic'>Fourier's</hi> later works, See Nouveau Monde (Oeuvres) IV, 447. +The propositions of <hi rend='italic'>Robert Owen</hi>, A new View of Society (1812), +have much similarity with those of Fourier. They differ only in the absence of the +French barrack-like character of the phalanxes, and the fantastic character of the +presentation of the doctrine. He would have all the land divided into districts +of 1,000 acres each; each district to have a four-cornered town with 1,000 +inhabitants, following a system of production and consumption in common, +but not with full equality; carrying on both agriculture and other business. +A principal feature here is an entirely new system of education. The author +says that man has hitherto been the slave of an execrable trinity: positive religion, +personal property and indissoluble wedlock. (Declaration of mental +independence.)</note> +</p> + +</div> + +</div> + +<pb n='207'/><anchor id='Pg207'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter IV. Freedom And Slavery.'/> +<index index='pdf' level1='Chapter IV.'/> +<head type='sub'>Chapter IV.</head> +<head>Freedom And Slavery.</head> + +<div> +<index index='toc' level1='Section LXVII. The Origin Of Slavery.'/> +<index index='pdf' level1='Section LXVII.'/> +<head type='sub'>Section LXVII.</head> +<head>The Origin Of Slavery.</head> + +<p> +An institution like that of personal bondage, which, it can +be shown, has existed, among all nations of which history gives +<pb n='208'/><anchor id='Pg208'/> +us information, at one time or another, must have very general +causes. Among these may be mentioned especially subjection +through war. It is not possible to calculate how much +the principle, that it was proper to reduce the man to slavery +<pb n='209'/><anchor id='Pg209'/> +whom it was considered right to kill, contributed to make war +less bloody in an uncivilized age.<note place='foot'>Compare +<hi rend='italic'>Tacitus</hi>, Histor., II, 44.</note> A nation of hunters is almost +compelled to grant no quarter; the conqueror would be +obliged either to feed his prisoner or to put arms in his hands. +It is certainly a great humanitarian advance, when this state +of things is superseded by slavery among nomadic nations.<note place='foot'>See +<hi rend='italic'>Iselin</hi>, Geschichte der Menschheit (1764), III, 7. +<hi rend='italic'>Bazard</hi>, Exposition de la Doctrine de Saint Simon, 1831, 153. +Among negro nations deprivation of freedom is one of the most usual punishments for +crime; but the criminal has the option of substituting his wife or child for himself. +<hi rend='italic'>L.A. de Oliveira Mendez</hi>, in the Memor. econom. of the Royal +Academy of Lisbon, vol. IV, I, 1812. As to slavery on account of crime among the +Germans, see <hi rend='italic'>Grimm,</hi> D. Rechtsalterth., 328 seq.</note> +</p> + +<p> +In times of peace, economic dependence is the result of poverty, +excessive debt etc.<note place='foot'>Loss at play was a frequent cause of slavery among +the ancient Germans. <hi rend='italic'>Tacit.</hi>, Germ., 24. For the principal causes +of slavery among the Israelites, see the books of Moses, II, 22, 3; III, 25, 39; IV, 21, +26 seq.; among the Indians, Laws of Menu, VIII, 415. The first serfs of Russia were +prisoners of war and their children. The laws of Jaroslaws recognize, besides, the +following causes: insolvency, contracting marriage with a slave, the illegal +breach of a contract for service, flight, unconditional contract for service. +<hi rend='italic'>Karamsin</hi>, Russ. Gesch., II, 37.</note> Where there is no division +of labor, the individual has no means of supplying his wants, except by +cultivating a spot of ground. But, how can the poor wretch +who has neither capital<note place='foot'>At least seed and the means of subsistence +until harvest time.</note> nor land exchange anything of value +for either? Such an advance, where there is no security in +law, can be made only on the credit of a very important pledge. +But the man who is destitute of all property can offer nothing +but the productive power of himself or of his family.<note place='foot'>Cases of +voluntary slavery to escape famine. <hi rend='italic'>Papencordt</hi>, Geschichte +der Vandalen, 186; <hi rend='italic'>Victor</hi>, Chron., V, 17; Tur., VII, 45; Lex +Bajuv, VI, 3; L. Fris, XI, I. According to the Edictum Pistense (a., 864), c., 34, one +could free himself again by paying back the purchase money and 20 per +cent. in addition. It frequently happened that people spontaneously accepted +the condition of a vassal in order to enjoy the protection of a powerful +personage. See <hi rend='italic'>Stüve</hi>, Lasten des Grundeigenthums, p. 74. In +1812, a young Himalayan offered himself to the traveler Moorcroft as a slave in order +to obtain food during the famine. <hi rend='italic'>K. Ritter</hi>, Erdkunde, III, p. +999. The same fact occurred, but in greater proportions under Joseph in Egypt. +<hi rend='italic'>Moses</hi>, I, 47, 18 seq.</note> And +<pb n='210'/><anchor id='Pg210'/> +so it is with the small landed proprietor who has lost all his +capital;<note place='foot'><hi rend='italic'>Cæsar</hi>, B.G., VI, +13.</note> for, considering the superabundance of land, the part +which he possesses has value in exchange only to the extent +that it is joined with the certainty of being cultivated; and +here is the origin of the <foreign lang='la' rend='font-style: italic'>glebæ +adscriptio</foreign>. The hereditary +transmission of the relation to the children seems to be equally +useful to them; or who, were this not the case, would think +of providing them with food? It also frequently happens that +poor parents prefer to sell their children to seeing them starve.<note place='foot'><hi +rend='italic'>Solon</hi> was the first to prohibit this commerce in Athens. +<hi rend='italic'>Kindlinger</hi>, in his Geschichte der deutschen Hörigkeit, p. 621, +speaks of a child promised as a slave before its birth, by its parents, as a species of +farm-rent. (See the Edictum Pistense, in <hi rend='italic'>Baluz</hi>, II, 192.) In +Chili, the poorest country people who were not entirely white, sold their children in +the towns, where they grew up with the families of their masters, and were then kept as +servants in a state of semi-serfdom. There is, it is true, no law governing this +condition of things. (<hi rend='italic'>Pöppig</hi>, Reise, I, 201 ff.)</note> +Hence the strange fact that most nations have the most rigid +system of slavery precisely at the time that the soil produces +food most readily. We need only cite the instance of the +South Sea Islands, at the time of their discovery. In many +negro countries, where the people have not yet learned to use +animals for transportation, the lowest classes, although they +enjoy a nominal liberty, are used as beasts of burden.<note place='foot'><hi +rend='italic'>Ritter</hi>, XIII, 727. For instance, men in South America used for the +purpose of riding. <hi rend='italic'>M. Chevalier</hi>, Cours, I, 251; +<hi rend='italic'>Lœwenstern</hi>, Le Mexique, Souvenirs d'un Voyageur (1843); and +<hi rend='italic'>Stephens</hi>, Travels in Yucatan (1841), +show how, even yet, in Central America, although the Indians are legally +free, yet, by their senseless way of running into debt, a number of legal relations, +amounting virtually to <hi rend='italic'>glebæ adscriptio</hi>, arise. But compare, +however, <hi rend='italic'>Humboldt</hi>, Neuspanien, IV, 263. This condition of things +has been produced in Peru, also, by the payment of one or two years' wages in advance. +(<hi rend='italic'>Pöppig</hi>, Reise, II, 225.)</note> +</p> + +</div> + +<pb n='211'/><anchor id='Pg211'/> + +<div> +<index index='toc' level1='Section LXVIII. The Same Subject Continued.'/> +<index index='pdf' level1='Section LXVIII.'/> +<anchor id="Section_68"/> +<head type='sub'>Section LXVIII.</head> +<head>The Same Subject Continued.</head> + +<p> +In all very low stages of civilization, the greatest absence +of the feeling of wants, and the greatest indolence, are wont +to prevail, and in the highest degree. As soon as their merest +necessities are provided for, men begin to look upon labor as +a disgraceful occupation, and indolence as the highest kind of +enjoyment. (§ <ref target="Section_41">41</ref>, 213 ff.) Sustained and voluntary efforts, +in any number, then become possible only by the creation of +new wants; but these new wants suppose a higher civilization. +Escape from this sorry circle is then effected in the most humane +manner, through the agency of foreign teachers; inasmuch +as the representatives of a more highly cultivated people +(missionaries, merchants etc.), by their own example, make +the nation acquainted with more wants, and at the same time +help toward their satisfaction.<note place='foot'>Thus <hi rend='italic'>Forbonnais</hi>, +Eléments du Commerce (1854) I, 364, says of trade with savages: +<foreign lang='fr' rend='font-style: italic'>il fait naître dans ces nations le goût +du superflu et des commodités, qui multiplie le, échanges et leur donne le goût +du travail.</foreign></note> But, in the case of nations +whose civilization is completely isolated, or having intercourse +only with others equally low, progress is the creature of +force exclusively. The barbarous isolation of families ceases +when the strongest and most powerful force the weaker +into their service. It is now that <emph>the division of labor really +begins</emph>: the victor devotes himself entirely to work of a higher +order, to statesmanship, war, worship etc.; the very doing of +which is generally a pleasure in itself. The vanquished perform +the lower. The one-half of the people are forced to +labor for something beyond their own brute wants. And it +is, here as elsewhere, the first step that costs.<note place='foot'>In very uncivilized +nations, among whom serfdom is not known, we generally +find the slavery of woman and the temporary bondage of the son-in-law +in order to secure the daughter in marriage. This is still the case among +the Laplanders. <hi rend='italic'>Klemm</hi>, Kulturgeschichte III, p. 54. +Slavery was unknown among the Greeks in the very earliest times. +<hi rend='italic'>Herod.</hi>, VI, 263. <hi rend='italic'>F. A. Wolf</hi>, +Darstell. der Afterthumswissenschaft, III, doubts whether any great advance +in the higher development of the mind would have been possible without +slavery.</note> (§ <ref target="Section_45">45</ref>.) +</p> + +</div> + +<pb n='212'/><anchor id='Pg212'/> + +<div> +<index index='toc' level1='Section LXIX. Origin Of Slavery.—Want Of Freedom.'/> +<index index='pdf' level1='Section LXIX.'/> +<head type='sub'>Section LXIX.</head> +<head>Origin Of Slavery.—Want Of Freedom.</head> + +<p> +It is not to be supposed that slavery, at this stage, is so +oppressive even to those who have been deprived of their +freedom. The feeling of moral degradation which slavery, +abstraction even made of its abuses, awakens in us, is unknown +in a very uncivilized age.<note place='foot'>In Russia, where free +peasants and serfs lived side by side, it has been +remarked that the latter were never so rich and never so poor as the former. +(<hi rend='italic'>Kohl</hi>, Reise durch Russland II, 8, 300.) The +Livonian peasants have become poorer since their +emancipation. (<hi rend='italic'>Cancrin</hi>, Œkonomie der menschlichen +Gesellschaften, 41). Many of the serfs refused to accept emancipation. +(<hi rend='italic'>Büsch</hi>, Geldumlauf, Einleitung, § 6.) +And so <hi rend='italic'>Martius</hi>, Reise in Brasilien +II, 552 ff., assures us that the negro slaves in Brazil are as a rule a very +merry set. He is also of the opinion that they are better clothed, lodged, +fed and employed than in their own country. For the remarkable official +defense of North American slavery directed by +<hi rend='italic'>Calhoun</hi>, to Lord Aberdeen, +see the Allg. Zeitung, 1844, No. 145. In this document, we find a comparison +instituted between the free negroes of the north and the slaves of the +south. In the north, there was one deaf-mute, a case of blindness and of insanity +in every 96; in the south, in every 672; a pauper, invalid and prisoner +in every 6 at the north, in every 54 at the south. In Maine, 1/12th of the +negroes were afflicted by disease; in Florida, 1/1105th(?). The fact that the +slave population of the United States increased, between 1840 and 1860, from +2,873,698 to 4,441,830, while the free negro population of Jamaica, between +1833 and 1843, underwent a frightful decrease, is to the same purport. However, +too much must not be inferred from all this, as the negroes in America +are very far from being the children of the soil.</note> The child willingly obeys the +orders of strangers, and is hired out to service by his parents +etc. The want or craving for liberty keeps pace with the intellectual +growth of a people. The systematic over-working +of servants or slaves, in the interest of their masters, is scarcely +thinkable in an uncultured age, when, in the absence of commercial +<pb n='213'/><anchor id='Pg213'/> +intercourse, every family consumes what it produces.<note place='foot'>The +servants in the Odyssey who cared for hogs and cattle etc. were certainly +in a better condition in many respects than the peasants of Attica, +who were free, but buried in debt until the time of Solon. Concerning the +mildness of the treatment of slaves in very early Roman times, see +<hi rend='italic'>Plutarch</hi>, Coriol., 24, and <hi rend='italic'>Cato</hi>, +I, 3, 20 ff.; <hi rend='italic'>Cato</hi>, de Re rust, 5, 56 ff.; +<hi rend='italic'>Macrob.</hi>, Stat. I, 10 ff. On the state of the serfs +among the Germans, see <hi rend='italic'>Grimm</hi>, Deutsche +Rechtsalterthümer, p. 339 ff.; among the ancient Scandinavians etc., +<hi rend='italic'>Dahlman</hi>, Geschichte von Dänemark, I, 163. See +<hi rend='italic'>Tacit.</hi>, Germ., 25.</note> +The only thing which the slave has to fear is an occasional +outburst of tyranny on the part of the master, a thing which +is far from unfrequent in all the relations of low civilizations. +Fear restrains masters to a certain extent; for, in those early +days, how few were the institutions of state which could protect +them against the vengeance of their slaves!<note place='foot'>Compare +Landnamabok, I, 6.</note><note place='foot'>The opinions of the ancients +for and against slavery are found in <hi rend='italic'>Arist.</hi> +Polit. I, 2. See especially the beautiful passages in +<hi rend='italic'>Philemon</hi>: <hi rend='italic'>Meineke</hi>, Comicorum +jr., 364, 410. <hi rend='italic'>Aristotle</hi> even thinks that there are cases in which +master and slave might be brought together by a mutual want, each of the +other. The former wants hands to execute the work of his brain; the latter +a guiding brain for his hands. Where the degree of dependence corresponds +exactly to the difference of ability, <hi rend='italic'>Aristotle</hi>, +leaving its abuses out of the question, declares slavery to be +just. See, also, Eth. Nicom., VIII, 11. Similarly +the Pythagorean <hi rend='italic'>Bryson</hi> in <hi rend='italic'>Stobœus</hi>, +Florid. LXXXV, 15. But <hi rend='italic'>Aristotle</hi> +would hold up emancipation to all slaves as a reward they might have in +prospect. Polit VII, 9, 9; Œcon. I, 5. It is characteristic of the many testaments +of philosophers, found in <hi rend='italic'>Diogenes Laertius</hi>, +that they contain declarations giving slaves their freedom. +The Essenes and Therapeutics condemned slavery under all +circumstances. <hi rend='italic'>Philo.</hi>, Opp. II, pp. 458, 482, +Opp. I. See <hi rend='italic'>Seneca</hi>, De Benef. III, +20. The <foreign lang='la' rend='font-style: italic'>jus naturale</foreign> of +the age of the Cæsars recognized the freedom and equality of man. Digest, XII, 664., L. +17, 32. The New Testament does not reject it absolutely, but would sanctify +it as well as all other relations in life. Compare Luke, 17, 7; Eph. 6 5 ff.; +Coloss. 3, 22; Tit. 2, 9. More especially, I Timothy, VI, 1 ff. It was not +until the ninth century that the opinion that slavery was anti-Christian because +men were all made in the image of God, arose. <hi rend='italic'>Planck</hi>, Geschichte +der kirchlichen Gesellschaftsverfassung, II, 350. Sachsenspiegel, III, 42. +A writer as recent as <hi rend='italic'>Pufendorf</hi> explains slavery +as arising from a free contract; <foreign lang='la' rend='font-style: italic'>faciam, +ut des.</foreign> Jus naturæ (1672) VI, 3. More recently +<hi rend='italic'>Linguet</hi>, Théorie des Lois civiles (1767), V, +ch. 30, and <hi rend='italic'>Hugo</hi>, Naturrecht, § 186 ff. have endeavored +to prove that slaves are in a condition preferable to that of poor free +men. And so <hi rend='italic'>Möser</hi> Patriot Phantasien, II,. p. +154, seq. Those who with <hi rend='italic'>Thaer</hi> separate the +element of production, <q>labor</q> from that of <q>intelligence,</q> +justify slavery on the same principle that Aristotle did, without knowing it. +Per contra, see <hi rend='italic'>F. G. Schultze</hi>, N. Œkonomie (1856), 418.</note> +</p> + +</div> + +<pb n='214'/><anchor id='Pg214'/> + +<div> +<index index='toc' level1='Section LXX. Emancipation.'/> +<index index='pdf' level1='Section LXX.'/> +<head type='sub'>Section LXX.</head> +<head>Emancipation.</head> + +<p> +As states grow greater and men's manners gentler, the ranks +of slavery are less and less liable to be recruited through the +agency of war.<note place='foot'><hi rend='italic'>Turgot</hi>, Sur +la Formation etc., § 21. The universal empire of the Romans +demonstrated this. Then it was, for instance, that during the wars of +Lucullus, a slave cost only four drachmas. (<hi rend='italic'>Appian.</hi>, +Bell. Mithr., 78.) <hi rend='italic'>Sardi venales</hi>: on account +of the glutting of the market with Sardinian slaves, made through +the victory of Tib. Gracchus, 177, before Christ. Many of the +lesser wars of the Romans can be looked upon only as slave-hunts. But the +great wars also were followed by uprisings of slaves on account of the many +new slaves which they made. Thus 198 in Latium, 196 in Etruria. +(<hi rend='italic'>Bücher</hi>, Aufstände der unfreien Arbeiter von, 143-129, +v. Chr., 1874.) During the relatively peaceful periods which +preceded many of the Roman revolutions, pirates delivered +over great masses of slaves. It frequently happened that several thousand +slaves were led to Delos and sold in a single day. (<hi rend='italic'>Strabo</hi>, +XIV, 668.) As emancipation was a measure which people could not make +up their minds to adopt, these pirates satisfied a <q>want</q> for a time, and this +partly explains the otherwise incomprehensible forbearance of the state towards +them.</note> It then becomes necessary to have recourse +to the family to keep up their number, which makes their +condition much more endurable, and which supposes that it +has been made more endurable in other respects beforehand. +Modern states, are, as a rule, larger than the ancient were. +The Germans had, long before the time of Charlemagne, +treated prisoners of war of German origin more mildly than +those of Gallic or Slavic origin.<note place='foot'><hi rend='italic'>Gregor. +Turon.</hi>, III, 15.</note> The condition of the latter +even improved from the time that nations began to think of +making permanent conquests. Since the Slavic wars of the +tenth century, certainly since the Lithuanian contests, it seems +that prisoners of war were not reduced to slavery.<note place='foot'><hi +rend='italic'>Grimm</hi>, D. Rechtsalterthümer, 323. It is a strange fact +that prisoners of war were in several remarkable instances sold as slaves +in Italy during the fifteenth century. (<hi rend='italic'>Sismondi</hi>, Hist. +des Républiques italiennes, IX, p. 312 seq.; XI, p. 138 seq.) And even in +the sixteenth century, the pope allowed those of states opposed to him to +be treated in this way. <hi rend='italic'>Sismondi, supra</hi>, +XI, 251; XIII, 485. <hi rend='italic'>Raynold</hi>, Ann. eccl. 1506, § 25 ff.</note> +Chivalry, +<pb n='215'/><anchor id='Pg215'/> +and allowing prisoners to go free, on their word of honor, +contributed largely to this result. +</p> + +<p> +The more productive agriculture is, the more numerous the +wants of land owners, the more extensive the division of labor +and commercial intercourse become, the easier it is for a large +class of the community to obtain support for themselves and +families without cultivating land of their own. (Wages.) +When exchanges through the medium of money become customary, +the chief argument for slavery disappears; and the +strong, rich and able man can, without having recourse to +force, command the labor of other men. Every further advance +in economic culture must necessarily help forward in this +direction. Thus, without the plow, for instance, we should all +be really only so many <hi rend='italic'>glebæ adscripti</hi>. It is due especially to +the ever increasing perfection of tools, machines and operations, +that the slave of antiquity was transformed into the serf +of the middle ages, and afterwards into the day laborer of +modern times.<note place='foot'>This graduation of +slave, serf and workman, has been carried out especially +by <hi rend='italic'>Saint Simon</hi>, Oeuvres, 328 ff. +Even <hi rend='italic'>Proudhon</hi> admits that the condition +of the lower classes is better now than formerly. (Contradictions +économiques, ch. X, 2.) Compare <hi rend='italic'>M. Chevalier</hi>, +Cours, I. Leçons 1 and 2, +where he shows that our productive power has increased during the last four +or five centuries in the production of iron in the proportion of 1 to from +25 to 30; in the preparation of flour since the time of Homer in the +proportion of 1:144; in the production of cotton during the last 70 years in +the proportion of 1:320. <hi rend='italic'>Aristotle</hi> predicted, +long ago, that <q>when the shuttle would move of itself, and plectra of +themselves strike the lyre, we should need no more slaves.</q> Polit., +2, 5. Every step of true progress brings us nearer the fulfillment of +the prophecy.</note> It is more particularly to be remarked, that +machines, since 1750, <q>first made the constitutional liberty of +many, instead of the feudal freedom of a few, possible.</q> +(<hi rend='italic'>Schäffle.</hi>) +</p> + +</div> + +<pb n='216'/><anchor id='Pg216'/> + +<div> +<index index='toc' level1='Section LXXI. Disadvantages Of Slavery.'/> +<index index='pdf' level1='Section LXXI.'/> +<anchor id="Section_71"/> +<head type='sub'>Section LXXI.</head> +<head>Disadvantages Of Slavery.</head> + +<p> +Slavery promotes the division of labor only in the very +beginning. The more dependent the slave is, the worse he +works. Whatever he spoils or allows to go to waste injures +only his master. Hence it is that slave-husbandry is only one +degree removed from what the Germans call <foreign lang='de' +rend='font-style: italic'>Raubbau</foreign>, and +which means, as nearly as we can translate it, the most +thoughtless and wasteful management possible.<note place='foot'>The +North American planters employed coarse tools rather than fine +ones, mules rather than horses, because their slaves took so little care of +them.</note> Whatever +he consumes is simply so much gain to himself. Industry +and skill are injurious to him, because, if remarkable for these +qualities, his master exacts more work from him and is +more adverse to setting him at liberty. Instead of the numberless +incentives of the free workman: care for the future, +for his family, honor and comfort, the slave is generally +moved by one—the fear of ill-treatment, and to this he gradually +becomes insensible.<note place='foot'>It can never obtain as much +labor from the slave, as the fear of losing his situation and +of not being able to obtain another, will from the free workman. +(<hi rend='italic'>Hume.</hi>) <hi rend='italic'>Marlo</hi>, +Weltœkonomie, 1848, I, 2, 38, grants this to be true only where +all the forces of nature are appropriated by occupation, and the number +of workmen is greater than the want of workmen.</note> The division of labor demanded +by manufactures, and which is to be found for the most part +only where each person is at liberty to choose his own avocation, +is scarcely supposable where slavery, in the strict sense +of the word, prevails. The same is true of the spirit of invention +and improvement.<note place='foot'>Even in Brazil, only free men are, +as a rule, employed as sugar refiners, distillers, teamsters etc. +(<hi rend='italic'>Koster</hi>, Travels in Brazil, 1816, 362.) +<hi rend='italic'>Storch</hi>, Russland unter Alexander I, Heft, 23, p. +255, cites the opinion of an eminent Russian manufacturer, that it would +first be necessary to liberate the serf factory-hands. Masters have +generally given up employing their own serfs in manufactures, allowed +them to seek work for themselves, and only required them to pay them +a species of tax. When this plan was adopted, it was found that they worked +much better, (<hi rend='italic'>v. Haxthausen</hi>, Studien I, 61, +116.) It was a consequence of slavery that, in antiquity, the very wealthy +purchased so little: <foreign lang='la' rend='font-style: italic'>omnia domi +nascuntur</foreign>! (<hi rend='italic'>Petron.</hi>, 38.)</note> +And even where the milder <hi rend='italic'>glebæ +<pb n='217'/><anchor id='Pg217'/> +adscriptio</hi> obtains, the division of labor is much hindered. +Hence, competent judges all agree on the badness of slave +labor;<note place='foot'>Thus <hi rend='italic'>Homer</hi>, Od. +XVII, 322, in whose time even there were day laborers, θῆτες or +ἔριθοι. (Od. IV, 644; X, 85; XI, 490; XIV, 102. <hi rend='italic'>Hesiod</hi>, Opera, +602.) And <hi rend='italic'>Varro</hi>, De Re rust. I, 17, advises +that difficult labor should be performed rather by day laborers. +<foreign lang='la' rend='font-style: italic'>Coli rura ab ergastulis pessimum est et +quidquid agitur a desperantibus.</foreign> <hi rend='italic'>Plin.</hi>, +H. N. XVIII, 7. <foreign lang='la' rend='font-style: italic'>Omne genus agri +tolerabilius sub liberis colonis, quam sub villicis.</foreign> +(<hi rend='italic'>Columetta</hi>, De Re rust I, 7.) +It has been estimated, that, in the West Indies, a negro slave performed only +one-third of the work performed by an Englishman in his own country. +(<hi rend='italic'>B. Edwards</hi>, History of the British West Indies, +II, 131.) During the one afternoon, in every week, in which the negroes +were allowed to work on their own account, they accomplished as much as on other +entire days. Edinburgh R. IV, 842. Compare <hi rend='italic'>Bentham</hi>, Traité de +Législation I, 319. <hi rend='italic'>Ch. Comte</hi>, Traité de Législation, 1827, +Livre V.; <hi rend='italic'>Cairnes</hi>, The Slave-Power, its Character, Career and +probable Designs, 1862; <hi rend='italic'>Olmsted</hi>, Journeys and Explorations in +the Cotton Kingdom, 1861.</note> which, as for instance in the United States, was used +only where the slaves were crowded together in large numbers +and could therefore be easily superintended. And not +only are the slaves themselves indolent, but their masters as +well; more particularly in slave countries where all labor is +considered disgraceful. What must be the national husbandry +of a people, one half of whom refuse to do anything that is right +and proper, through malice, and the other half through pride! +As soon as, on account of increased population and consequent +increased consumption, this enormous waste of force +can be endured no longer, free workmen become more profitable, +not only to themselves and to the whole community, but +to the greater number of the individuals who compose it.<note place='foot'>While +the older tyrants had prohibited idleness, Draco and Solon even +under pain of degradation (see places in <hi rend='italic'>Büchsenschütz</hi>, +Besitz und Erwerb, 260). <hi rend='italic'>Socrates</hi> called the ἅργια the +sister of Freedom (Aelian, V.H.X, 14), and the σκολή the most beautiful of +all professions.</note> +On the Bernstoff estates the quantity of rye harvested before +<pb n='218'/><anchor id='Pg218'/> +and after emancipation was as 3:8-⅓; of barley-corn as 4:9-⅓; +of oat-grain as 2-⅔:8.<note place='foot'><hi rend='italic'>B. Franklin</hi>, +Observations concerning the Peopling of New Countries etc., 1751.</note> +</p> + +<p> +The owners of serfs, especially, are apt to be very wasteful +of their labor, because they imagine that they obtain it gratis. +Tucker has made a curious calculation tending to show that +when civilization reaches a certain point, the master's self-interest +leads to emancipation. In Russia, where there are +seventy-five persons to the English square mile, it seemed to +him that serfdom was still a good economic speculation. In +western Europe, where there were one hundred and ten persons +to the square mile, freedom, in all relations of master and +servant, he considered more advantageous to all parties. Emancipation +began in England in the fourteenth century, when that +country had a population of forty to the square mile, and was +completed in the seventeenth, when the population was ninety-two +to the square mile.<note place='foot'>Monument erected to +<hi rend='italic'>Bernstorff</hi> by his peasants, 8, 15. The +<hi rend='italic'>Zàmoiski</hi> estates yielded, 17 years after emancipation, three +times as much as they did when serfdom prevailed. <hi rend='italic'>Coxe</hi>, +Travels in Poland, I, 22. The transformation of the serfs into hereditary farmers +cost <hi rend='italic'>Count Bernstorff</hi> 100,000 thalers; +but the revenue derived from his lands increased in consequence, in twenty-four +years, from 3,000 to 27,000 thalers. An English mower can mow a +field two and three times as great as a Russian mower in a given time. If +the former receives daily wages equivalent to seventy pounds of wheat, and +the latter to only twelve, the Englishman's labor is still the cheaper; for he +turns out 100 pounds of hay while the latter turns out only eight. +<hi rend='italic'>Jacob</hi>, 43 seq. But the hiring out of serfs in the large cities of +Russia yielded less to their masters than in the interior. <hi rend='italic'>Storch</hi>, +Handbuch, II, 286.</note> Tucker concludes, that the turning +point comes, when the population is relatively to the number +of square miles as 66:1.<note place='foot'><hi rend='italic'>Tucker</hi>, Progress +of the United States, 1843, pp. 111 ff. We need not call +attention to the inaccuracy of these figures, nor remark how little serviceable +for our present purpose an average obtained from the density of population +in different parts of Russia, where such densities are themselves so very +different, would be.</note> Such a calculation cannot, of course, +be universally true. The free workman can usually command +a much larger portion of the sum total of economic profits +<pb n='219'/><anchor id='Pg219'/> +than can the slave or serf, who must be satisfied with the minimum +necessary to support life.<note place='foot'>The Spartans seemed to +have counted on an adult free man for twice as much coarse food +as a bondsman. (<hi rend='italic'>Thucyd.</hi>, VI, 16.)</note> +Hence, free labor is more +profitable to masters only when production in general is so +much enhanced thereby that a greater quantity of goods falls +to their share also. But this will always be the case where +workmen are capable of development.<note place='foot'><hi rend='italic'>Stewart</hi>, +Principles, I, 7, in accordance with historical data, says, that +the peasantry in our days work for other people, because they have wants +which can be satisfied only in this way; because <q>they are slaves of their +own wants.</q> The unquestionable superiority of free to slave labor, in point +of economy, has been dwelt upon especially by <hi rend='italic'>Turgot</hi>, Sur +la Formation et la Distribution, § 28, and by <hi rend='italic'>Adam Smith</hi>, +Wealth of Nations, I, 8, III, 2. But see <hi rend='italic'>J. B. Say</hi>, Traité, +I, ch. 19, and <hi rend='italic'>Storch</hi>, Handbuch, II, 184. When +<hi rend='italic'>Hume</hi>, Discourses, No. 11, Populousness of ancient Nations, +demonstrates the greater cost of slavery from the fact that the master of slaves +must either breed or buy them, he forgets that in the case of free workmen he is obliged +to provide also for the support of the workman's children. Only, the slaveholder +has, indeed, to advance the whole at once.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXII. Effect Of An Advance In Civilization On +Slavery.'/> +<index index='pdf' level1='Section LXXII.'/> +<head type='sub'>Section LXXII.</head> +<head>Effect Of An Advance In Civilization On Slavery.</head> + +<p> +At the same time, the same degree of servitude becomes +more and more oppressive to the bondman as civilization advances. +The greater his intellectual progress, the more does +he feel the want of liberty, and the more keenly he experiences +the degradation of his condition. The development of luxury +digs a gulf between master and servant which grows wider +every day. (§ 227 ff.) As commerce extends, it becomes +more profitable for the master to exact excessive work from +his slave. In the West Indies, it was a problem which every +slaveholder solved for himself, whether, by immoderately increased +production, which cost the lives of many slaves, the +gain in sugar was greater than the loss occasioned by the +<pb n='220'/><anchor id='Pg220'/> +consequent death of the negroes.<note place='foot'><hi rend='italic'>Humboldt</hi>, +Cuba, I, 177. <hi rend='italic'>Ashworth</hi>, Tour in the U.S. Cuba and Canada, +1861. The slaves in Louisiana were so overworked that they lived, on an +average, scarcely seven years. Edinburg Rev., LXXXIII, 73. Even the +Stoics were not agreed, whether it was right, in case of shipwreck, to sacrifice +a cheap slave in order to save a valuable horse. (<hi rend='italic'>Cicero</hi>, +de Off. III, 23.) Whether the self-interest of masters is an inducement to the mild +treatment of their slaves depends on the price for which fresh slaves may be obtained. +This is a strong reason why a high degree of civilization, where there are +not counteracting influences, must make slavery less endurable. The more +valuable slaves are, the worse is their condition. In the unfertile Bahamas, +the price was £21; in Demarara, £86. In the former place they were required +to do little work and were well fed and well clothed. Hence their +numbers have increased there, while in Demarara they have decreased. +(Edinburgh Rev., XLVI, 496, 180.)</note> When, with the advance of +civilization, the state guarantees to all more certain protection +of their rights than they enjoyed in a less advanced stage of +social improvement, the last check on masters, the fear of the +vengeance of their slaves, is removed.<note place='foot'>Proverb: +<foreign lang='la' rend='font-style: italic'>quot servi totidem hostes.</foreign> +(<hi rend='italic'>Macrob.</hi>, Sat. I, 11, 13.)</note> Demoralization naturally +increases in the same proportion; and that of the master +as well as that of his servants.<note place='foot'><hi rend='italic'>Jefferson</hi>, +Notes on Virginia, 212. The chastity of both parties especially +suffers. The <hi rend='italic'>leno</hi> of ancient comedy was a slave trader! +Compare L. 27, Digest, V, 3. In the English negro colonies, it was not unusual for the +guests of the planters, even in the best families, on retiring, to ask the +accompanying servant for a girl, with as little concern as they would in England +for a light. (Negro Slavery, or a Creed of ... that state of Society as +it exists in the United States and in the Colonies of the West Indies, London, +1823, 53.)</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXIII. The Same Subject Continued.'/> +<index index='pdf' level1='Section LXXIII.'/> +<head type='sub'>Section LXXIII.</head> +<head>The Same Subject Continued.</head> + +<p> +This explains why it is that, in all countries, the power of +the state, in a period of transition towards a higher civilization, +has endeavored to render slavery milder. Great credit is +due the Church in this regard. It soon extinguished slavery +entirely in Scandinavia,<note place='foot'>Even the law of Upland forbade the +sale of Christians. The children of a slave and of a free person were born free. +Emancipation was considered a Christian act, to be performed for <q>the +salvation of one's soul.</q> Voluntary slavery was prohibited in 1266, and Magnus +Erichson forbade slavery generally from the year 1335. See +<hi rend='italic'>Geijer</hi>, Geschichte von Schweden, pp. 157, 185, 273. +<hi rend='italic'>Estrup</hi>, in <hi rend='italic'>Falcks</hi> N. Staatsburg Magazin, +1837, 179, ff.</note> and in portions of Europe it abolished +at least the sale of prisoners to foreign countries.<note place='foot'>L. Alam, 137, +1. L. Fris., 17, 5. Decree of 960 concerning the abolition +of the trade in Christian slaves between Germany, Italy and the Byzantine +Empire. <hi rend='italic'>Tafel und Thomas</hi>, Urkunden der Staats-und Handelsgeschichte +von Venedig, I, 18 ff.</note> The +<pb n='221'/><anchor id='Pg221'/> +<hi rend='italic'>Concilium Agatheuse</hi>, in the year 506, decreed that serfs should +not be killed by their masters at pleasure,<note place='foot'><hi +rend='italic'>Tacit</hi>. Germ. 25. In the Legg. Walliæ 206 (Wolton) we read: +<q><foreign lang='la' rend='font-style: italic'>Hero eadem potestas in servum suum ac +in jumentum.</foreign></q></note> but that they should +be brought before a tribunal of justice. (The manorial tribunals +of more recent times.) Moreover, the numberless holidays +of the church operated greatly in favor of the bondmen. +Pope Alexander III. recommended their gradual emancipation.<note place='foot'>The +council of London in 1102 forbade men to be sold like beasts. (Concil., +ed. Venet. 1730, XII, 1100, No. 27.) <hi rend='italic'>Guérard</hi>, Polyptiques +d'Irminon, Prolegg., 220, describes a pedagogical model emancipation by the Church of +its own serfs. On the whole, the church contributed more towards the emancipation +of the serfs of others than of its own. See ch. 39, C. XII, qu. 2; c. +3,4; De Rebus eccl.</note> +One of the principal steps in the way of progress was +made when they could no longer be sold singly, but only with +the village or on the estate to which they belonged.<note place='foot'>In Flanders +since the end of the twelfth century. <hi rend='italic'>Warnkönig</hi>, Flandrische +Staats und Rechtsgeschichte (I, 244).</note> The +feudal aristocracy improved the condition of the bondmen by +reducing a great number of freemen to their level.<note place='foot'>In what +relates to Germany, compare <hi rend='italic'>Sugenheim</hi>, Geschichte der Aufhebung +der Leibeigenschaft in Europa, 1861, p. 350 ff. The destruction of the old +manorial system (<foreign lang='de' rend='font-style: italic'>Hofwesen</foreign>) +in the fifteenth and sixteenth centuries, was often unfavorable to bondmen and +favorable to serfs. <hi rend='italic'>Maurer</hi>, Gesch. der +Frohnhöfe, II, 92. In Poland, where all were originally equal land-owners, +many sank gradually through poverty to the condition of the so-called +<hi rend='italic'>kinetes</hi>, who, although personally free, were not +very far removed from slaves. Beginning with the thirteenth century, a +great number of immunities, after the model of those accorded in Germany, were +granted, by means of which they lost, for the most part, their direct subjection +to the emperor and the empire alone. This was soon followed as a consequence by +their personal oppression. (<hi rend='italic'>Röpell</hi>, Geschichte von Polen, I, +p. 308 seq., and p. 570 seq.) In Bohemia, the old form of serfdom had so far +disappeared in the fourteenth century, that it might be said it was known only to +history. But during the reign of the weak king, Ladislaus II, a new species of +serfdom came into vogue, the result of the preponderance of the aristocratic element. +<hi rend='italic'>Palacky</hi>, Gesch. von Böhmen, II, p. 33 seq.; III, 31 seq. +Aristocratic Denmark, before the peasant war of 1255-1258, subjected the free +peasantry who had been leaseholders for a term of years to unlimited socage duty. +Waldemar III, reduced to the same kind of service the land-owning peasantry, which +especially from the date of Margaret's reign, developed into a species of +<hi rend='italic'>glebæ adscriptio</hi>. From the sixteenth century, when the royal +power almost disappeared, these public privileges were abandoned to the nobility to +such an extent that, in 1650, there were scarcely 5,000 free peasants. +<hi rend='italic'>Dahlmann</hi>, III, p. 73 seq. However the severity of +<hi rend='italic'>traeldom</hi> made way in the fourteenth century for the +<hi rend='italic'>vornedskap</hi> (modified bondage), a milder species of vassalage. +See <hi rend='italic'>Kolderup Rosenvinge</hi>, Grundriss der dänischen +Rechtsgeschichte, § 94.</note> This +<pb n='222'/><anchor id='Pg222'/> +could not be effected without a real amelioration of slavery; +and, later, when the feudal aristocracy declined, the older serfs +were, with those who had been formerly free, raised from their +abject condition. The sense of chivalry would not permit a +lord to be served by a bondman. The old adage <q>the serf +lives to serve and serves to live,</q> by degrees, lost its force. +Serfs were required to perform certain tasks on the lands of +their master and to pay him a certain quantity of the produce +of their own. Heriots (<hi rend='italic'>mortuarium</hi>), which became usual +from the 8th century (<hi rend='italic'>J. Grimm</hi>), may be considered evidence +that even bondmen were permitted to acquire and hold +property in their own right. Thus was one of the chief disadvantages +of slavery, in an economic sense, removed.<note place='foot'>The French expression +<foreign lang='fr' rend='font-style: italic'>mainmorte</foreign> comes originally +from the deprivation of the right of inheritance. In Beaumanoir's time, 1283, it was +customary, after a number of serfs had lived together for a year and a day, for their +chattels movable to become the common property of the community. +(<hi rend='italic'>Warnkönig</hi>, Französische Rechtsgeschichte, II, 157.)</note> It +may be affirmed, as characteristic of the aristocracy of feudal +times, that they treated those, who like the serfs were entirely +at their mercy, with much more consideration than those who +were free, and, although dependent on them, had certain rights +guaranteed by contract. The absolute monarchy found in +<pb n='223'/><anchor id='Pg223'/> +nearly all nations, at the opening of modern times, was forced +by its struggle with the mediæval aristocracy to favor the +emancipation of the serfs and of the lower classes. Even in +Russia, Iwan III. (1462-1505) seems to have restored to the +peasantry the right of migration, of which they had been deprived +by the invasion of the Mongols, nor did they lose it +again until the great troubles at the beginning of the seventeenth +century, which gave the ruling power to the nobility.<note place='foot'>In France, +Louis X. made it a fiscal speculation to sell serfs their liberty +in whole districts, even against their will. His edict, Ordonnances, I, 583, +recognizes that all men are by nature free, and that France is not without +reason called the land of the Franks etc. Even in 1298, Philip IV. had exchanged +the serfdom to the crown of several provinces for a land duty. The +last ruler of Dauphiny gave all the serfs of the crown their liberty gratis, in +1394. (<hi rend='italic'>Sugenheim</hi>, p. 130.) When the so-called +<foreign lang='fr' rend='font-style: italic'>coutumes</foreign> were written, there +were only nine provincees in which by local law serfdom was permitted. +The defeat of the <foreign lang='fr' rend='font-style: italic'>jacquerie</foreign> +injured the cause of emancipation in France in the same way that the suppression of +the war of the peasants did in Germany. About 1779, <hi rend='italic'>mainmorte</hi> +was abolished in all lands of the crown, and its proof made almost impossible in +all others. (<hi rend='italic'>Warnkönig</hi>, II, 151 seq.) Yet it is said that there +were 150,000 <hi rend='italic'>serfs de corps</hi> in France in 1789. +(<hi rend='italic'>Cassagnac</hi>, Causes de la Revolution, III, 11.) Koloman, who died +in 1114, forbade the slave trade in Hungary, and labored to raise all Christian slaves +to <hi rend='italic'>conditionarii</hi> (renters). But the right of migration was +abolished in 1351. King Sigismund, and still more, Matthias Corvinus, restored it, after +the suppression of the war of the peasants, but in 1514 it was again lost until +1586. Further progress was arrested until the Urbarium of Maria Theresa.</note> +</p> + +<p> +Where civilization has reached its highest development, the +irresistible power of public opinion, governed by the ideas of +the universal brotherhood of man and of democratic equality, +causes the abolition of all irredeemable and of all hereditary +relations of servitude.<note place='foot'>In Italy, Frederick II. liberated all the +serfs of the crown. (Constitutt. Regni Sicil., 164.) A model instance of emancipation at +Bologna in 1256. The serfs of the state were simply set at liberty; the freedom of those +of private persons was purchased with the money of the state, and a small +corn-tithe laid on the emancipated as a compensation for the expense incurred +in their behalf. In the future, there was not to be a bondman on +Bologna territory. The motives which led to this measure are a strange +admixture of Christianity and Democracy. (<hi rend='italic'>Muzzi</hi>, Annali di Bologna, +1840, I, 479.) Italy, at the end of the fourteenth century, was entirely free +from Christian serfdom. (<hi rend='italic'>Muratori</hi>, Antt. Ital., I, 798.) In the +canton of Berne, Switzerland, slavery was gradually abolished, the process commencing +about the beginning of the fifteenth century. It continued, however, +in the case of ordinary masters until 1798. <hi rend='italic'>Sugenheim</hi>, p. 530 +seq. In England, Alfred the Great's efforts towards the gradual abolition of slavery +(<hi rend='italic'>Wilkins</hi>, Leges, 29) remained without result. The steps taken by +William I, towards a much narrower end, however, seem to have been more successful. +(Leges Will. Conq., 225, 229; <hi rend='italic'>Turner</hi>, Hist. of England, I, 135.) +From the time of the Norman conquest, prisoners of war ceased to recruit the +ranks of slavery. Under Henry III and Edward I, socage tenants became +more and more frequent; but, before long, their duties became less onerous, +and might be discharged by others hired for the purpose, instead of by themselves. +The first remarkable vestige of a class working for wages is met +with in the law of 1351, which may be considered an effort made by the +nobility to oppose the tendencies in favor of emancipation, which were a +consequence of the development of cities. (<hi rend='italic'>Eden</hi>, State of the +Poor, I, 7, 12, 30, 41,) <hi rend='italic'>Infra</hi>, § 175. Although the peasant war +under Wat Tyler and Straw, who wished to abolish servitude at a blow, failed of its +object, we find that there were a great many instances of emancipation by individuals in +the fourteenth and fifteenth centuries when death or sickness overtook them, in +which they declared the moral unfitness of slavery. (<hi rend='italic'>Wycliffe</hi>: +<q>When Adam dalve and Eve span, who was then the gentleman?</q>) Elizabeth liberated +the last serfs of the crown. Compare 12 Charles II, ch. 24, 1660. +Emancipation in the lowlands of Scotland was completed in 1574. +(<hi rend='italic'>Tytler</hi>, Hist. of Scotland, II, 260.)</note><note +place='foot'>Modern Emancipation Laws: in Prussia, 1719, 1807, 1819; Lausitz; 1820, +Westphalia; in Austria, 1781 (Bohemia and Moravia), 1782 (other German +countries and Galicia); 1785 (Hungaria); Schleswig-Holstein, 1804, after +many of the landed gentry had voluntarily emancipated their own serfs; in +Bavaria, in 1808; in the kingdom of Westphalia, in 1808; in Hessen-Darmstadt, +in 1811; in Württemberg, in 1817; in Baden, in 1783, 1820 in newly +acquired countries; in Mecklenburg, in 1820; in the kingdom of Saxony, in +1832; in Hanover, in 1833. The law of 1702, abolishing serfdom in Denmark, +was evaded until 1788, and in part, even until 1800 by the +<hi rend='italic'>Schollband</hi> (clod-bond) introduced in its stead. The only +Christian people in Europe, who, until recently, kept serfs, was the Russian. The serfs +of Russia, in 1834, numbered 22,000,000, i.e., about 40 per cent. of the entire +population. In the meantime, the law of February 19, 1861, passed after four years of +preparation, fixed the date of emancipation at the beginning of the year 1863. +Slavery has been abolished in the United States since January 1, 1863; first of all in +all portions of the country engaged in rebellion.</note><note place='foot'>There is a +very interesting discussion in the Journ. des Economistes for +June 1863, of the question whether the owners of serfs are entitled to compensation +on their emancipation, by <hi rend='italic'>Laboulaye</hi>, +<hi rend='italic'>Wolowski</hi>, <hi rend='italic'>Lavergne</hi>, +<hi rend='italic'>Garnier</hi>, <hi rend='italic'>Simon</hi> and others. In the United +States it would have required $2,000,000,000 +to fully compensate the slave-holders for depriving them of their slaves. +(Quart. R., Jan., 1874, 142.) Compare my view, <hi rend='italic'>Roscher</hi>, +Nationalökonomi des Ackerbaues, § 124.</note> +</p> + +</div> + +<pb n='224'/><anchor id='Pg224'/> + +<div> +<index index='toc' level1='Section LXXIV. The Same Subject Continued.'/> +<index index='pdf' level1='Section LXXIV.'/> +<head type='sub'>Section LXXIV.</head> +<head>The Same Subject Continued.</head> + +<p> +It cannot be doubted, that an entirely direct leap from complete +servitude to complete freedom may be attended by many +<pb n='225'/><anchor id='Pg225'/> +evils. No man is <q>born free,</q><note place='foot'>Leave a new-born child to its +<q>natural freedom</q> for twenty-four hours, and it will in all probability be +dead at the end of the time!</note> but only with a faculty for +freedom; but this faculty must be developed. The knowledge +and respect for law, and the self-control, which are the +conditions and limits of freedom, are never acquired without +labor, seldom without the making of grave mistakes, and never +except through the practice of them. As a rule, both parties, +masters as well as servants, would like to get rid immediately +of all the inconveniences of the former condition and yet continue +to enjoy its advantages. The servant, for instance, will +now yield no more the specific obedience of former times, but +demands still specific mildness from the land-owner, or loaner +of capital, his former master. It is inevitable that there should +be complaints on both sides.<note place='foot'>Compare Edinburgh Review, LXXXIII, +64 ff., April, 1851, 333. <hi rend='italic'>Klein's</hi> +Annalen XXV, 70, ff. Even in the fifth book of Moses, 15, 13, ff., we see +that experience had taken into consideration that a freed serf without capital +or landed property might very readily be in a worse condition than he was +before. In the United States, the anticipation that the emancipated negroes +might diminish in numbers has not been realized. The census of 1870 +showed a negro population of 4,880,000, nearly ten per cent. more than in +1860. The increase of the number of churches, schools and savings banks +also bears testimony to the prosperity of the negro. +(<hi rend='italic'>R. Somers</hi>, The Southern States since the War, 1871.)</note> +But in the higher stages of economic +culture, the relation of paternal protection and childlike +<pb n='226'/><anchor id='Pg226'/> +obedience between the different classes of the people, which, +even in medieval times, never obtained in all its purity, is certainly +unrecallable. Hence it is, that all hope of a better condition +of things is based only on this, that the lower classes +may as soon as possible attain to true +independence.<note place='foot'><hi rend='italic'>J. S. Mill</hi>, Principles, 10, ch. +7.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXV. The Same Subject Continued.'/> +<index index='pdf' level1='Section LXXV.'/> +<head type='sub'>Section LXXV.</head> +<head>The Same Subject Continued.</head> + +<p> +Even in antiquity, the principal nations of the world could +not keep the humanizing influence of civilization from making +itself felt on their slaves. And if they did not go so far +as to bring about the total abolition of slavery, it is unhesitatingly +to be attributed to their religious inferiority.<note place='foot'>As to the +Jews, see <hi rend='italic'>Ewald</hi>, Geschichte von Israel, I 2, p. 198. In general, +see <hi rend='italic'>H. Wallon</hi>, Hist, de l'Esclavage dans l'Antiquité, II, +1847.</note> In +Athens, during the Peloponnesian war, it was almost impossible +to distinguish the slaves from the poorer freemen by their +looks or dress. Their treatment was mild in proportion as +desertion was easier by reason of the smallness of the state or +the frequency of war. It was forbidden to beat them; and only a court of justice could +punish them with death.<note place='foot'><hi rend='italic'>Thucyd.</hi> +IV, 27; <hi rend='italic'>Xenoph.</hi> De Re. rep. Art. I, 10 ff., +<hi rend='italic'>Aristoph.</hi> Nubes, 6; <hi rend='italic'>Antiph.</hi> +De Caede Herod, 727. In the <q>Frogs</q> of Aristophanes, the relation +between the slave Xanthias and his master is eloquent testimony to the +good treatment he received. Slaves enjoyed great freedom of speech. +(<hi rend='italic'>Demosth.</hi> Phil. III, iii.) Concerning masters accused +of cruelty, see <hi rend='italic'>Demosth.</hi> Mid. 529, 7. Athen. VI, 266. +The slave who had been ill-treated might seek refuge in a temple, after which +his master was compelled to sell him. (<hi rend='italic'>Schol. Aristoph.</hi> +Equitt. 1309. <hi rend='italic'>Plutarch</hi>, Thes. 36.)</note> Emancipation, +in individual cases, was very frequent, and the names +of Agoratos and of the law-reviser Nicomachos show how +great a part an emancipated slave might play in the nation.<note place='foot'>Slaves +might purchase their own freedom with their <foreign lang='la' +rend='font-style: italic'>peculium</foreign>. See Petit. Legg., Art. II, 179. +There were many who lived entirely on their own account, +paying a certain duty or tax to their masters, and who were well able +to make savings. <hi rend='italic'>R. F. Hermann</hi>, Privatalterthümer, § 13, +9, 58, 11 ff. See the instance in <hi rend='italic'>Plato</hi>, De Rep. VI, 495, +where a slave who had grown wealthy asks the daughter of his former master in +marriage. Moreover, there was a general indisposition to hold Greeks as slaves. +(<hi rend='italic'>Philostr.</hi> Apoll. VIII, 7, 12.) The case cited in +<hi rend='italic'>Demosth</hi>. adv. Nicostr. 1249 ff., is all the stronger on this +account.</note> +<pb n='227'/><anchor id='Pg227'/> +The helot system of the Lacedemonians preserved much +longer a great deal more of medieval barbarism; but even +here, we may infer from the frequent uprisings and emancipations +of the helots, from their services in war etc., that their +lot was made less hard than it had been.<note place='foot'>Under Cleomenes, +many purchased their freedom with their own means. +<hi rend='italic'>Plutarch</hi>, Cleom. 23. At an earlier period, men +like Lysandros, Gylippos, Kallikratidos had belonged to a class composed of +the children of slaves brought up as citizens.</note> +</p> + +<p> +Among the Romans, with whom war and conquest were +so long considered<note place='foot'><hi rend='italic'>Cicero</hi>, pro +Muræna, IX, 22.</note> the principal means of acquisition, slavery +was relatively very hard.<note place='foot'>Think of the subterranean +<foreign lang='la' rend='font-style: italic'>ergastula</foreign>, the fettered +door-keepers and the gladiatorial exhibitions.</note> But, later, there came to be +several different grades of slavery (<foreign lang='la' rend='font-style: italic'>servi +ordinarii</foreign> and <foreign lang='la' rend='font-style: italic'>mediastini</foreign> +etc.); and in slavery, every gradation denotes some amelioration +of condition.<note place='foot'>Even from the time of <hi rend='italic'>Plautus</hi>, +the <foreign lang='la' rend='font-style: italic'>servi honestiores</foreign> were +wont to keep <foreign lang='la' rend='font-style: italic'>vicarios</foreign>, +or subordinate slaves. <hi rend='italic'>Plaut.</hi> Asin. I, 4, +<hi rend='italic'>Seneca</hi> De Tranq. Anim. 8. Compare <hi rend='italic'>Cicero</hi>, +Parad. V, 2. Of the slaves of the state, the public scribes were sometimes found in +excellent circumstances.</note> The slave obtained the right to possess +resources of his own (<foreign lang='la' +rend='font-style: italic'>peculium</foreign>).<note place='foot'>The peculium +was fully developed in the time of Plautus and Terence. Compare +<hi rend='italic'>Terent.</hi>, Phorm. I, 1. It was customary to promise slaves their +freedom as soon as they had acquired a certain <foreign lang='la' +rend='font-style: italic'>peculium</foreign>. (<hi rend='italic'>Dionys. Hal.</hi>, +Antt. Rom., IV, 24. <hi rend='italic'>Tac.</hi>, Ann., XIV, 42.) Humane masters permitted +their slaves to dispose freely of their <foreign lang='la' +rend='font-style: italic'>peculium</foreign> by will. (<hi rend='italic'>Plin.</hi>, +Ep., VIII, 16.) There were many of the Romans who gave their slaves a fixed salary, from +which they could make savings. (<hi rend='italic'>Senec.</hi>, Epist., 80, 7.) +Shepherds raised some sheep for themselves alone. (<hi rend='italic'>Plaut.</hi>, +Asin., III, 1, 36; <hi rend='italic'>Varro</hi>, R. R., I, 17, 7.) Premiums were +offered for certain products (<hi rend='italic'>Athen.</hi>, VI, 274 d), +and there were cases even in which businesses were farmed out to slaves. +(Corp. Inscr. Gr., No. 4,713 f.) The <foreign lang='la' rend='font-style: italic'>servi +publici</foreign> had the right to dispose of the half of what they owned, by will. +(<hi rend='italic'>Ulpian</hi>, XX, 16.) Contracts of loan were sometimes made between +master and slave. (<hi rend='italic'>Plut.</hi>, Cato, I, 21, L., 49, +§ 2, Digest, XV, 1.)</note> In addition to this, +<pb n='228'/><anchor id='Pg228'/> +emancipation became much more frequent in the later republic; +so much so, that Augustus considered it necessary to pass +laws taxing frivolous emancipation. (<hi rend='italic'>L. Aelia Sentia</hi> and +<hi rend='italic'>Furia</hi>.)<note place='foot'>Compare <hi rend='italic'>Tacit.</hi>, +Ann., XIII, 26 seq. During the time from 356 to 211 +A.C., it seems that there were, on an average, 1,380 slaves emancipated +yearly. (<hi rend='italic'>Dureau de la Malle</hi>, Economie polit. des Romains, +I, 290 ff.)</note> Where men like Terence, Roscius, Tiro, Phædrus +and the father of Horace rose from the condition of slavery, the treatment +of slaves cannot have been entirely brutalizing.<note place='foot'>Concerning +the highly educated slaves of Atticus, of the like of whom +the Greeks had formerly few examples, see <hi rend='italic'>Drumann</hi>, +Geschichte Roms., V, 66. The high prices, 100,000, and even 200,000 sesterces, paid +for slaves, suppose a very high degree of education. (<hi rend='italic'>Martial</hi>, +I, 59; III, 62; XI, 70; <hi rend='italic'>Seneca</hi>, Ep., 27.) But even +<hi rend='italic'>Cicero</hi> was ashamed of his affliction over the +death of an exceptionally clever slave. (Ad. Att., I, 12.)</note> +Under the emperors who oppressed the free citizens, +legislation was directed more than ever towards the protection +of the slaves.<note place='foot'>At an earlier period, even the censor +had punished cruel masters. But most of what was done to prevent the arbitrary +condemnation to death of slaves, their castration etc., and to give them rights +against their masters for libidinous acts towards them, for cruelty and insufficient +support, or the furnishing them with bad food, was done after the time of Hadrian. +(Compare <hi rend='italic'>Seneca</hi>, de Benef., III, 22; de Ira, III, 40, +<hi rend='italic'>Sueton.</hi>, Claud, 25, Dom., 7; <hi rend='italic'>Spartian.</hi>, +Hadr., 18; <hi rend='italic'>Gaius</hi>, I, 53; L., 1, § 2, Digest, I, 6; L., 1, +§ 8, D., I, 12; L., 1, § 2, D., XLVII, 8; L., 1; Cod., IX, 14; Contra, see +<hi rend='italic'>Dio Cass</hi>, I, V, 17.) However, the <foreign lang='la' +rend='font-style: italic'>vitæ necisque potestas</foreign> existed in the time of +Justinian. (<hi rend='italic'>Zimmern</hi>, Geschichte des röm., Privatrechts, I, +2, 661 ff.)</note> Instead of permanent slavery, a condition +of things was introduced and became more general every day, +one in which the bondman might contract a legal marriage, +have property of his own, and in which he was protected +against an arbitrary increase of the quota he had to pay his +master, whether in money or produce, although he still remained +bound to the land. This class was formed not only of +the <foreign lang='la' rend='font-style: italic'>originarii</foreign>, +or those born into it, but also of a large number of impoverished freemen, +barbarian prisoners of war etc.<note place='foot'><hi rend='italic'>Salvian</hi>, +De Gubern. Dei, V, 8. <hi rend='italic'>Theod.</hi>, Cad. V, 4. +<hi rend='italic'>Eumenis</hi>, Paneg Coast. 8, 9. <hi rend='italic'>Trebell</hi>, +Poll. Claud., 9. <hi rend='italic'>Justin.</hi> Cad., XI, 26, 47. Compare +<hi rend='italic'>v. Savigny</hi>, Ueber den romischen Colonat. Berliner Akad., +1822-23.</note><note place='foot'>The figures given in <hi rend='italic'>Athen.</hi>, +VI, 103, concerning the number of bondmen in Greece are almost incredible. For +Attica alone, the estimates vary between 110,000 (<hi rend='italic'>Letronne</hi>, +in the Mem. de I'Académie des Inscr., 1822, 192, ff.) and 400,000 +(<hi rend='italic'>Athen.</hi> 1. c.), while the free men are estimated at from 130,000 +to 150,000. In Rome, during the time from the expulsion of the kings until +the destruction of Carthage, the number of the slaves remained about the +same. (<hi rend='italic'>Blair</hi>, State of Slavery among the Romans, 1833, 10, +15.) On the other hand, <hi rend='italic'>Dureau de la Malle</hi> is of opinion, +that in 576 B.C., the number of slaves was to the number of free men as 1 to 25, +and in 225 B.C. (including the metics), as 22 to 27. (Economie polit. des Romains I +270 ff., 296.) Compare <hi rend='italic'>Cato</hi>, de Re. rust. I, 3, IV, X, 1 XI; +1, XVII, XVIII, 1. In Germany, the number of bondmen, from the eighth to the tenth +century, was estimated to be at least as great as that of free men. +(<hi rend='italic'>Grimm</hi>, D. Rechtsaltherthümer, 334.) Among the Anglo Saxons, +before the Norman conquest, it was much higher, even three-fourths of the entire +population. (<hi rend='italic'>Turner</hi>, Hist. of the A. S., VIII, 9.) Compare +on the subject of this whole chapter my paper in the Archiv. der polit Œkonomie, N. +F., IV, 30 ff.</note> +</p> + +</div> + +<pb n='229'/><anchor id='Pg229'/> + +<div> +<index index='toc' level1='Section LXXVI. (Appendix To Chapter IV.) The Domestic Servant +System.'/> +<index index='pdf' level1='Section LXXVI. (Appendix To Chapter IV.)'/> +<head type='sub'>Section LXXVI. (Appendix To Chapter IV.)</head> +<head>The Domestic Servant System.</head> + +<p> +In most countries the servant system developed itself gradually +out of serfdom, or of some condition of tutelage analogous +thereto. This is seen most clearly in the long continuance +of forced service, by which the subjects of the lord of the fee +were compelled to allow their children to remain in the court +of the lord as servants, either without any remuneration whatever, +or for very low wages fixed by long continued custom.<note place='foot'><hi +rend='italic'>Klöntrupp</hi>, Abhandlung der Lehre vom Zwangsdienste, 1801. Frequently, +the lord had only a right of preference in case the children of the tenant desired +to abandon the parental roof and take service elsewhere.</note> +Here, also, belongs the right of correction, so generally accorded +to masters in former times. In the higher stages of +civilization, the whole relation is wont to be resolved more and +more into freedom of competition; and this process is wont to +take place earliest and most strikingly in the cities. Where +vast numbers of men are brought together, demand and supply +<pb n='230'/><anchor id='Pg230'/> +of services meet most easily. The nearer in the course of +this development the servant system approaches to piece-wages +and day-wages, the shorter does the customary (presumptive) +duration of the contract last,<note place='foot'>In <hi rend='italic'>Adam Smith's</hi> +time, in England, the presumption was that a servant +had been hired for a year. (I, 2, 15 ed., Bas.) Frederick the Great's ordinance +of 1769, on this subject, forbade any one to enter into service for a +shorter time than this (II, § 1 ff.), while the Saxon ordinance of 1835, on the +same matter, allowed engagements by the month, in cities. <hi rend='italic'>Darjes</hi>, +Erste Gründe der Cameralwissenschaften, 2d ed. (1768), p. 432, demands that servants +should always hire themselves for at least four or five years, and that +their masters should have, during the whole of this time, the right to enforce +the contract. In North America, however, service by the month has become +customary and general, and no notice of the dissolution of the contract is, as +a rule, required. (Deutsche Vierteljahrsschrift, 1853, II, 191.) In Switzerland, +contracts for service by the week are frequently made even by country servants. +(<hi rend='italic'>Böhmert</hi>, Arbeiterverhh., II, 157.)</note> the more voluntary is +the period of leave-taking by both parties;<note place='foot'>In the +south of England, farm hands were used to change service only at +Michaelmas. The choice of such a date made farmers very dependent on +them, as it fell in harvest time. (<hi rend='italic'>Marshall</hi>, Rural +Economy of the Southern Countries, II, 233.) A similar complaint in Cleves. +(<hi rend='italic'>Schwerz</hi>, Rheinischwestphälische Landw., 21 ff.) In +Jülich, a half year's notice was required, during which time the servant who +had received it, performed his work with disgust, and stirred up his fellow +servants against their master. (<hi rend='italic'>Schwerz</hi>, +II, 87.)</note> the more does the entire relation +tend to be limited to single acts of service agreed upon +in advance (§ <ref target="Section_39">39</ref>), and the more frequently do both +parties endeavor to supply the place of the domestic servants by workmen +who receive wages and live outside of the family.<note place='foot'>The +families of day laborers, to whom the owner of the land gives the +use of a house, small garden, a cow etc., constitute such a transition; and +also, workmen who are fed. In Brandenburg, in 1644, only married persons +or widowers with children were permitted to work as day laborers. +(<hi rend='italic'>Mylius, C. C. March.</hi>, V, 1, 3, 11.)</note> The +extreme of this direction at present is the servant-institutes in +cities, the more movable and more democratic character of +which finds expression in this, that they have extended the +use of personal services to a lower circle of consumers than +could previously have thought of employing them. In English +<pb n='231'/><anchor id='Pg231'/> +agriculture this transition was completed mainly in the +third decade of this century. The change was unquestionably +favorable to the improvement of the art of agriculture, but it +was frequently damaging to the social relation existing between the rich +and the poor in the country.<note place='foot'><hi rend='italic'>Wakefield</hi>, +Swing Unmasked, or the Causes of rural Incendiarism, 1831.</note> In Germany, the +sale of the public domains, conscription and <foreign lang='de' +rend='font-style: italic'>Landwehr</foreign> duty have operated in this +direction.<note place='foot'>By means of the former, the number of +independent small householders was much increased in +the country. Masters feel indisposed to hire young +men liable to be subjected to military duty, because they may be called away +at the moment their services are most needed. The returning soldier, as a +rule, feels above doing menial service. (<hi rend='italic'>Schwerz</hi>, +passim, I, 191 ff., 236.) On this account, servants' wages in Cleves rose much +higher than those of day laborers. (194.) In Belgium, a farm hand cost, on an average, +400 francs a year; a day laborer, counting 300 working days to the year, only +339 francs. (<hi rend='italic'>Horn</hi>, Statist. Gemälde, 175.) In the +Palatinate, day laborers who receive nothing but their wages cost their masters less +than those who receive only their food; and servants are the dearest of all. +(<hi rend='italic'>Hanssen,</hi> Archiv der Politischen Œkonomie, N. F. X, 243.) +If servants were relatively more poorly paid in 1813 than day laborers +(<hi rend='italic'>Lotz</hi>, Revision, III, 147), it was because of the at least +temporary retrogression of civilization which every great war causes.</note> Hence +it is, for instance, that in Prussia, the servants, in 1816, were 15.18 per cent. of the +entire male population over 14 years of age, and 17.84 per +cent. of the entire female population over 14 years of age. In +1861, on the other hand, there were only 11.88 and 12.93 per +cent., respectively, while the number of day laborers and workmen, +in the same time, increased from 16.29 per cent. males, and 10.87 per cent. +females, to 20.95 and 16.65 per cent., respectively.<note place='foot'><hi +rend='italic'>Engel</hi>, Preuss. Statist. Jahrb., II, 261. Services which contribute +to personal convenience are naturally committed much less frequently to independent +day laborers than those which aid in production proper. Hence it +is, that, as civilization advances, house-servants, especially of the female sex, +constitute an ever-increasing portion of the total number of servants. In +Prussia, in 1816, the number of servants who ministered to personal comfort +was only 4.19 per cent. of the total number of servants engaged in industry; +of female servants, it was 13.4 per cent. In 1861, on the other hand, the +percentages were 8.4 and 37.2. In Great Britain, of the total number of +servants over 20 years of age, only 2 per cent. were engaged in personal +services. In 1841, they were 3-½ per cent. (<hi rend='italic'>Meidinger</hi>.) In +France, in 1851, 2.5 per cent. of the whole population were in <foreign lang='fr' +rend='font-style: italic'>domesticité</foreign>. (Stat. off.)</note> +In most civilized countries, the grade of society +<pb n='232'/><anchor id='Pg232'/> +from which servants are recruited grows lower and lower as +the spirit of independence extends to the deeper strata of humanity.<note place='foot'>In +England, now more especially, out of farm-hand day laborers: Edinburgh +Rev., April, 1862.</note> +</p> + +<p> +The servant class may continue a long time yet to be a +school of development for those of the lower classes, who, ripe +in body, are not intellectually independent; just as the duty +of bearing arms has been a school of improvement for all male +youth. Life-long servants are as seldom to be desired as life-long +soldiers. +</p> + +<p> +In most places, the long transition period from complete +bondage to free competition was governed by a police system +of wardship, which was very unfavorable to the servant class. +Such especially was the provision that all young people of the +lower classes, who could not expressly show that they were +employed under the paternal roof or at some trade, should be +compelled to seek some outside or inland work;<note place='foot'>A chief +element in the earlier <q>organization of labor.</q> So, also, in the +Magdeburg Gesindeordnung (service-regulation) of 1789.</note> such also +was the strict prohibition of <q>usurious</q> wage-claims, and +the <q>decoying</q> of servants from their masters.<note place='foot'>Saxon +<foreign lang='de' rend='font-style: italic'>Landesordnungen</foreign> of 1482 and +1543. Cod. August. I, 3, 23. The <foreign lang='de' +rend='font-style: italic'>Gesindeordnung</foreign> (service regulation) of Frederick +the Great, threatened with the house of correction the receivers, and under certain +circumstances also the givers of wages higher than the fixed rate of wages; but as a +<q>matter of course,</q> the payment of wages less than this was permitted. (V, § 7) +Great care was taken that wages greater than the law allowed should not be +evaded by the payment of <hi rend='italic'>arrha</hi> or payment in produce. The same law +forbade the deprivation of the servant of his right to determine the service +by making of loans to him on long time (II, § 7.) Even <hi rend='italic'>v. Berg</hi>, +Handbuch des deutschen Polizeirechts, calls it a duty of the public authorities charged +with the protection of property and of the public security, to see to it that +there be no lack of good servants, and that the public (as if those who sell +their services were not a part of it) should not be made the victims of exorbitant +demands in the matter of servants' wages. <hi rend='italic'>Jung</hi>, more humane, +demands that the authorities shall protect, especially, the weaker party. (Grundlehre +der Staatswirthschaft, 1792, 700.) In Prussian legislation, the Silesian +rescript of March 13, 1809, is the beginning of the new order of things. +(<hi rend='italic'>Rabe</hi>, Samml. preuss. Gesetze, X, 59 ff.) The +<foreign lang='de' rend='font-style: italic'>Obertribunal</foreign>, or high court, +decided, in 1874, that the bringing back of absconding servants by the police, +which the law concerning servants of 1810 provided for, should not be allowed +to occur any more.</note> Besides, a +<pb n='233'/><anchor id='Pg233'/> +great many provisions relating to servants, and based on views +belonging to an older economic condition, were intended to throw obstacles +in the way of farm hands and country servants<note place='foot'>Ordinance of +the elector of Saxony of 1766, prohibiting the inhabitants +of cities to take an apprentice from among the peasantry, unless he had served +at least four years as a farm hand, beginning with his fourteenth year. Similarly, +in Prussia in 1781.</note> +becoming servants in towns; and, on the other hand, to +facilitate the speedy abandonment of service in all cases in +which the servant desired to marry.<note place='foot'>In Berlin, even +before the <q>populationistischen</q> period: <hi rend='italic'>Fidicin</hi>, Histor. +diplom. Beiträge zur Gesch. der Stadt Berlin, I, 101. (From the year +1397.)</note> All these preferences +in favor of one class of contractors, and at the cost of another, +are radically opposed to the modern political spirit. The laws +relating to servants are wont, in our day, to have but one object, +the prevention, by registration with the police, of fraud +and breach of contract, and of all strife and litigation by the +legally formulating of the conditions which are very frequently +tacitly understood. +</p> + +<p> +The ideal of the relation of master and servant is attained +when it is considered by both as a part of the life of a Christian +family.<note place='foot'>I Peter, 2, 18 ff.; I Timoth., 6, 12; Ephes., +6, 5; Philem., 15 ff.</note> Hence, benevolence on the one side and devotedness +on the other, fidelity on both sides, disinterested care for +the present and future interests each of the other <hi rend='italic'>tanquam +sua</hi>; and especially for each other's eternal future. Whether +this state of mutual feeling is best furthered by the patriarchal +system, by a police system, or by free competition, it is scarcely +possible to say. It may, however, be affirmed that it depends +upon a mutual and continued denial of self not easy to attain. +<pb n='234'/><anchor id='Pg234'/> +Where it really prevails, all the advantages of the piece-work +system are obtained in a worthy and organic manner, and +without its atomistic drawbacks.<note place='foot'>In the German colonies +of Mennonites in Russia, every youth serves a +few years in the family of some other peasant. This is considered a sort of +school. Wages are of course very large, and the treatment very mild. +<hi rend='italic'>v. Haxthausen</hi>, Studien, II, 185. Southwestern Germany +where small landed proprietors are many, something very analogous to this +continues. (<hi rend='italic'>v. d. Goltz</hi>, loc. cit., 452.)</note> +</p> + +</div> + +</div> + +<pb n='235'/><anchor id='Pg235'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter V. Community Of Goods And Private Property. +Capital—Property.'/> +<index index='pdf' level1='Chapter V.'/> +<head type='sub'>Chapter V.</head> +<head>Community Of Goods And Private Property. +Capital—Property.</head> + +<div> +<index index='toc' level1='Section LXXVII. Capital.—Importance Of Private +Property.'/> +<index index='pdf' level1='Section LXXVII.'/> +<head type='sub'>Section LXXVII.</head> +<head>Capital.—Importance Of Private Property.</head> + +<p> +As human labor can attain its full development, only on the +supposition that personal freedom is allowed to develop to its +full economic importance and dimensions, so capital can develop +its full productive power only on the supposition of the +existence of the freedom of personal property. Who would +save anything, that is, give up present enjoyment, if he were +not certain of future enjoyment?<note place='foot'>For a masterly exposition of +the doctrine that the right of prescription or limitation is related to the +politico-economical necessity of property, see <hi rend='italic'>John Stuart +Mill</hi>, Principles, 3, II, ch. 2, sec. 2.</note> The legitimacy of private +property has, since the time of Locke,<note place='foot'><hi rend='italic'>Locke</hi>, +On Civil Government, II, §25-51; and so <hi rend='italic'>L. Mendelssohn</hi>, Jerusalem +(1783), 32; <hi rend='italic'>Thiers</hi>, Du Droit de la Propriété (1849).</note> +been based, by the greater number of political economists, on the right inherent +in every workman, either to consume or to save the product +of his labor. But it should not be forgotten here that, at least +in the higher stages of the economy of a nation, scarcely any +work or saving is possible without the coöperation of society. +And society must be conceived not only as the sum-total of +the now living individuals that compose it, but in its entire +<pb n='236'/><anchor id='Pg236'/> +past, present and future, and also as being led and borne onward +by eternal ideas and wants.<note place='foot'>Modern writers, in their attempt +to find a philosophical basis for the right of property, have taken two principal +directions, the first a juridical, the second a political one. The axiom, +<foreign lang='la' rend='font-style: italic'>res nullius cedit primo +occupanti</foreign> (compare L. 3, Digest, XLI, 1), explains only the smallest part +of the relations of property, and that only because of a very fortuitous +circumstance. According to <hi rend='italic'>Hobbes</hi> (Leviathan, 24), property has +its origin in the recognition of it by the power of the state, by the +<foreign lang='fr' rend='font-style: italic'>autorité publique</foreign>, the +<foreign lang='fr' rend='font-style: italic'>gouvernement</foreign> +(<hi rend='italic'>Bossuet</hi>, Politique tirée de l'Ecriture, Sainte, L. 3, 4), +or as <hi rend='italic'>Montesquieu</hi> (Esprit des Lois +XXVI., 15) more mildly expresses it, in the laws. The application of this +principle would, on account of the extreme changeableness of the laws of +every state, lead to most extreme insecurity, and to a steady oscillation from +one Utopia to another, from one revolution to another, if it were not, at the +same time, recognized that each one had a just title to the acquisitions he +had made, not because the law, for the time being existing, acknowledged +the right, but because they were the product of his labor and saving. The +theory which bases the right of property on contract cannot be objected to +with as much reason. Thus, <hi rend='italic'>Hugo Grotius</hi>, Jus Belli et +Pacis, II, 2, who even justifies the occupation of things without an owner, on +the supposition of the existence of an implied contract. It is very characteristic of +the English, that in their political language, the words <q>liberty</q> and +<q>property</q> are so frequently found in each other's company. In one of his classic +speeches made by Fox in 1784, he gives a definition of liberty which begins +with the words, <q>It consists in the safe and sacred possession of a man's +property</q> etc. The recent doctrine, not unfrequently to be met with, that +every man has a right to an amount of property corresponding to his wants, +may be used to sanction all kinds of socialistic inferences. An entirely bewildered +and bewildering description is to be found in <hi rend='italic'>Proudhon's</hi> Qu'est ce +que la Propriété, 1848, as the precursor of which <hi rend='italic'>Brissot's</hi> +Recherches philosophiques sur le Droit de Propriété et le Vol, may be considered. In +medieval times, there are always a multitude of other titles to property besides +production and saving. The title which is held in highest esteem for the +time being is always because of this very extreme vis-a-vis of all other +titles, strengthened and made general.</note> +</p> + +</div> + +<pb n='237'/><anchor id='Pg237'/> + +<div> +<index index='toc' level1='Section LXXVIII. Socialism And Communism.'/> +<index index='pdf' level1='Section LXXVIII.'/> +<head type='sub'>Section LXXVIII.</head> +<head>Socialism And Communism.</head> + +<p> +In opposition to this, the idea of a community of goods has +found favor, especially in times when the four following conditions +met:<note place='foot'>The word socialism brought into use by +<hi rend='italic'>L. Reybaud</hi> is as ambiguous as +the word communism is simple and intelligible. But most socialists agree +that actual <q>society</q> (which is indeed to be distinguished from the state) is, +together with its foundations, the existing relations of property and the +family, entirely wrong. A radical reconstruction, they say, is needed to +remove forever the chief evil of this system, viz.: the glaring difference between +the rich and the poor, the educated and the uneducated. The difference +between the doctrines of the socialists and of Political Economy does +not, by any means, consist in this, that the former concerns itself more with +the welfare of the lower classes, or even that it gives wider scope to economy +in common. But socialism is, indeed, a living or housekeeping in +common (<foreign lang='de' rend='font-style: italic'>Gemeinwirthschaft</foreign>), +which goes far beyond the feeling for the common interest +(<foreign lang='de' rend='font-style: italic'>Gemeinsinn</foreign>). Such economy +in common is always opposed to freedom, and, at its first introduction, contrary to +law. It can guarantee no compensation to those who have suffered from violence or force, +because it leads to a thoughtless and wasteful exhaustion of the nation's resources, +inasmuch as it weakens the incentive to industry and frugality. Political Economy, +on the other hand, recommends an <hi rend='italic'>expropriation</hi> when the incentives +to industry and frugality are thereby strengthened; and the increased resources +thus obtained serve it, as full compensation to those whose property +has been <hi rend='italic'>expropriated</hi>.</note> +</p> + +<p> +A. <hi rend='italic'>A well-defined, confrontation of rich and-poor.</hi> So long +as there is a middle class of considerable numbers between +them, the two extremes are kept, by its moral force, from coming +into collision. There is no greater preservative against +envy of the superior classes and contempt for the inferior, than +the gradual and unbroken fading of one class of society into +another. <foreign lang='la' rend='font-style: italic'>Sperate miseri, cavete +felices!</foreign> In such a state of +social organization, we find the utmost and freshest productive +activity at every round of the great ladder. Those at the +bottom are straining every nerve to rise, and those higher up, +<pb n='238'/><anchor id='Pg238'/> +not to fall below. But where the rich and the poor are separated +by an abyss which there is no hope of ever crossing, +how pride on the one side and envy on the other rage! and +especially in the <hi rend='italic'>foci</hi> of industry, the great cities, where the +deepest misery is found side by side with the most brazen-faced +luxury, and where the wretched themselves conscious of +their numbers, mutually excite their own bad passions. It +cannot, unfortunately, be denied, that when a nation has attained +the acme of its development, we find a multitude of +tendencies prevailing to make the rich richer and the poor, at +least relatively poorer, and thus to diminish the numbers of +the middle class from both sides; unless, indeed, remedial influences +are brought to bear and to operate in a contrary +direction.<note place='foot'>See <hi rend='italic'>Roscher</hi>, Betrachtungen +über Socialismus und Communismus, Berliner Zeitschrift für Geschichtwissenschaft, +1845, III, 422 ff.</note> +</p> + +<p> +B. <hi rend='italic'>A high degree of the division of labor</hi>, by which, on the +one hand, the mutual dependence of man on man grows ever +greater, but by which, at the same time, the eye of the uncultured +man becomes less and less able to perceive the connection +existing between merit and reward, or service and remuneration. +Let us betake ourselves in imagination to Crusoe's +island. There, when one man, after the labor of many +months, has hollowed out a tree into a canoe, with no tools +but an animal's tooth, it does not occur to another who, in the +meantime was, it may be, sleeping on his bear-skin, to contest +the right of the former to the fruit of his labor. How different +this from the condition of things where civilization is advanced, +as it is in our day; where the banker, by a single +stroke of his pen, seems to earn a thousand times more than +a day-laborer in a week; where, in the case of those who loan +money on interest, their debtors too frequently forget how +laborious was the process of acquiring the loaned capital by +the possessors, or their predecessors in ownership. More especially, +we have, in times of <q>over-population,</q> whole masses +<pb n='239'/><anchor id='Pg239'/> +of honest men asking not alms, but only work, an opportunity +to earn their bread, and yet on the verge of starvation.<note place='foot'><foreign +lang='fr' rend='font-style: italic'>Vivre en travaillant ou mourir en +combattant</foreign>—the device on the flags of the mutinous +silk-weavers at Lyons, in 1832.</note> +</p> + +<p> +C. <hi rend='italic'>A violent shaking or perplexing of public opinion in its +relation to the feeling of Right, by revolutions</hi>, especially when +they follow rapidly one on the heels of another, and take opposite +directions. On such occasions, both parties have generally +prostituted themselves for the sake of the favor of the masses; +and the latter have become conscious of the changes which the +force of their arms may effect. In this way, it is impossible +that until order is again entirely established, the reins of power +should not be slackened in many ways at the demands of the +multitude. In this way, too, they are stirred up to the making +of pretentious claims which it is afterwards very difficult to +silence. In every long and far-reaching revolution, whether +undertaken in the interest of the crown, the nobility or the +middle classes, we find, side by side with the seed it intended +to sow, the tares of communism sprout up. +</p> + +<p> +D. <hi rend='italic'>Pretensions of the lower classes in consequence of a democratic +constitution.</hi> Communism is the logically not inconsistent +exaggeration of the principle of equality. Men who always +hear themselves designated as <q>the sovereign people,</q> +and their welfare as the supreme law of the state, are more +apt than others to feel more keenly the distance which separates +their own misery from the superabundance of others. +And, indeed, to what an extent our physical wants are determined +by our intellectual mould! The Greenlander feels comfortable +in his mud hut, with his oil-jug. An Englishman in +the same condition would despair.<note place='foot'>We are so assured by +<hi rend='italic'>Vauban</hi> (Dime Royale, 34 seq), of the later years +of the reign of Louis XIV, that nearly 1/10 of the French people begged, +that 5/10 could give no alms, because they were themselves on the very brink +of indigence; 3/10 were <foreign lang='fr' rend='font-style: italic'>fort malaisés, +embarassés de dettes et de procès</foreign>; scarcely one per cent. could be said +to be <foreign lang='fr' rend='font-style: italic'>fort à leur aise</foreign>. How +much better off is the present Parisian workman! And yet, at that time, there was not +the least spread of communistic doctrines. It is indeed seldom that completely +down-trodden men react against their wretchedness with great +energy.</note><note place='foot'><q>If my <emph>caprice</emph> be the source of law, +then my <emph>enjoyment</emph> may be the source of the division of the nation's +resources.</q> <hi rend='italic'>Stahl</hi>, Rechtsphilosophie, II, 2, 72.</note> +</p> + +</div> + +<pb n='240'/><anchor id='Pg240'/> + +<div> +<index index='toc' level1='Section LXXIX. Socialism And Communism. (Continued.)'/> +<index index='pdf' level1='Section LXXIX.'/> +<anchor id="Section_79"/> +<head type='sub'>Section LXXIX.</head> +<head>Socialism And Communism. (Continued.)</head> + +<p> +What has just been said will serve to explain why, in the +following four periods of the world's history, socialistic and +communistic ideas have been most widespread: among the +ancients at the time of the decline of Greece,<note place='foot'>That the socialism +of <hi rend='italic'>Plato</hi>, De Repub., V, was no mere fancy, is proved +by the polemic which <hi rend='italic'>Aristophanes</hi> directs against it in +his Ecclesiazuses. See also <hi rend='italic'>Aristot.</hi>, Polit., II, 2, Schn. +In the contemporary practice of the Greeks, with the increasing democratization of +the state, it became more and more usual for it to bear the expense of the outlay +for the means of subsistence of the great crowd. (See <hi rend='italic'>Plutarch</hi>, +Cimo, 10.) Every act of public life was paid for. Citizens were paid for attending +popular meetings three oboli per day, while the pay of the soldiers was six, and +that of the sailors three. (<hi rend='italic'>Thucyd.</hi>, III, 17; VII, 27; VIII, +45.) The pay of the commonest day laborer was from three to four oboli per day. +<hi rend='italic'>Aristophan.</hi>, Eccl., 310, and <hi rend='italic'>Pollux</hi>, +VII, 29. The number of magistrates was very large, in order that as many +as possible might participate in this species of remuneration. Thus, in +Athens, when it had only about 20,000 inhabitants, there were 6,000 judges. +In addition to all this, there were numberless feasts, plays, banquets etc., which +were offered to the people gratis. The wealthy who were compelled to meet +all the expense thus incurred, lived in such a state of terror of the populace, +that they considered their own impoverishment as a species of deliverance. +(<hi rend='italic'>Xenoph.</hi>, Conviv., 4, and <hi rend='italic'>Lysias</hi>, +pro Bonis.) <hi rend='italic'>Isocrates</hi> called it much more dangerous to be +rich than to commit a crime, since in the latter case one might obtain a pardon +or a mild punishment. (De Permut., p. 160.) (<hi rend='italic'>Lysias</hi>, +De Invalido, de sacra Olea, seq.) There is little difference between this +state of things and a semi-community of goods. Only that, indeed, the great +mass of the slaves were excluded from enjoying them. The contrast which +somewhat later distinguished the Cynics from the Cyreno-Epicureans affords +a striking analogy to that which, in our own times, exists between the +pure socialists and the worshipers of mammon after the fashion of Doctor +Ure. Concerning the Utopia of <hi rend='italic'>Iambulos</hi>, see +<hi rend='italic'>Diodor.</hi>, II, 55 ff.</note> and in that +of the degeneration of the Roman Republic;<note place='foot'>Our sources of +information concerning the division of the Roman republic into a moneyed +oligarchy, and the proletariat are very numerous. Compare +<hi rend='italic'>infra</hi>, § 205. The speeches of the Gracchi (e.g. +<hi rend='italic'>Plut.</hi>, T. Gracchus, 9), and still more the violent discourses +of Catiline's conspiracy (<hi rend='italic'>Sallust</hi>, Cat., 20, 23, 37-39), +remind us very forcibly of the shibboleths of modern socialism. +We very frequently meet with the expression of a longing desire to +return to the most uncivilized and hoary past, when there was no money and +no wealth—an aspiration which lies at the very foundation of communism. +Thus <hi rend='italic'>Virgil</hi>, Geo., I, 125, ff., <hi rend='italic'>Tibull.</hi> +I, 3, 35, ff. <hi rend='italic'>Propert.</hi> II, 13, III, 5, 11; +<hi rend='italic'>Seneca</hi>, Epist., 90; <hi rend='italic'>Senec.</hi>, +Oct. II, <hi rend='italic'>Hippol.</hi>, II, 2; <hi rend='italic'>Plin.</hi>, +H. N. XXXII, 3. On the other hand, the practice of supporting the populace at the +expense of great candidates or of the state, was developed to a very great extent. The +masses lived very largely by the sale of their right of suffrage to the highest +bidder. At the election of consuls in the year 54, 500,000 thalers were offered +to the century called on to vote first. (<hi rend='italic'>Cicero</hi>, ad Quintum +II, 15; ad. A.H. IV, 15.) Even <hi rend='italic'>Cato</hi> had a part in such +bribery. (<hi rend='italic'>Sueton.</hi>, Caes., 19.) In the social reform of the +younger Gracchus, besides the limitation of large land-ownership, the principal +points were the following: the sale of wheat under the market price, but only to +the inhabitants of Rome itself; the construction of great highways in Italy; +colonization at the expense of the state, and the increase of soldiers' pay. +(<hi rend='italic'>Ritsch</hi>, Gracchen, 392 ff.) The socialistic plans +of Rullus went much further. Were his agrarian laws put in execution, he +would have confiscated very nearly the entire country in the interest of the +poor, and of their demagogues! (<hi rend='italic'>Cicero</hi>, De Lege agrar.) +Rome twice experienced a social revolution of the most frightful character, one by which +a great portion of all private goods fell into the hands of the propertyless (soldiers), +who knew nothing of how to turn it to account or to invest it—under +Sulla, and then under the later Triumviri. (Compare <hi rend='italic'>Appian</hi>, +Bell, civil., V, 5, 22.) Complaints concerning the latter, in +<hi rend='italic'>Horat.</hi>, Epist., I, 2, 49; <hi rend='italic'>Virgil</hi>, +Buc., IX, 28; <hi rend='italic'>Tibull.</hi> I, 1, 19, IV, 1, 182; +<hi rend='italic'>Propert.</hi>, IV, 1, 129. The elder Gracchus had promised +compensation to the last possessors. <hi rend='italic'>Tabulæ novæ</hi> of Cinna, +Catiline, Cælius, Dolebella. Clodius introduced the distribution of wheat, which +according to Cicero pro Sext., 25, ate up almost one-fifth of the public revenues. +About 320,000 persons were, in this way, supported for a long period of time +(<hi rend='italic'>Sueton.</hi>, Caes, 41, <hi rend='italic'>Dio C.</hi>, XLIII, +21; L. LV, 10), but only in such a manner as to keep them from starvation. +(<hi rend='italic'>Sallust</hi>, 268 ed. Bip.) To all this was soon added +distributions of salt, meal and oil, also free baths, numberless public plays, +colossal banqueting, payment of one year's rent etc. <foreign lang='la' +rend='font-style: italic'>Panem et circenses!</foreign> (Juvenal, X, 80 seq.) The +mere distribution of money under Augustus, in which from 200,000 to 320,000 men +participated, cost each time from 2,500,000 to 6,000,000 thalers. (Monum Ancyr., 372 +Wolf.) Extraordinary assistance was, by way of preference, accorded to colonies +of the poor. (<hi rend='italic'>Sueton.</hi>, Caes, 42.) Concerning this entire +policy, see <hi rend='italic'>Plin.</hi>, Paneg., 26 ff. Even in Constantinople, at +the time of its foundation, large distributions of bread were made at the expense of +Egypt, although there could scarcely be any real pauperism in that new and +flourishing city. (<hi rend='italic'>Theod.</hi>, Cod., XIII, 4, XIV 16; +<hi rend='italic'>Socrat.</hi>, II, 13.) I can only allude to the plan +proposed by the emperor Gallien by the neo-platonist Plotin, to found a city +in which the ideas of Plato's republic should be carried out. (Porphyr., V, +Plotin., 8.)</note> among the moderns +<pb n='241'/><anchor id='Pg241'/> +in the age of the Reformation,<note place='foot'>During the two centuries of which the +Reformation constituted the middle point, the transition from the peasant system +of agriculture to the large farming system of modern times bore very heavily on the +inferior classes. Such, too, was the operation of the fall in price of the precious +metals. (§ <ref target="Section_140">140</ref>.) The suppression of the many +monasteries caused an increase in the wretchedness of the poor; and the numerous +poor-laws enacted in England, Spain etc., were not sufficient to supply a remedy. The +feeling of the people during this period of tribulation found expression in the War of the +Peasants, in the sect of Anabaptists, in the many reformations and counter-reformations, +in the revolt of the Netherlands, in the conflicts for the crown +in France and England etc. In Italy, the contrast existing between the +moneyed oligarchy and the proletariat had been developed several centuries, +but from the middle of the sixteenth century, it had become much more oppressive +by reason of the universal impoverishment of the country. For an +account of the pantheistic <q>Brethren and Sisters of the Free Spirit,</q> with +their community of goods and of women, see <hi rend='italic'>Ullmann</hi>, Reformatoren +vor der Reformation, II, 18 ff. They were very numerous from the thirteenth +to the fifteenth century in Italy and France, as well as in Germany, and lead +us to the Adamites in the Hussite war. (<hi rend='italic'>Aschbach</hi>, Geschichte K. +Sigismunds, III, 109.) Earlier yet, we have the sect of the Giovannali, who had +their property and women in common, and who, in 1355, had won the third +of Corsica, but who were afterwards suppressed by Genoa and the Church. +(<hi rend='italic'>Lebret</hi>, Geschichte von Italien, VI, 208 ff.) The coarse +socialist, <hi rend='italic'>John Balle</hi>, bears about the same relation to Wycliffe, +that Münzer and Bockholt did to Luther. (<hi rend='italic'>Walsingham</hi>, Hist. Angliæ +in <hi rend='italic'>Camden, Scriptt.</hi>, 275.) Hans +Böheim of Würzburg, 1476, seems to be the direct precursor of Münzer. +(<hi rend='italic'>Ullmann</hi>, I, 421 ff.) It was almost as usual in Luther's time, +as in 1848, or in our day, to hear of the deep demoralization of trade—the +<hi rend='italic'>Fuggerei</hi> of the Germany of the time—and of the universal +system of fraud that prevailed. See the citations in <hi rend='italic'>Hagen</hi>, +Deutschland's Verhältnisse im Reform-Zeitalter, II, 313 ff. Münzer's fundamental +principle: <foreign lang='la' rend='font-style: italic'>Omnia simul communia!</foreign> +<hi rend='italic'>Sebastian Frank</hi>, Chronica, Zeytbuch und Geschychtbibel etc., +1551, fol. VI, 16, 27, 116, 194, 414, 433. John Bockholt's life presents us with a +striking contrast. While they were bringing his perfumed women, sparkling with jewels, +to his rose-covered bed, hung with curtains of gold cloth, on which he was +reclining, his subjects were a prey to the horrors of famine, to such an extent +that they were compelled to salt the bodies of children who had died +of starvation. How frightful the end of this communistic benefactor of mankind! +Libertine community of goods and women. (<hi rend='italic'>Calvin</hi>, Instructio adv. +Libertinos, cap. 21.) English communists in the age of the reformation. +(<hi rend='italic'>J. Story</hi>, Comment. on the Constitution of the U.S., I, 36.) Even +under Cromwell, there were many Englishmen who believed that farmers were no +longer obliged to pay rent to land-owners. On the sect of Levellers, see +<hi rend='italic'>Walker</hi>, History of the Independency, II, 152. Even in +<hi rend='italic'>Erasmus</hi>, we find some sympathy with communism. (Enchirid. milit. +Christ, 80.) <hi rend='italic'>Contra</hi>, see <hi rend='italic'>Melanchthon</hi>, +Prolegg. in Cic. de Off., Corp. Reform, XVI, 549 ff. The most remarkable systematic +works of this period are <hi rend='italic'>Thomas More's</hi>, Utopia, 1516, +and <hi rend='italic'>Campanella's</hi> Civitas, solis, 1620. <hi rend='italic'>Thomas +More</hi> bluntly says that all existing governments are in fact only permanent +conspiracies of the rich to further their own interests under the mask of the common +good, and to despoil labor. The abolition of money, which should be continued in use only +to carry on foreign war, would, he contends, remove all misery. There was +no really private property in his Utopia. There should be a rigid superintendence +of all work by the public authorities, whose duty it should be to see +to it, that no one should abandon agricultural pursuits. All should eat at a +common table and dress after the same fashion. Internal commerce should +give way to a mutual exchange of gifts under the supervision of the state. +<hi rend='italic'>Campanella</hi>, besides a community of goods, recommends continually +varying occupation, to last not more than four hours daily; education in common, +especially by means of pictures, popular encyclopedias etc., all under the supreme +guidance of a despotism to be composed of the wise, some secular +and some spiritual, operating through the confessional. Socialists nearly +always succeed better in the critical part of their works than in the positive. +Compare <hi rend='italic'>R. Mohl</hi>, Geschichte und Literatur der +Staatswissenschaften, § 1, 165 ff.</note> and again, in our own +day.<note place='foot'><p>Considering the aversion exhibited against private property +by <hi rend='italic'>J. J. Rousseau</hi>, and the unlimited power which he accords to +the majority for the time being in the state (Contrat Social, 1761, II, ch. 4), it cannot +be denied that his freedom and equality contain, to say the least, germs of +communism by no means insignificant. But, he would, in the present state +of civil society, have a feeling of respect for the rights of property implanted +in the mind of the child very early, and even before the feeling of liberty is +developed. (Emile, 1762, Livre II.) About the same time <hi rend='italic'>Morelly</hi> +published his Basiliade ou Naufrage des Iles flottantes, 1753, a political romance in the +interest of communism. See the same author's Code de la Nature, 1755. +<hi rend='italic'>Mably</hi>, in his two works, Doutes proposés aux Economistes, 1768, +and La Législation ou Principes des Lois, 1776, recommended the abolition of all +inequality and a real community of goods. The introduction of property seems +to him, <foreign lang='fr' rend='font-style: italic'>une faute qu'il était presque +impossible de faire</foreign>. Even <hi rend='italic'>Beccaria</hi> calls +property a dreadful but perhaps a necessary right which has left to the unfortunate +nothing but a naked existence. (Dei Delitti e delle Pene, 1765, cap. +22.) The French Reign of Terror came pretty near carrying these ideas into +effect. We need only refer to the abolition of the census, the payments made +to the workingmen who attended the section meetings, two francs per diem, +the enormous extension of confiscation, requisitions and forced loans, the +revolution effected in the fortunes of individuals by the system of issuing assignats, +the maximum affixed to the price of all the necessaries of life, the +abolition of indirect taxes, and of what remained of the economic institutions +handed down from the middle ages. According to <hi rend='italic'>St. Just</hi>: +<foreign lang='fr' rend='font-style: italic'>l'opulence est une infamie; il ne faut ni +riches ni pauvres</foreign>. The Cahier des Pauvres demands, +first of all, that salaries <q>should no longer be estimated in accordance +with the murderous principles of unbridled luxury.</q> See Forster's letter +dated November 15, 1793. (Sämmtl. Schriften, IX, 125.) On the conspiracy +of Baboeuf, who was executed in 1796, and who wanted to see the completest +equality and community of labor, of enjoyment and education, the abolition +of large cities etc., see <hi rend='italic'>Buonarotti</hi>, La Conjuration de B., 1821. +This book contributed powerfully towards the revival of communistic ideas after the +July revolution. Among modern communists who are to be distinguished +from the more ancient, especially by the industrial coloring given to their +theories, <hi rend='italic'>Cabet</hi>, Voyage en Icarie, 1840, II, holds a very +prominent place. He declares the abolition of religion, of the family and of the state, to +be open questions, and desires to bring the practice of a community of +goods to a successful issue only through the peaceful channel of conviction. +</p> +<p> +Compare <hi rend='italic'>Reybaud</hi>, Etudes sur les Réformateurs contemporains ou +Socialistes modernes, 1840. <hi rend='italic'>L. Stein</hi>, Der Socialismus und +Communismus des heutigen Frankreich. See, also, the learned history of socialistic +systems in <hi rend='italic'>Marlo's</hi> Weltökonomie, I, 2, 435 ff.; and in what +concerns the most recent time, <hi rend='italic'>R. Meyer</hi>, Der Emancipationskampf +des vierten Standes, II, 1874, seq.; a book which, in spite of its many defects, both +doctrinal and journalistic, is as rich in thought, and in the knowledge of the subject +it treats of, as it is permeated by a love of truth regardless of consequences. Among the +opponents of socialism and communism, <hi rend='italic'>Malthus</hi>, On Population, B. +III, ch. 3, and <hi rend='italic'>B. Hildebrand</hi>, Die Nationalökonomie der Gegenwart +und Zukunft, vol. I, 1848, hold a very distinguished place. <hi rend='italic'>J. S. +Mill</hi>, Principles, II, ch. 1, 3, calls attention to the fact that hitherto the +principle of free property has never been consistently carried out. The first social +arrangement of modern society was almost everywhere the result of conquest and violence, +large traces of which yet remain. Things have always been made property which +ought not to be property. Governments have endeavored to intensify the +darkness of the dark side of property, and favored the concentration instead +of the diffusion of wealth etc. Hence, no one can claim that the social +wrongs, so-called, had their origin in property as such. +<hi rend='italic'>Schäffle</hi>, Kapitalismus und Socialismus, 1870, has made a very +note-worthy effort to recognize whatever of truth there is in socialism, and to combat +its errors.</p></note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXX. Socialism And Communism. (Continued.)'/> +<index index='pdf' level1='Section LXXX.'/> +<head type='sub'>Section LXXX.</head> +<head>Socialism And Communism. (Continued.)</head> + +<p> +We thus see, that the attempts made by socialism and communism +are, by no means, phenomena unheard of in the past, +<pb n='242'/><anchor id='Pg242'/> +and peculiar to modern times, as the blind adherents and opponents +of them would have us believe. They are rather diseases +<pb n='243'/><anchor id='Pg243'/> +of the body social, which have affected every highly +civilized nation at certain periods of its existence. If the +<pb n='244'/><anchor id='Pg244'/> +body be too weak to react healthily and curatively (§ +<ref target="Section_84">84</ref>), the +evil is very apt to lead to the decline of all true freedom and +<pb n='245'/><anchor id='Pg245'/> +order. The communist, viewing all other things, especially +the organization of the state, only as instruments to supply +his material and absolute wants, considers the liberal either as +a fool who is ever pursuing the phantoms of the brain, or as a +knave who covers his own selfishness under the mask of the +public welfare.<note place='foot'><hi rend='italic'>Saint Simon's</hi> +reproach to the liberals, that their fundamental principle +was: <foreign lang='fr' rend='font-style: italic'>ôte-toi de là, que je +m'y mette</foreign>, is well known.</note> Hence the adherents of communism are +satisfied with any form of government which seems to offer +them most, and this a ruthless despotism can do, at least, for the +moment. And, although they are ever ready for any revolution +in the form of government, and easily to be won over to +it, they are most readily captivated by a despotic revolution. +On the other hand, when communism seriously threatens all +that constitutes the wealth of a people, the owners of that +wealth are compelled to fly to any refuge which holds out the +promise to protect them from it, although by seeking that +same refuge they may destroy their own political freedom.<note place='foot'>Compare +<hi rend='italic'>Malthus</hi>, Additions to the Essay on Population, 1817, IV, ch. +7.</note> The Achean league, which under the leadership of Aratos, the +<q>enemy of tyrants,</q> had come into existence, promising so +much hope, beheld itself later, and mainly through fear of the +contagious effects of Spartan socialism under Cleomenes, compelled +<pb n='246'/><anchor id='Pg246'/> +to unite with the Macedonians, that is, to give themselves +up entirely. (§ 204). +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXXI. Community Of Goods.'/> +<index index='pdf' level1='Section LXXXI.'/> +<head type='sub'>Section LXXXI.</head> +<head>Community Of Goods.</head> + +<p> +We now, for the present, turn our gaze from the frightful +revolution, destructive of all civilization, which would necessarily +precede the establishment of a community of goods,<note place='foot'>The +<foreign lang='fr' rend='font-style: italic'>travailleurs égalitaires</foreign> +wished to murder not only the king, the court, +and the ministry, but also the Liberals and all owners of property.</note> +and inquire what would be the consequences. Among angels +(<q>gods and sons of gods</q> of Plato) and mere animals, a community +of goods might, perhaps, exist without producing injury. +And so, too, it might exist among men bound one to +the other by the bonds of the truest love. The life of every +model family is accompanied by a species of community of +goods.<note place='foot'>As soon, indeed, as this true love disappears +in the married state, the community of goods even there degenerates only too +easily into a spoliation of the better party by the worse.</note> +But in more extensive social organizations, this love +is never found except as an element of the most exalted religious +enthusiasm, which, as a rule, is of very short duration; +of which the Acts of the Apostles (II, 44 ff, 32 ff, V, I, II) +affords us the best known and most beautiful example.<note place='foot'>The +community of goods of the first Christians at Jerusalem, so frequently +cited and extolled (<hi rend='italic'>James</hi>, I, 1), was only a community +of use, not of ownership (Acts IV, 32), and, throughout, a voluntary act of love, +not a duty (V. 4), least of all, a <emph>right</emph> which the poorer might assert. +Spite of all this, that community of goods produced a chronic state of poverty in the +church of Jerusalem. Hence, Paul had collections taken up for them on all sides, without, +however, anywhere establishing a similar institution. (Romans, 15, 26; I. +Corinth., 16, 1.) Compare <hi rend='italic'>Mosheim</hi>, De vera Natura Communionis +Bonorum in Ecclesia Hierosol., in his Dissertatt. ad Histor. Eccles. pertinentes, II, 1 +ff. As to whether <hi rend='italic'>Barnabas</hi> (Epist., 19) desired to say anything +more, compare Epist. ad Diognetum, 5. For a real recommendation of a community of goods, +on economic grounds, see <hi rend='italic'>Joh. Chrysostom.</hi>, in Acta Apost., Hom. +XI. Also <hi rend='italic'>Clemens Rom.</hi> c. 2 C. 12, qu. 1. Community of goods +among the Essenes: <hi rend='italic'>Philo.</hi> Opp. II. 457 ff. +<hi rend='italic'>Joseph. Bell</hi>, Jud., II. 8. <hi rend='italic'>Bellermann</hi>, +Geschichtliche Nachrichten über die Essener. (1821.) In many monasteries, there has been +and is a species of community of goods. There was once a singular contest on +this subject, carried on between the Minorites and the Pope, in the time of +Louis of Bavaria. The Minorites claimed that property was a thing, so +much to be condemned, that even food, at the moment of eating it, did not +belong to the person using it. The Pope taught on the other hand, that even +Christ and the Apostles possessed property, part personal and part in common. +(<hi rend='italic'>Raynaldi</hi>, Ann. eccl., XV, 241, 285 ff.) Community of goods of the +Homiliates, later of the Brothers of Common Life, after the manner of the +monks, but of a much higher kind. (<hi rend='italic'>Ullmann</hi>, Reformatoren v.d. +Reform, II, 62 ff.) The first settlers of New Haven, Connecticut, held their property +in common. Land was divided among families in proportion to the number +of persons in them, and of the number of cattle they had brought with them; +and all sales and purchases were made on account of the whole community. +And so in Massachusetts during the first seven years of the colony's existence. +(<hi rend='italic'>Ebeling</hi>, Geschichte und Erdbeschreib. der Vereinigten Staaten, +II, 391, I, 557.) <hi rend='italic'>Herrnhut</hi> community of goods in Pennsylvania, +from 1742 to 1762, but which was done away with when the number of colonists became +too great. (<hi rend='italic'>Ebeling</hi>, IV, 717.) Community of goods of the Shakers +and Lutheran Rappers. (<hi rend='italic'>Buckingham</hi>, Eastern States, II, 214, 427. +<hi rend='italic'>Prinz Neuwied</hi>, Reise in Nord Amerika, I, 136, ff.) Russian sects +with community of goods. (<hi rend='italic'>v. Haxthausen</hi>, I, 366, 407.) +<hi rend='italic'>Harless</hi>, christliche Ethik § 501, distinguishes very +well between the <q>anti-christian</q> and <q>pseudo christian</q> stand point, from +which it is sought to establish the doctrine of a community of goods. The +Christian view of this subject (compare Ephes., 4, 28, I; Thess., 4, 11, II, 3, 12; +Matth., 6, 24; Pet. 4, 10; Matth., 26, 7-11) is accused of hypocrisy by many socialists. +It is very easy, they say, when one is himself in comfortable circumstances, +to represent to the poor that their poverty is a school for heaven, +and to preach a contempt for riches etc. They entirely forget, that the first +promulgation of the Gospel was made at a time when the worst kind of pauperism +prevailed; and that even the Master Himself, and the greater number +of His Apostles belonged to the lowest stratum of society. <hi rend='italic'>Luke</hi>, +9, 58. Many of the Fathers of the Church, however, in their exhortations to benevolence, +used language in which modern Socialists have found a rich mine which +they have sedulously worked. (Compare <hi rend='italic'>Villegardelle</hi>, Histoire des +Idées sociales, 1846, 61 ff.)</note> +</p> + +<pb n='247'/><anchor id='Pg247'/> + +<p> +Where this love does not exist, each participant in the community +of goods will, as a rule, seek to do the least and enjoy +the most possible.<note place='foot'>Even <hi rend='italic'>Aristotle</hi> says that +what is common to many is a matter of little concern to any one. (Polit., II, 1.) +<hi rend='italic'>Bastiat</hi> remarks: <q>We compete to-day +to see who works most and best. Under another regime, we should emulate +one another to see who should work least and worst.</q> (Harmonies Econ., +ch. VIII.) When the first settlers of Virginia, in 1611, gave up the system +of common labor and of joint-stock companies, as much work was performed +in a day as formerly in a week, or as much by three workmen as formerly +by thirty. (<hi rend='italic'>Purchas</hi>, Pilgrims, iv, 1866. +<hi rend='italic'>Bancroft</hi>, History of the United States, I, 161.) Even in New +England, therefore among men both steady and accustomed to labor, who for conscience +sake had sacrificed so much, a community of goods was accompanied uninterruptedly by +famine. A change for the better took place, for the first time in 1623 with the +introduction of the institution of private property which was followed in 1624 by the +right of inheritance. (<hi rend='italic'>Bancroft</hi>, I, 340.) The military colonies +of Algeria, also, in which husbandry in common was carried on, begged, at the end of a +year, that the system should be abandoned, for the reason that it was good for +nothing but to generate idlers; and yet, these colonists were all powerful +men of about the same age, and accustomed to order and service in common. +They were, moreover, assisted by the nation with pay and food. Compare +<hi rend='italic'>Bugeaud's</hi> account: Revue des deux Mondes, June 1, 1848. <q>The +French associations (after 1848), whose object was labor in common, have nearly all +died out.</q> <hi rend='italic'>M. Chevalier</hi> in the Journal des Débats, Feb. 3, +1851. In the United States, sixteen phalansteries of Fourierites, founded between 1840 and +1846, had all collapsed in 1855. (<hi rend='italic'>D. Vierteljahrsschrift</hi>, +October, 1855, 205 ff.)</note> In a society of one hundred thousand +<pb n='248'/><anchor id='Pg248'/> +members, each individual would be interested in the results of +its aggregate frugality only indirectly, and only to the extent +of a one-hundred thousandth part of the whole; that is, practically, +not at all.<note place='foot'>Even in New Harmony, the members considered the task which +they had to perform to obtain food, clothing and shelter, as villeinage in the worst +sense of the term. (<hi rend='italic'>H. Bernhard v. Weimar</hi>, Nordamerikan. Reise, +V, 134 ff.; 151, 310, ff.) It is very inconsistent in socialists to continue the +proprietorship and heirship of the state. To be consistent they should give both +these rights only to mankind as a whole. Compare <hi rend='italic'>Kiraly</hi>, Ueber +Socialismus und Comm., 1868, 35.</note> Individual selfishness would expend itself +entirely on the division of what the whole community produced. +It would, consequently, and almost always be detrimental +to the whole, and to the other individuals of the +society; whereas, at present, it does so only in exceptional +cases. When Louis Blanc, as Mably had before him, recommended +that the <foreign lang='fr' rend='font-style: italic'>point d' honneur</foreign> should +take the place of the <foreign lang='fr' rend='font-style: italic'>interêt +personnel</foreign>, as a spur to production, and a check on consumption, +and cited the army as an illustration of its workings, +he forgot, among other things, the thirty cases in which the +<pb n='249'/><anchor id='Pg249'/> +<foreign lang='fr' rend='font-style: italic'>code militaire</foreign> +pronounces sentence of death on the violators of +its provisions. And, as a matter of fact, the Münster Anabaptists +could not help punishing with death every transgression +of their communistic precepts.<note place='foot'>It would not be +entirely fair to take a partisan view of the <foreign lang='fr' +rend='font-style: italic'>ateliers nationaux</foreign> +of 1848, and claim them as a practical refutation of socialistic utopias, +since no serious experiment was made with them. Compare <hi rend='italic'>E. Thomas</hi>, +Histoire des Ateliers nationaux considérés sous le double Point de Vue politique +et social, 1848.</note> If, in a community in which +the principles of communism were rigorously carried out, all +the burthens and enjoyments of life were equal, and equally +divided according to the ideas of the crowd, men like Thaer, +Arkwright, and others of their class, who now provide bread +for hundreds of thousands from their studies and laboratories, +would then be able, at most, with a rake and shovel, to provide +food for three or four. The division of labor, with its infinite +amount of productive force, would, for the most part, cease. +Nor would the consequence be that the humbler classes would +be freed from work of a coarse, mechanical, unintellectual and +severe nature; but that the higher classes would be dragged +down to engage in it likewise. And what an increase there +would be in the number of consumers at the same time! +Every man would, with a light heart, follow the most imperious +of human impulses if the whole community were to +educate his children. But we have seen that a community of +goods is desired most urgently in times of over-population. +Hence, here it would make the evil greater yet, by increasing +consumption and diminishing production. +</p> + +<p> +Where there are now one thousand wealthy persons, and one +hundred thousand proletarians, there would be, after one generation, +no one wealthy and two hundred thousand proletarians. +Misery and want would be universal.<note place='foot'>Socialists generally overlook the +fact, that the greater number of enjoyments from which the poorer classes are excluded, +by the right of property, would not exist at all were it not for that very right. +(<hi rend='italic'>Spittler</hi>, Politik, 356 ff.) This remark may also be made of +<hi rend='italic'>Hugo's</hi> ingenious objections. (Naturrecht, +§ 208 ff.) One of the most effective pieces of socialistic declamation is +that the lower classes have a much shorter average of life than the upper. +Hence the institution of private property is charged with being a species of +spoliation of the poor of so many years of life, and the entire <q>present society</q> +condemned on that account. Here again it is not borne in mind, that +a few centuries ago the general average of life was probably still smaller; +and that it was precisely the growth and development of <q>present society</q> +that lengthened the days of the poorer classes even, although it may have +lengthened those of the rich in a still greater proportion. See § 246.</note> +For the purpose +<pb n='250'/><anchor id='Pg250'/> +of giving the crowd a very agreeable,<note place='foot'>But a community of goods would +not, by a great deal, accomplish as much as is generally supposed. In Prussia, for +instance, in 1867, only about three per cent. of the entire number of families in the +community had a yearly income of 1,000 thalers; only nine per cent. had 500 thalers or +more, and only 6,465 returned an income of more than 4,000 thalers, while only +590 returned one of 16,000 thalers. (Preuss. statist. Ztschr, 1868, 83. +<hi rend='italic'>Held</hi>, Die Einkommensteuer, 197 ff) How little, therefore, could +the poor here gain by the spoliation of the rich! Besides, the purely personal consumption +of the rich is, after all, not so great; and if all luxury were abandoned, +an innumerable number of men would lose their gains. (Compare <hi rend='italic'>Ad. +Smith</hi>, Wealth of Nations, I, ch. 11, 2.) It would be to kill the hen that had +hitherto laid the golden egg in order to divide its flesh a little more equally.</note> +but rather short-lived +period of pleasure, a period simply of transition, almost all +that constitutes the wealth of a nation, all the higher goods of +life, would have to be cast to the waves, and henceforth all +men would have to content themselves with the gratifications +afforded by potatoes, brandy and the pleasures of the most +sensual of appetites. And then, the equal education of all, +demanded by the communists, would have no result but this, that no one would +acquire a higher scientific training.<note place='foot'><hi rend='italic'>Babeuf</hi> +declared all arts and sciences to be evils. He would have no one +learn anything but Reading, Writing, Arithmetic, and a little of the Geography +of France; and have the strictest censorship enforced to keep every +one within these limits. Compare the able criticism of <hi rend='italic'>Proudhon</hi>, +Contradictions, ch. 12.</note> But, +after all, there lurks concealed in communism much more of +envy than is generally supposed. +</p> + +</div> + +<pb n='251'/><anchor id='Pg251'/> + +<div> +<index index='toc' level1='Section LXXXII. The Organization Of Labor.'/> +<index index='pdf' level1='Section LXXXII.'/> +<head type='sub'>Section LXXXII.</head> +<head>The Organization Of Labor.</head> + +<p> +Most theoretical adherents of the doctrine of a community +of goods, feeling<note place='foot'>According to <hi rend='italic'>Umpfenbach</hi>, +Nationalökonomie, 201, where a community of +goods obtains, there can be but the alternative, viz.: whether each person or +each family shall receive just the same amount. (The former would be more +in harmony with principle, but what an over-population would be the consequence!) +Precisely so, too, if each person were to come and take his own +portion (anarchy!), or if it were parcelled out to each by a board of distributors +(despotism!).</note> more or less the weight of the above objections, +have supplemented it with the idea of an organization +of labor<note place='foot'>This expression came into vogue, principally, through +<hi rend='italic'>L. Blanc</hi>, Organization +du Travail (1841), the leading ideas in which work are the following: +The suppression of competition by the establishment of state industries; +equality of remuneration for labor; equality and legislative determination of +the rate of interest; the choice of superintendents by the workmen. With +many modern socialists, the shibboleth is not so much <foreign lang='fr' +rend='font-style: italic'>liberté</foreign> as <foreign lang='fr' +rend='font-style: italic'>solidarité</foreign>. Besides, <hi rend='italic'>Fichte's</hi> +Naturrecht (1796), and his geschlossener Handelsstaat, are, +without doubt, among the most remarkable works favoring an <q>organization +of labor.</q> They aim at the destruction of the present social system, which, at +most, needs only to be reformed and rejuvenated; and to galvanize the dead +body into a new and different life (Medea's magic cauldron!). Compare +<hi rend='italic'>Corvaja</hi>, Bancocrazia o il gran Libro sociale, 1840.</note> +or the centralized superintendence of all production +and consumption, either by the government already existing, +or by one to be created anew. Such a government would be, +of course, a despotism such as the world has scarcely yet seen, +a Cæsaro-Papacy, usurping both the place and power of Father +of the universal Family.<note place='foot'>Cabet's Icarian colony in America numbered +298 adults and only 107 children. Yet spite of this condition, so favorable to +production, it did but a very sorry business. Its government was very similar to that of +a house of correction or a penitentiary. Even in religious matters, spite of all pretended +toleration, those members who did not agree with Cabet were described in +the official weekly paper as <foreign lang='fr' rend='font-style: italic'>des infames +ou des aveugles</foreign>. (D. Vierteljahrsschrift, 1855, October, 205 ff.)</note> +But the evils mentioned above +would be entailed none the less. Every incentive which now +<pb n='252'/><anchor id='Pg252'/> +moves man to industry or frugality would disappear, and nothing +remain but universal philanthrophy; or, if you will, but patriotism, +virtues which are not wanting even now. Even guardianship +of the government newly created would be carried on +in a very loose manner; for it would be exercised without any +feeling of personal interest, even in the most favorable case +supposable. It is well known and easily understood, that +state industries are never engaged in, in the long run, with the +same zeal, nor crowned with the same success, as competing +private industries. It is well known, too, how intimate +the connection is between the political freedom of a people and +their economic production; that, for instance, England's greater +wealth, as compared with that of Turkey, depends, most +largely, on the freedom that obtains in the former country +and the servitude that prevails in the latter.<note place='foot'>An +eastern sage says, that land possesses the ideal of legal security +through which a beautiful woman, decked with pearls, might travel without +danger. What would such a sage say of a European country, in which even +orphan children have their property not only preserved to them, but find it +increased from having been placed at interest, as soon as they reach their +majority? (<hi rend='italic'>Barrow</hi>.)</note> And we may inquire +just here, what the result would be, if the despotism of +government should go ten times farther that it has ever gone +in Turkey, when, moreover, the despot who led the state, was +not an individual with his few officials, but the whole crowd, +with its million eyes and million hands. It would, practically, +be to give every producer an escort of a policeman and a revenue +agent, as if he were a prisoner. +</p> + +<p> +And where would be the gain? A division of wealth +which would seem unjust to many would exist now as well as +before, because the idle and the unskillful would receive the +same reward as the most industrious and skillful.<note place='foot'><q>The +equality of communism is the worst species of inequality, because +it guarantees to one for two hours of poor labor as much as it does to an +other for four hours of good work.</q> (<hi rend='italic'>Bastiat</hi>, +Harmonies économiques, ch. 8.)</note> The opposition +of one class of society to another, so much complained +<pb n='253'/><anchor id='Pg253'/> +of, would continue. The only difference would be, that +whereas, it now comes from the weak, it would then come +from the strong.<note place='foot'><hi rend='italic'>Proudhon</hi>, +Qu'est-ce que la Propriété, 283, says, very justly, that <q>a community +of goods is the spoliation of the strong by the weak.</q></note> +Compulsory association is certainly more +prolific in strife and crime than is a state of society in which +everybody manages his own affairs. +</p> + +<p> +A journey on foot, in company with others, is allowed, on +all hands, to be a very good test of friendship. But, a community +of goods would, in the strictest sense of the word, +be a journey on foot through the whole of life with numberless +<q>friends.</q> Here, every one would believe himself entitled +to possess whatever pleased him. And, who would decide; +since so many communists preach the dissolution and +extinction of all government, and the reign of anarchy? Besides, +there can be no doubt, that the difference of human +talents and human wants, would soon, spite of every law, lead +to a difference in property again. Hence, that first revolution +would have to be repeated from time to time—a real Sisyphus +labor! No sooner have the bees produced anything, than the +drones come, and divide anew! +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXXIII. The Organization Of Labor. (Continued.)'/> +<index index='pdf' level1='Section LXXXIII.'/> +<head type='sub'>Section LXXXIII.</head> +<head>The Organization Of Labor. (Continued.)</head> + +<p> +Experience, however, teaches us, that, in all the lower stages +of civilization, a community of goods exists to a greater or +lesser extent.<note place='foot'>Called a negative community of goods, by +<hi rend='italic'>Zacchariä</hi>, Vierzig Bücher vom Staate, IV, +146, in contradistinction to the positive and universal community of gain, +as desired by the communists.</note> The institution of private property has been +more fully evolved out of this condition of things, only in proportion +as well-being and culture have been developed as cause +and effect of such well-being. Thus, among most nations of +hunters and fishermen, the idea of private property was unknown +<pb n='254'/><anchor id='Pg254'/> +when these nations were first discovered. This is, +indeed, very natural. Their chief spring of production flows +as if of itself, apparently inexhaustible; and the hunter can +hardly think of such a thing as saving any of his booty.<note place='foot'>Community +of goods and of women among the Ichthyophages on the Red +Sea, who lived in caves, went naked for the most part, plundered all shipwrecked +people, and never reached an advanced age. <hi rend='italic'>Diodor.</hi>, III, 15 ff. +<hi rend='italic'>Peripl.</hi>, Maris Erythr., 12. Concerning the Scythians, see +<hi rend='italic'>Strabo</hi>, VII, 300; the Spaniards, <hi rend='italic'>Plutarch</hi>, +Marius, 6; the Rhetians, <hi rend='italic'>Dio Cass.</hi> LIV, 22; the +Triballi, <hi rend='italic'>Isocr.</hi>, Panath., § 237; the Kilici, +<hi rend='italic'>Sext.</hi>, Empir. Pyrrh. Hypot. III, 24. Community of goods among the +Caribs who performed all their work in common, and had, at least in the case of males, a +common table and common stores with supplies. (<hi rend='italic'>Petr. Martyr</hi>, Dec. +VII, 1. <hi rend='italic'>Rochefort</hi>, II, c. 16. <hi rend='italic'>B. Edwards</hi>, +History of the West Indies, I, 43 ff.) Among the Kuskowimers of Russian America, all the +able-bodied men of the tribe live together. (<hi rend='italic'>v. Wrangell</hi>, +Nachrichten, 129.) Among the inhabitants of the Aleutian islands, at least in times of +scarcity of food, the produce of the fisheries is divided according to their need. +(<hi rend='italic'>V. Wrangell</hi>, 185.) The organization +of labor is rigidly enforced among the Otomacs, on the banks of +the Orinoco, and they are, nevertheless, more civilized than their neighbors. +(<hi rend='italic'>Depons</hi>, Voyage, I, 295.) A community of goods must, however, be +considered an advance, in the case of an isolated people; and it is an error to +look upon it as the most primitive condition, as does, for instance, +<hi rend='italic'>Ambrosius</hi>, De off. Minist. I, 28, and <hi rend='italic'>Frederick +II</hi>, in the preface to his general code. (Allgemein. Gesetzbuche, 1231.) The +hospitality of the inhabitants of the Friendly Islands borders on a community of goods. +(<hi rend='italic'>Mariner</hi>, Freundschaftsinseln, 75, 81. +<hi rend='italic'>Klemm</hi>, Kulturgeschichte, IV, 398.) Concerning the +beginnings of property among the Esquimaux, See <hi rend='italic'>Klemm</hi>, II, +294.</note> And, among nomadic nations, the land is a great meadow held +in common; and the industry of plunder is considered, as it is in all +inferior stages of civilization, especially honorable.<note place='foot'>Οὐκ +ἄδοξον ἧν παρὰ τοῖς παλαιοῖς ληστεύειν, ἀλλ᾽ ἔνδξον. +(<hi rend='italic'>Didym.</hi>, ad Odyss. II, 73, IX, 252.)</note> +The <hi rend='italic'>conquistadores</hi> of Peru found there something very +like a community of goods, under the despotic guardianship +of the state, viz.: a yearly division of all lands among the +people, in proportion to their rank; the cultivation of these +lands in common, under the superintendence of the state, and +to the sound of music. But, at the stage of civilization that +Peru was then in, land is about the only resource possessed. +The results were the usual ones. A country like Peru, with +<pb n='255'/><anchor id='Pg255'/> +only one city, no beasts of burthen, no plows, no trades and +no commerce, cannot possibly be rich.<note place='foot'>In Mexico, +the Spaniards found land ownership among the most distinguished +of the natives, but only a species of possession in common and +common store houses among the peasantry. (<hi rend='italic'>Robertson</hi>, +History of America, § VII.) Hence, the agriculture of the country was so unimportant that +the little army of the <hi rend='italic'>conquistadores</hi> frequently +produced a famine by their marches.</note> That the constitution +of Lycurgus established a sort of community of goods +among the Spartans, is well known. I need only recall the +public education, the meals in common, the authorization of +stealing,<note place='foot'>The Tcherkesses considered robbery +honorable provided the robber was not caught <hi rend='italic'>in +flagrante</hi>. Compare <hi rend='italic'>Koch</hi>, Reise in den kaukasischen Isthmus, +I, 370 ff. <hi rend='italic'>Bell</hi>, Journal of a Residence in Circassia, +I, 181, II, 201. The organized robber bands of ancient Egypt, when it was so +highly civilized (<hi rend='italic'>Diodor.</hi>, I, 80) may, on the other hand, +be accounted for by similar conditions actually existing in the large cities of +our own day.</note> the prohibition of trade, of the precious metals and +fine furniture, the equal division of property and the inalienable +character of the land<note place='foot'>What a frightful organization of +labor we find in Sparta, combined with a community of goods! Let us recall the exposing +of children authorized by law, the mode of education which must have cost the life of +all whose constitution was weak, the <hi rend='italic'>cryptia</hi>, the stern +hierarchy of age etc. <hi rend='italic'>Plut.</hi>, Inst. Lac. 2, appreciates the +bad taste of the black broth at its true value. The Cretan community of goods was +based chiefly on the unnatural relation created by the authorities known as +paiderastia; and which was a very efficient means to prevent over-population. +(<hi rend='italic'>Plat.</hi>, De Legg, I, 636. <hi rend='italic'>Arist.</hi>, +Polit. II, 8.)</note> etc. With such laws, Sparta could +neither be, nor desire to become, wealthy. Of all Greek +states of any historical importance, it preserved longest the +economic peculiarities belonging to a low stage of civilization. +Among most modern nations, the fundamental idea of +their land laws, which had their origin in the middle ages, is, +that each family is only the usufructuary, and that the community +is the sovereign proprietor of the soil. This community +of landed possession finds expression, among other things, in +the vast extent of communal woods and pasturages, in the +varied intersecting of parcels of land one by the other, which, +indeed, change proprietors from time to time, and in the common +<pb n='256'/><anchor id='Pg256'/> +working of the land, carried as far as possible etc.<note place='foot'>Remarkable +reasons therefor in <hi rend='italic'>Cæsar</hi>, Bell. Gall., VI, 22.</note> In +all medieval times,<note place='foot'>There are, especially in Russia, a multitude +of such institutions among the inhabitants of the country still. See +<hi rend='italic'>Roscher</hi>, Nationalökonomik des Ackerbaues, § 71 +ff.</note> not only the individual is considered an +owner of the land, but, over and above him, the family. At +the same time, we are wont to find existing an amount of +mortmain property in the hands of corporations, monastery +lands, crown lands and domains of very great importance.<note place='foot'>In +the Corpus Juris Canonici, that crown of medieval theology, politics +and jurisprudence, the ideal of a community of goods occupies a place +almost as prominent as in the works of modern socialists. The only difference +is, that in the former the opposition to private property arises from a +one-sided religiousness and contempt of the world, while, in the latter, it +arises generally from irreligiousness and over-estimation of worldly goods.</note> +All these institutions have declined in number and shown a +disposition to disappear, in proportion as national husbandry +or economy has grown more productive. +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXXIV. The Organization Of Labor. (Continued.)'/> +<index index='pdf' level1='Section LXXXIV.'/> +<anchor id="Section_84"/> +<head type='sub'>Section LXXXIV.</head> +<head>The Organization Of Labor. (Continued.)</head> + +<p> +To this tendency we find, indeed, another, and a no less +powerful one, opposed. Everywhere as civilization advances, +the sphere of action of the state grows larger, and the ends +it serves more numerous. +</p> + +<p> +In its origin, government was established to preserve only +the external security of its subjects. By degrees, it comes to +look after their internal legal security, by enforcing internal +peace, prohibiting revenge for bloodshed etc. It next extends +its care to the well-being, the culture, and even to the comfort +of the people. But the claims of the state must grow in the +same proportion as the service it renders. While Lowe, in +1822, estimated the yearly net income of the British people at +<pb n='257'/><anchor id='Pg257'/> +£251,000,000; the government expenses,<note place='foot'>This does not include the +cost of the schools, churches and benevolent institutions.</note> in 1813 and 1814, +averaged £106,000,000, and these sums were voluntarily devoted +to public purposes by parliament. And so, between +1685 and 1841, the population of England more than trebled +its numbers, But, in the same period of time, the outlay of +the state increased forty fold. (<hi rend='italic'>Macaulay</hi>.) Simultaneously +with this development of things, it becomes more and more +usual by the exercise of the power of eminent domain and +others like it, to sacrifice private rights, acquired by the very +best of titles, to the preponderating common good. We +may allude, further, to the duty, universally imposed in +modern times, of performing military service, to the national +systems of public instruction in so many countries; to the +large number of societies, joint-stock companies, popular holidays; +but particularly to the associations for insurance of +every description. And so it may, indeed, be claimed that we +have come nearer to a community of goods than could have +been dreamed of a hundred years ago.<note place='foot'>According to +<hi rend='italic'>Lassalle</hi>, System der erworbenen Rechte, 1861, § 259, history +shows that law, as civilization advances, curtails more and more the +proprietary sphere of private individuals, inasmuch as it tends more and +more to place a greater number of objects outside the circle of individual +ownership.</note> And yet, these are, +for the most part, institutions in which we find reflected the +peculiar strength and solidity of our age. Whoever wishes to +compare the power of one people with that of another, must +take into account not only the elements which constitute their +intellectual and physical force, but especially their inclination +to permit these elements to coöperate for public purposes.<note place='foot'>Saint +Simonism is a warning example of this tendency. Saint Simon +never lost an opportunity to give vent to his utter contempt for the liberals, +and for constitutional government—<foreign lang='fr' rend='font-style: italic'>ce +bátard du régime féodal et du régime industriel</foreign>; and to counsel the crown, +after the example of Louis XI. to place itself at the head of the working class, and +in opposition to the middle class. (Oeuvres de <hi rend='italic'>Saint Simon</hi>, +éd. 1841, 44, 148, 209.) <hi rend='italic'>Bazard</hi>, Exposition, 76, demanded +that all antagonism between the temporal and spiritual powers, all opposition +for the sake of freedom, <foreign lang='fr' rend='font-style: italic'>méfiance +organisée</foreign> of parliaments, and all competition, should cease. Even education +he would have bestowed according to <foreign lang='fr' +rend='font-style: italic'>capacité</foreign>, which he would have determined by the +<foreign lang='fr' rend='font-style: italic'>chefs légitimes de la société</foreign> +(280). To the criminal court should be referred all cases of <foreign lang='fr' +rend='font-style: italic'>delicts</foreign>, that is, all inopportune acts, even in +the scientific and artistic departments. They should be tried after the manner of the +<q>courts of trade;</q> that is, in a summary way, without appeal, and by experts +(317 ff). All the relations of property should be determined by the <foreign lang='fr' +rend='font-style: italic'>décision arbitrale des chefs d'industrie</foreign> (326). +<hi rend='italic'>Bazard</hi> everywhere insists that the reign of genius and of +self-sacrifice on the one hand, and on the other of confidence and obedience, is the +only true policy (330). Saint Simonism was nearly related to Bonapartism.</note> +</p> + +<pb n='258'/><anchor id='Pg258'/> + +<p> +We may now inquire: At what point does this increasing +community cease to be a gain? This is as easily determined +generally, as it is difficult to say what the limit to it is in particular +instances. Progress in the direction of a community +of interests of this nature is beneficial, only so long but certainly +as long as it corresponds with the feeling entertained by +the community, that they have interests in common. Hence it +is, that such a noble kind of communism reigns in art and literature, +one which causes the stronger to willingly labor for the +weaker, and with the greatest success.<note place='foot'><hi rend='italic'>Schäffle</hi>, +Nat. Œk., III, Aufl., I, 61.</note> And so, too, the christian +care of the poor, even were it carried to the height of the +Gospel counsels (Luke, 3:11), would be no direct obstacle in +the way of the development of a nation's public economy, provided +it were given, and accepted, only as christian benevolence. +Every approximation towards a community of goods +should be effected by the love of the rich for the poor, not by +the hatred of the poor for the rich. If all men were true +Christians, a community of goods might exist without danger. +But then, also, the institution of private property would have +no dark side to it. Every employer would give his workmen +the highest wages possible, and demand in return only +the smallest possible sacrifice.<note place='foot'>If we remove +in thought, all injurious elements from a community of +goods, and add to it all the incentives and restraints necessary to be added, +we shall have a state of things entirely similar to that in a nation whose public +and private affairs are carried on in accordance with the principles of a +healthy system of Political Economy as understood to-day. (Edinburgh +Review, January, 1851.)</note><note place='foot'>How true freedom is +accompanied by what <hi rend='italic'>Bastiat</hi> calls <q>true Saint +Simonism and true communism,</q> see <hi rend='italic'>infra</hi>, § 210.</note> +</p> + +</div> + +<pb n='259'/><anchor id='Pg259'/> + +<div> +<index index='toc' level1='Section LXXXV. The Right Of Inheritance.'/> +<index index='pdf' level1='Section LXXXV.'/> +<anchor id="Section_85"/> +<head type='sub'>Section LXXXV.</head> +<head>The Right Of Inheritance.</head> + +<p> +The right of inheritance to resources has its origin in a combination +of the idea of the family with the idea of property. +And, indeed, this combination of ideas is a very natural one. +The larger portion of mankind consider the pleasures of the +family as the highest attainable, and endeavor, whenever their +economic means make it at all possible, to secure them. At +the same time, the selfishness of most men is not confined to +their own persons, but extends also to their posterity. Hence +it is that bed and board, <hi rend='italic'>eonnubium</hi> and +<hi rend='italic'>commercium</hi>, have, +from time immemorial, been considered correlative ideas; and, +to all the more logical socialists, a community of wives (or +celibacy)<note place='foot'>The experiments of a community of goods, +which have proved successful in practice, were all based on the more +or less complete celibacy of the members of the societies. Compare +<hi rend='italic'>Hermann</hi>, Staatsw. Unters., II, Aufl., 45.</note> +is as dear as a community of goods.<note place='foot'>Thus +<hi rend='italic'>Proudhon</hi> (Contradictions, ch. 5) says that the many socialists, +who would construct their societies after the type of the family, as the +<foreign lang='fr' rend='font-style: italic'>molscule organique</foreign>, are all +wrong. The family has a <q>monarchical, patriarchal</q> character. +In it, the principle of authority is formed and preserved. On it, ancient +and feudal society was based; and <q>precisely against this old patriarchal +constitution, modern democracy protests and revolts.</q> +<hi rend='italic'>Fourier</hi> calls marriage, <foreign lang='fr' +rend='font-style: italic'>un groupe essentiellement faux: faux par le nombre borné +à deux, par l'absence de liberté et par les dissidences du goṅt, qui éclatent dès le +premier jour</foreign>. (Nouveau Monde, 57.)</note> (§ 245.) And +in practice, the greater number of nations of hunters, who, +according to our conceptions, have no knowledge of a real +family and no knowledge of property, have a custom of burying +with the dead the things they used, to kill their cattle etc., +or to deprive minor children of their inheritance.<note place='foot'>On the +Indians of North America, see <hi rend='italic'>Schoolraft</hi>, Information respecting +the Indian Tribes of the United States, II, 194; on the South American +<hi rend='italic'>d'Orbigny</hi>, Voyage, IV, 220, and passim, on the South +Sea Islanders, the Novara-Reise, II, 418; on the ancient Albanians, +<hi rend='italic'>Strabo</hi>, XI, 503.</note> +</p> + +</div> + +<pb n='260'/><anchor id='Pg260'/> + +<div> +<index index='toc' level1='Section LXXXVI. Economic Utility Of The Right Of +Inheritance.'/> +<index index='pdf' level1='Section LXXXVI.'/> +<head type='sub'>Section LXXXVI.</head> +<head>Economic Utility Of The Right Of Inheritance.</head> + +<p> +The certainty, that the material welfare of their children depends, +in great part, on their industry and frugality, is one of +the most powerful incentives to good, in the case of most +men. And this is the basis of the economic utility of the family +right of inheritance.<note place='foot'>The hereditary transmission +of property to posterity has an obvious tendency +to make a man a good citizen. It ranges his passions on the side of +duty, and induces him to make himself profit the common good, and it assures +him that his reward shall not die with himself, but that it shall be +handed down to those to whom he is joined by the dearest and most tender +feelings. (See <hi rend='italic'>Blackstone's</hi> Commentaries, II, 11.) +Without the right of inheritance, credit is scarcely possible, since +with the death of the debtor the only stay of the creditor would +cease.</note> There is scarcely any other institution +which opposes over-population with such efficiency, for +the reason, that the obstacle placed in its way here is placed +very directly, at the point where it can make itself felt most, +viz.: in the life of the family itself. The weaker the family feeling, +the less does the abolition of the right of inheritance interfere +with the economic interests of a nation. Hence, for instance, +it is, that taxes imposed upon legacies, bequests, testamentary +gifts etc., are less objectionable in proportion as they +affect only those in the more remote degrees of relationship +in which inheritance is something merely accidental. While, +when a nation is yet in the intermediate stages of civilization, +the <emph>family</emph> right of inheritance seems to be very strong, +especially as regards landed property, a consequence of the +fact, that a superior kind of title to such property is recognized +to exist in the family; at a period, when individualism +becomes more developed, the liberty of devise by will is wont +to prevail more and more.<note place='foot'>Testamentary freedom +(which obtained in places there about the beginning +of the eighteenth century) prevails completely in England at present, +contrary to the principle of the Roman law requiring an obligatory portion +(<foreign lang='fr' rend='font-style: italic'>la légitime</foreign>) to be +left to the heirs, which is still binding in France, but in a +very much developed form. The consequence is that last testaments are as +frequent in England as they are rare in France. There were, in Paris, in +1825, 7,649 judicial, and only 1,081 testamentary partitions of property. +(<hi rend='italic'>Monnier</hi>.) In Great Britain, in 1838, the number +of testamentary alienations of property taxed stood to those in which there +was no will, in the proportion of 8:3; and the values of the alienated property +as 10:1. (<hi rend='italic'>Porter</hi>.) Among a people noted for their high moral +tone, testamentary freedom is a powerful means of strengthening paternal authority +on the one hand, and of keeping alive, in the minds of parents, on the other, a +sense of responsibility for the future of their children. Compare +<hi rend='italic'>Helferich</hi>, Tübinger Zeitschr., 1854, 143, ff.</note> +Then the right of inheritance becomes, +<pb n='261'/><anchor id='Pg261'/> +so to speak, a more elevated species of personal property, +a prolongation of the same beyond the grave. Should +testamentary freedom be too much hampered, selfishness would +manifest itself in a way much more detrimental to economic +interests, viz.: in the consumption of wealth, during the lifetime +of its owner. Every man would be but a life annuitant +of his own property. +</p> + +<p> +But, at the same time, in periods of moral decline, complete +freedom may degenerate so as to produce evils equally great. +The wealthy Bœotians, in the later days of Hellenic history, +were wont to form themselves into dissolute drinking companies; +and not only the childless, but even fathers of families +made over their property to these companies, limiting their +offspring to a portion which it was made their duty to let them +have. It was so in Rome, also, in Cicero's time, when every +acquaintance of standing took it very ill if not remembered in +the will of the testator, and where Octavian, for instance, in +the last twenty years of his reign, received about 70,000,000 +thalers through legacies left him by his <q>friends.</q><note place='foot'><hi +rend='italic'>Polyb.</hi>, XX, 6. Hence it was, that all (?) the wealth of Thebes, +when it was destroyed by Alexander the Great, was only 440 talents. (Athen., IV, +148.) <hi rend='italic'>Drumann</hi>, Gesch. Roms. etc., VI, 333 ff. +<hi rend='italic'>Cicero</hi>, Phil., II, 16. <hi rend='italic'>Hoeck</hi>, +Röm. Gesch., I, 2, 118. <hi rend='italic'>Sueton.</hi>, Octav., 66. An especially +scandalous instance in <hi rend='italic'>Petron.</hi>, 140. For a masterly theory +of legacy-hunting, see <hi rend='italic'>Horat.</hi>, Sat., II, +5. Compare <hi rend='italic'>Lucian</hi>, Dialogues of the Dead, 5-9. +<hi rend='italic'>Petronius</hi> speaks of a <foreign lang='la' +rend='font-style: italic'>turba hæredipetarum</foreign>. (124.)</note> Here, +<pb n='262'/><anchor id='Pg262'/> +the repeal of the law making it obligatory on testators to leave +a certain proportion of their wealth to their children would +remove the last safe-guard of their material welfare.<note place='foot'>Even the +revolutionary shibboleth, <foreign lang='fr' +rend='font-style: italic'>paternité</foreign>, really means nothing more +than the equal right of inheritance of all, i.e., the abolition of the right of +inheritance! (<hi rend='italic'>R. Meyer</hi>.) The strongest attack, from a scientific +point of view, made on the right of inheritance in more recent times, comes from Saint +Simonism. The founder himself, after a life rich in experience but poor in action, +spent in the search of much but in the finding of little, succeeded only +in arraying the industrial and proprietary classes against each other, in declaring +the poorest class to be the most important of all, and in basing the +new <hi rend='italic'>religion of love</hi> on the emancipation of labor. His disciples +went further. In order to abolish all the privileges of birth, +<hi rend='italic'>Bazard</hi>, Exposition de la Doctrine de Saint Simon, 1831, p. 172, +ff., taught that it was not enough to distribute public employments according to merit, +and in the interest of the people generally, but that the distribution of property +should be made in accordance with the same principle. The inequality of ownership should +correspond with the inequality of merit. Every one may, during his life, +keep what he had acquired himself, but give it to the state at death. Thus +would a reconciliation be effected between the general interest and private +interest; and the public revenue, supplied in this way, might easily be employed +in place of the revenue raised by such taxation as weighs most +heavily on the inferior classes. <hi rend='italic'>F. Huet</hi>, also, Le Regne social +du Christianisme, 1853, III, 5, would have all private property, after the death of the +owner, fall <foreign lang='fr' rend='font-style: italic'>également à tous les jeunes +travailleurs</foreign>. The practical consequences of this system may now be seen in +Turkey. There, the principal military fiefs are held in this way. Hence it is, that the +Turkish owner of such a fief builds as little as possible. When one of his walls +threatens to fall, it is kept standing by means of props. If it falls in fact, the only +consequence is that there are fewer rooms in the house, and the owner settles beside the +ruins. (<hi rend='italic'>Denon</hi>, I, p. 193.) In the Butan, there exists a species +of practical Saint Simonism. <hi rend='italic'>Robinson</hi>, Descriptive Account of +Assan, 1841.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXXVII. Landed Property.'/> +<index index='pdf' level1='Section LXXXVII.'/> +<head type='sub'>Section LXXXVII.</head> +<head>Landed Property.</head> + +<p> +As land, in its uncultivated state, has neither been produced +by man, nor can be entirely consumed by him, the above demonstration +of the necessity of private property cannot without +<pb n='263'/><anchor id='Pg263'/> +any more ado, be extended to land.<note place='foot'>It was chiefly fear of the +consequences of the declamations of the socialists and their declamation against +<q>monopoly</q> that induced <hi rend='italic'>Bastiat</hi> to reduce all +the value of landed property to that of the capital employed in its manuring, +improvement etc. (Harmonies, ch. 9.) We may, however, unreservedly +grant him that, as a rule, until the time of its original possession by man, land +had no <hi rend='italic'>valeur</hi> whatever (278).</note> Hence, individual +property in land is everywhere much more recent than individual +property in capital.<note place='foot'><hi rend='italic'>Kant</hi> thinks the very +contrary: Metaph. Anfangsgründe der Rechtslehre, (Werke, IX, 72 ff). +<hi rend='italic'>Contra</hi>, <hi rend='italic'>Grotius</hi>, J. B. et P., II, 2. +<hi rend='italic'>Graswinkel</hi>, in his Schriften für die Freiheit des Meeres, 1652 +ff., in <hi rend='italic'>Laspeyres</hi>, Geschichte der niederländischen N. Œk., 12. +<hi rend='italic'>Hufeland</hi>, Neue Grundlegung, I, 307.</note> +</p> + +<p> +But a certain expenditure of capital and labor is necessary +that land may be used productively, and, in most instances, +this employment of capital and labor is of long duration, irrevocable +in the very nature of things, and one the fruits of +which can be reaped only after some time has elapsed. Now, +this cooperation of capital and labor is such, that no one would +undertake to employ them in the cultivation of the land, had +he not the strongest assurance of possessing it. Hence, agriculture +in its most rudimentary stage supposes ownership of +the land, at least from the time that it is <q>tickled with the +hoe,</q> until it <q>smiles with the harvest;</q> or, to express it more +accurately, all the time intervening between the work of the +plow and the labor of the sickle. The more, afterwards, population +and civilization increase, the more products must be +wrung from the soil. But this can be accomplished only by +means of its more <emph>intensive</emph> cultivation (higher farming), by +lavishing a greater amount of capital and labor on it, and, as +a rule, by extending the circle of agricultural operations by +means of combinations more and more artificial. Hence, the +progress of civilization demands an ever increasing fixity, and +a more pronounced shaping of landed property (the <hi rend='italic'>specification</hi> +of jurists), in the interests of all who share in this progress, +and even of those who own no landed property themselves. +Were there no property in land, every one would find it more +<pb n='264'/><anchor id='Pg264'/> +difficult and laborious to gratify his want of agricultural +products;<note place='foot'><q>A district of Tartary of ten square miles, in +which several hordes pasture their flocks, may contain between 400 and 500 +shepherds, who find employment in this mode of production.</q> In Brie, in +France, on the same area, 50,000 peasants who own no land, live and draw +their sole income from their labors in the fields (<hi rend='italic'>J. B. +Say</hi>).</note> +and the products themselves would be of an inferior +kind. +</p> + +<p> +Thus, for instance, in Camargo, the lackmus was formerly +prepared from plants to be had <q>free</q> in the woods. It was +then, however, much dearer than it is now that the plants are +artificially raised on landed property.<note place='foot'><hi +rend='italic'>Schubert</hi>, Reise durch Frankreich und Italien, I, 188.</note> +It is otherwise with +the fisheries. The appropriation of rivers or seas would not +tend to increase the abundance of their products, and hence +this appropriation is, on the whole, rare.<note place='foot'><q>Without labor, +the earth bestows nothing on man but a stopping place. +Hence, the reasons for private property do not extend so far as to prove that +the great land and water highways should not be reserved as common property, +and as a home to every man.</q> (<hi rend='italic'>Zachariä</hi>, vom Staate, VII, +43.)</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section LXXXVIII. Landed Property. (Continued.)'/> +<index index='pdf' level1='Section LXXXVIII.'/> +<head type='sub'>Section LXXXVIII.</head> +<head>Landed Property. (Continued.)</head> + +<p> +Whenever this admixture of capital and labor with land has +taken place to no great extent, private property in land is not +found developed in any degree. Thus, there are even now +many half-civilized countries in which the land is forfeited because +not tilled for many years, and where it may be occupied +by the first person who will cultivate it.<note place='foot'>This is the practice in +Taway. <hi rend='italic'>Ritter</hi>, Erdkunde, V, 130. And so in +ancient Germany. <hi rend='italic'>J. Grimm</hi>, Rechtsalterthümer, 92. Right of the +<q>dead fire</q> in Spain and Portugal during the middle ages. <hi rend='italic'>S. +Rosa de Viterbo</hi>: Elucidario das Palavras etc., I, 470. In many parts of Persia, the +land belongs to anyone who has provided it with water by canals or wells. +(<hi rend='italic'>Fraser</hi>, Journey in Chorasan, ch. 7.) Especially after the +Mongolian devastation about the beginning of the fourteenth century, it was decreed +that land which had remained uncultivated for a long time should belong to the person +who made it productive. (<hi rend='italic'>d'Ohsson</hi>, Hist. des Mongols, IV, 418.) +Similarly, in the time of the ancient Persians (<hi rend='italic'>Polyb.</hi>, X, 28, +3), the harvest for the first five years belonged to the person who first irrigated the +land. On the upper Euphrates, likewise, the land is very often neither sold nor leased. +Anyone who will till it and pay one-tenth of the produce to the bey may +have it for nothing. (<hi rend='italic'>Ritter</hi>, X, 669; compare VIII, 468; IX, +900.) So, too, among the Fulah and Mandingo negroes, and even among the Tscherkessans. +(<hi rend='italic'>Klemm</hi>, Kulturgeschichte, III, 337 ff.) As the latest stages of +development so often present instances of a reversion to the earliest, we find that +Theodosius and Valentinian decreed that the <hi rend='italic'>agri deserti</hi> should, +after two years' cultivation, belong to the possessor. L. 8, Cod. Just., XI, 58.</note> +In Europe, common +<pb n='265'/><anchor id='Pg265'/> +possession of forests and pasture lands asserted itself much +longer than that of arable land, because, in the case of the +former, labor and capital play a much less important part in +the management of them. And yet, even in the case of arable +land etc., and, in the highest stages of civilization, the property-quality +is yet less developed than the property-quality of +capital. How seldom do we find <hi rend='italic'>fidei commissa</hi> of capital, +or capital juridically tied up. We find that the law of all +ancient nations drew a marked distinction between moveable +and immoveable property, and that the power of disposing of +the former by sale, pledge, in dowry, partition etc., was a much +freer one. And even now, the police power which may be +exercised over moveable property is much more restricted +than that over houses and land.<note place='foot'>Thus anyone +may burn his own coat or throw it in the water; but no +one may set fire to his own house or drown his land by the destruction of a +dam. Even the non-user of a large area, in a thickly populated region, +would scarcely be permitted. The taking of property by the state, at the +present day in times of peace, is confined almost exclusively to land.</note> +The justice of the exclusive +right of possession to what one has earned and saved is obvious +to every one. On the other hand, the appropriation of +<q>original and indestructible natural forces</q> has its basis not +so much in justice as in the general good; and the state has +always considered itself entitled to attach to the <q>monopoly +of land,</q> which it accorded to the first possessor, all kinds of +limitations and conditions in the interest of the common good, +<pb n='266'/><anchor id='Pg266'/> +and sometimes to consider private property in land in the light +of a semi-public function.<note place='foot'>Thus <hi rend='italic'>P. +v. Arnim</hi>, in a work entitled <q>Ideen zu einer vollständigen +landwirthschaftlichen,</q> Buchführung, 1805, a treatise on <q>agricultural +book-keeping,</q> considers the farmer as a state official who should cultivate whatever +he believed in conscience, or what the state declared to be, most necessary. +He suggests that the state should subject all new purchasers of land to an +examination to ascertain whether they are rich and noble enough to act in +this way.</note> I may instance the feudal principles +of the latter portion of the middle ages, which are so far +removed from our ideas of private property in land; and yet, +of which many echoes are heard, even in our day, and are not +without their influence in practice. Thus, further, for instance, +even in England, the greater number of the poor-rates, of +taxes for the support of the established church, the maintenance +of public highways etc., are heaped upon the rent of +land. Many socialists have proposed to make the state the +sole proprietor of the soil,<note place='foot'>Thus, for instance, +<hi rend='italic'>Herbert Spencer</hi>, Social Statics, 1851, 114 ff., and to +some extent <hi rend='italic'>Spinoza</hi>, Tract. polit., VI, 2. There are now +in England several Land-Tenure-Reform-Associations, some of which would +<q>expropriate</q> all land and vest the title in the state. The programme of the +others embraces not only opposition to the right of primogeniture, to family +<hi rend='italic'>fidei commissa</hi> and the assertion of the right of freedom of trade +in land, and of a more democratic use of common lands, but also the appropriation by the +state of the increase in the rent of land which is caused by no labor of the landlord, +but solely by the increase of population and of the wealth of the community +or of the nation. <hi rend='italic'>Newmarch</hi>, on the other hand, very correctly +remarks, that since it is impossible to draw a line of demarkation showing the increase of +the value of land growing out of the increase of population etc., the owner +of land in making improvements would never know whether he made them +for himself or for the state. (Statist. Journal, 1871, 488 ff.) Compare +<hi rend='italic'>Wolkoff</hi>, Sur la Rente foncière, 1854, and <hi rend='italic'>H. +H. Gossen</hi>, Entwickelung der Gesetze des menschlichen Verkehrs (1854).</note> +sometimes adding the condition, +that the previous private owners should be compensated in +capital, when it would be at least supposable that private capital +might be enticed to cultivate it, if long and sure leases of +it were made. This would be a <q>good</q> demesne-husbandry, +extending over the entire country. We need only glance at +those kingdoms in which something analogous is to be found, +<pb n='267'/><anchor id='Pg267'/> +especially the despotisms of the east,<note place='foot'>In Congo and +on the gold coast of Guinea the land, in whole villages, +is tilled in common and the harvest distributed among the families per capita. +Wherever absolutism reigns, the prince is also the owner of all the land. +(<hi rend='italic'>Klemm</hi>, III, 337.) In China, where the original tenure +in common of the land by all was broken through in the third century before Christ, all +the land of the country now belongs, strictly speaking, to the state; and the possessor +of land who permits it to go untilled is punished. (<hi rend='italic'>Plath.</hi> in the +phil.-hist. Sitzungsberichten der Münchener Akad., 1873, 793 ff.) In Corea, +private property in land is unknown; arable land is divided by the state according +to the number in a family. (<hi rend='italic'>Ritter</hi>, IV, 633.) The example, on the +largest scale, of a country without private property in land is the British +East Indies. Compare the paper by <hi rend='italic'>Ch. Campbell</hi>, in the Essays +published by the Cobden Club; System of Land Tenure in various Countries, 1870.</note> +to divine that such a +system does not suffice to insure the real productiveness of a +nation's economy.<note place='foot'>The legal and economic difference between +property in land and property in capital is well defined by <hi rend='italic'>J. +S. Mill</hi>, Principles, II, ch. 2, 6. <q>The reasons +which form the justification, in an economical point of view, of property in +land, are only valid in so far as the proprietor of the land is its improver. +In no sound theory of private property was it ever contemplated that the +proprietor of land should be merely a sinecurist quartered on it.</q> He here +alludes specially to Ireland. The Fourierist, <hi rend='italic'>Considérant</hi>, +distinguishes accurately between the capital produced by labor and saving, and the +increase of the value of land caused by capital and labor, and its original value. +Only the first two elements can justly be made property. But as, for prudential +reasons, it is necessary to grant individuals the right of private property +in land, those who are not such proprietors must, as a compensation for +the common property which they have lost, be guaranteed the right to labor. +(Théorie du Droit de Propriété et du Droit au Travail.) In England, the +opinion that the compulsory support of the poor was introduced in compensation +to them for the establishment of private property in land has met +with considerable favor. <hi rend='italic'>Bishop Woodward</hi>, On the Expediency of +a Regular Plan for the Maintenance of the Poor in Ireland, 1775. Compare +<hi rend='italic'>Eden</hi>, State of the Poor, I, 413. However, the poor rates, in a +country like England, are much more than an equivalent of what its soil could produce +without the assistance of capital.</note> +</p> + +</div> + +</div> + +<pb n='268'/><anchor id='Pg268'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter VI. Credit.'/> +<index index='pdf' level1='Chapter VI.'/> +<head type='sub'>Chapter VI.</head> +<head>Credit.</head> + +<div> +<index index='toc' level1='Section LXXXIX. Credit In General.'/> +<index index='pdf' level1='Section LXXXIX.'/> +<head type='sub'>Section LXXXIX.</head> +<head>Credit In General.</head> + +<p> +Credit<note place='foot'>The principal classical work on this subject is +<hi rend='italic'>Nebenius</hi>, Der öffentliche Credit, 1820, 2d ed., 1829. Previously, +<hi rend='italic'>Salmasius</hi>, De Modo Usurarum, 1639; and even +<hi rend='italic'>Demosthenes</hi>, adv. Dionysiod, 1283. Compare further +<hi rend='italic'>Schäffle</hi>, in the Deutsch. Vierteljahrsschrift, No. 106, II, +289 ff.</note> is the power of disposition over the goods of +another,<note place='foot'>Compulsory loans by the state, for instance, +occupy an intermediate position between taxes and credit-operations, +properly so called.</note> +voluntarily granted in consideration of the mere promise +of the counter-value.<note place='foot'>Besides loans proper, all payments +in advance, or delays made in the payments of earnest-money, all leases and +lettings, which <hi rend='italic'>Courcelle-Seneuil</hi> calls +<foreign lang='fr' rend='font-style: italic'>un médiocre degré de crédit</foreign>, +insurances and even all contracts for wages where the payment is delayed for a long +period of time, are species of credit. For a nice distinction between leasing +(<foreign lang='de' rend='font-style: italic'>Pacht</foreign>) and letting (<foreign +lang='de' rend='font-style: italic'>Miethe</foreign>), see <hi rend='italic'>Knies</hi>, +Tübinger Ztschr., 1860, 180 ff., and the Freiburger Univ. Programm., +9. September, 1862. <hi rend='italic'>D. Wakefield</hi>, Essay upon Political Economy, +1804, 35, distinguishes between <q>loan-credit</q> which is given to a poor man in the +hope of his paying it by means of his labor, and <q>exchange-credit,</q> or credit +between property owners. <hi rend='italic'>Cieszkowski's</hi> definition: +<foreign lang='fr' rend='font-style: italic'>le crédit c'est la métamorphose +des capitaux stables et engagés en capitaux circulants et dégagés</foreign>. (Du +Crédit et de la Circulation, 2d ed., 1847.) According to <hi rend='italic'>Knies</hi>, +Tübinger Ztschr., 1859, 568, every credit-operation is an exchange or sale of services, +one of which is to be performed in the present, and the counter-service of +the other party in the future. According to <hi rend='italic'>Macleod</hi>, it is +<q>a sale of debts.</q></note> As Franklin says: A good pay +is master of another man's purse. Hence, it is evident that +whoever would obtain credit must be believed to possess the +ability as well as the intention to fulfill his promise. Where +<pb n='269'/><anchor id='Pg269'/> +this belief is based simply on the opinion entertained of the +person of the debtor, we speak of personal credit,<note place='foot'>Personal +credit, of course, preponderates in commerce. Hence it is, that +in mercantile life, information concerning the personal status, reputation etc. +of his colleagues, plays so important a part with the merchant. This information +was made more accessible in England by the Lloyd institution. On +similar North American institutions, see <hi rend='italic'>Tellkampf</hi>, Beiträge, I, +51. Credit given on security is a modification, sometimes of personal and sometimes of +real credit. Compare, <hi rend='italic'>infra</hi>, the theory on bankers, brokers +etc.</note> in contradistinction +especially to the credit based on bailment, pledge, +hypothecation etc. The longer the time between the making +of the promise and the period fixed for its fulfillment, the less +certain is the latter, where the security is simply the person +of the debtor. It is chiefly in very uncivilized nations and +also in nations in their decrepitude, and during periods of anarchy, +and in despotisms, that personal security stands higher +than any other. The same is true, though for other reasons, +in very energetic civilized nations, where the people put a high +estimate on the element of labor in their economy, among +whose members legal security is, indeed, found, but where the +peculiar sensitiveness of speculation would be too much hampered +by the more sluggish nature of other credits; as, for +instance, in North America, and even in ancient Rome. Civilized +nations that have reached the stationary economic state, +on this account much prefer the greater security and the absence +of care which accompany non-personal credit.<note place='foot'>In despotisms, +credit is almost entirely personal. <hi rend='italic'>Montesquieu</hi> Esprit des +Lois, L.V., 15. In New York, says <hi rend='italic'>M. Chevalier</hi>, a merchant +with resources worth 200,000 francs, can do a business of from 1,000,000 to 1,500,000 +francs. In Paris, under similar circumstances, the same man would find it difficult to +be credited to the extent of 500,000 francs. In Holland, two hundred years +ago, a person who hypothecated his property was obliged to pay a higher +rate of interest than in business (<hi rend='italic'>Becher</hi>, Polit. Discurs, +1763, 699), while the stationary period, one hundred years ago, made personal credit +extremely difficult. In Zurich, it was encouraged by the prohibition of loaning money +out of the country. (<hi rend='italic'>Büsch</hi>, Geldumlauf, III, 40.)</note> +In estimating +the ability of the debtor to meet his promise, we must +take into account, especially, the disposable character of his +resources; otherwise it would be impossible to understand +<pb n='270'/><anchor id='Pg270'/> +why the merchant may so frequently obtain a loan on his +stock equal to its whole value, while the owner of land can +place it as security only to the extent of half its value. +</p> + +<p> +Credit, on the whole, grows in importance with an advance +in civilization, and this is true especially of credit intended for +productive purposes. This is a consequence of the greater +division of labor which causes unfinished products to be put on +the market more and more frequently,—products which come +to have a value only after some time, but which, when that time +has elapsed, have present value. And, indeed, as the world +advances and civilization grows, it becomes much easier to +forecast the future with certainty. The future, also, then becomes +more a source of solicitude, and fixed capital, as a consequence, +plays a part which grows daily more important. +The limit to the development of credit is this: it is safe only +when the debtor invests his borrowed goods in the production +of, to say the least, their equivalent. This is why the personality +of the state, clothed with immortality and with a formally +boundless power of taxation, is so often seduced into engaging +in transactions of credit which are never self-discharged.<note place='foot'><hi +rend='italic'>Schäffle</hi>, Nat. Œk., II, Aufl., 112.</note> +The social diseases of panics and of extravagant enterprises +stand in the same relation to credit that unbelief and superstition +do to true religion.<note place='foot'><hi rend='italic'>Schäffle</hi>, +according to the purpose which it is intended to subserve, divides +credit into production-credit (investment of loans in immoveable property +and in moveable property engaged in industrial operations), consumption-credit +and clearing-credit, or loans made to pay respited purchase and earnest +money, inheritances etc. (Kapitalismus und Socialismus, 552.)</note> +(<hi rend='italic'>Schäffle</hi>.) +</p> + +</div> + +<div> +<index index='toc' level1='Section XC. Credit—Effects Of Credit.'/> +<index index='pdf' level1='Section XC.'/> +<anchor id="Section_90"/> +<head type='sub'>Section XC.</head> +<head>Credit—Effects Of Credit.</head> + +<p> +As regards the effects of credit, we may remark, that it is as +powerless directly to produce new capital as is the division +of labor to produce new workmen. To every credit of the +<pb n='271'/><anchor id='Pg271'/> +creditor corresponds a debit of the debtor. As Turgot said: +<foreign lang='fr' rend='font-style: italic'>Tout credit est un +emprunt</foreign>.<note place='foot'><hi rend='italic'>Pinto</hi>, Traité de la +Circulation et du Crédit, 1771, considers loans bearing interest as new portions of the +resources of a country (p. 161), and that government loans not made in excess of its +powers are <foreign lang='fr' rend='font-style: italic'>une alchymie réalisée dont +souvent eux mêmes qui l' opèrent n' entendent pas tout le mystère</foreign>, (p. 338.) +Similarly and earlier, <hi rend='italic'>v. Schröder</hi>, F. Schatz-und Rentkammer, +238 ff; <hi rend='italic'>Mélon</hi>, Essai politique sur le Commerce, 1734, ch. 6; +next, <hi rend='italic'>Hamilton</hi>, Report to the House of Representatives on the +subject of Manufactures, Dec. 5, 1791; <hi rend='italic'>Von Struensee</hi>, +Abhandlungen, 1800, I, 259. See infra, § 210. More recently, <hi rend='italic'>St. +Chamans</hi>, Nouvel Essai sur la Richesses des Nations, 1824, 83 ff. +To some extent, even <hi rend='italic'>Dietzel</hi>, System der Staatsanleihen, +1855, 200. This is a dangerous error, since to every credit there is a set-off in +the nature of a debit of an equal amount; and the evidences of debt are nothing but claims +on the future revenue of the state. This was fully recognized by +<hi rend='italic'>Cantillon</hi>, 291 ff. One of the principal advocates of that view +among writers on Political Economy is the vivacious, acute and practically not +unskillful, but sophistically superficial <hi rend='italic'>Macleod</hi>. (Elements +of Political Economy, 1858, ch. 3, Dictionary, 1862, v. Credit.) The creditor's +assignable right of demand, he considers immaterial capital. While bills of lading, +warehouse receipts, dock yard receipts etc., only represent goods, the bank note is +new goods. Even metallic money has only a credit-value, inasmuch as it can be used only to +effect exchanges. To the - of the creditor may correspond a + of the +debtor; but the latter is negative only in the sense that we speak of negative +electricity, a negative thermometrical degree. When an estate is leased, the +owner has, in his demand for rent, a vendible <emph>plus</emph>; but the lessee no +corresponding <emph>minus</emph>. (Not so. To the same extent that the proprietor has his +future payments on the lease discounted, the present sale-value of his estate +is diminished; or if it is not sold, the last party obtaining the discount has +made his available capital as much less by the advance as that of the lessor +has been increased.) The <q>discounting of the future,</q> that is, the apparent +capitalization of hopes, so much in vogue at the present time, may be a great spur to +production as it may also be to baseless extravagance.</note><note place='foot'>Many +theoreticians ascribe a direct creation of new capital to credit, in so +far as the capacity of the evidences of debt to circulate as a medium of exchange +effects a real saving, and permits the former very costly and intrinsically +valuable instruments of exchange to be used in some other way. +(§ <ref target="Section_123">123</ref>.) Compare <hi rend='italic'>Ricardo</hi>, +Proposals for a secure and economical Currency (1817). <hi rend='italic'>J. S. +Mill</hi>, Principles, II, 174 and 36. <hi rend='italic'>McCulloch</hi>, Commercial +Dictionary, art. Credit. And so it was in the first four editions of this book +of mine. But here, too, there is, immediately, only a transfer of already existing +capital. The person, for instance, who accepts a bank note for payment, +loans a part of his capital to the bank; and the advantage to the whole +community of such credit-operations consists chiefly in this: that so large +a quantity of cash-capital which lay idle in banks etc., may be used more +productively.</note><note place='foot'>When <hi rend='italic'>Roesler</hi> says that +credit is capital, the product of saving, and very serviceable in further production +(<hi rend='italic'>Grands.</hi>, 300), he confounds credit itself +with the foundations of credit, which are, indeed, in large part material or +moral capital.</note> But, on the other hand, credit +<pb n='272'/><anchor id='Pg272'/> +facilitates the transmission of the elements of production, +especially of capital, from one hand to another.<note place='foot'>Compare Discourse +on Trade, Coyn and Paper-Credit, London, 1697, 72 ff.</note> When, +therefore, the debtor employs the capital that he has borrowed, +more productively than the creditor would have done, the whole +country is a gainer; as it is a loser, on the contrary, when a +person engaged in industry advances to the idler, the frugal +man to the spendthrift, the solid man to the wild speculator. +In declining nations, where every new development hastens +decay, the latter alternative may be the prevailing one; and, +especially here, may the usurious giving of credit by the shrewd +to the simple lead to ruinous debtor-slavery. Among a vigorous +and energetic people, the former is apt to govern, as it +is only by the productive employment of the loans made that +they are permanently enabled to pay interest. Here credit is +an invaluable means, not only of putting idle capital in motion, +and of making active capital still more active, but especially of +concentrating capital, by which it may gain as much in productive +power as labor does by the coöperation of labor. This is +effected, very frequently, by means of joint-stock companies, +the principle of which recommends them especially in enterprises +where stationary capital is required rather than circulating +capital, and where capital generally plays a greater +part than labor; and where this labor can be subjected to provisions +which may be accurately laid down beforehand; as, +for instance, in the case of docks, insurance companies, banks,<note place='foot'>Compare +<hi rend='italic'>Buron</hi>, Guerre au Crédit, 1868. <hi rend='italic'>Schäffle</hi>, +Tüb. Ztsch., 1869, 296 ff. With a thorough understanding of its politico-economical +bearing, <hi rend='italic'>O. Michaelis</hi>, (Berliner V. Jahrsschr. 1863, IV, 121,) +says: The capital-value of my credit is not equal to the nominal value of my evidences +of indebtedness [notes etc.], but to the capitalized amount of the extra surplus which I +have obtained in my business by means of credit, after deduction is made of the +costs and of the risk-premium.</note> +<pb n='273'/><anchor id='Pg273'/> +etc. Banks, then, become real reservoirs of capital, provided +they are properly and judiciously established and managed; +real reservoirs which receive in one place the capital which is +superfluous elsewhere, in order to supply some other place +with that which is necessary to it. The more confidence increases, +the more are even the smallest driblets of capital +awakened from their slumbers, and made active and productive. +It is only by means of credit that the help of foreign +capital can be obtained for home production. Indeed, credit, +considered as an exchange of probable future goods against +actually existing goods, is one of the principal functions of +the temporal solidarity of the economy of nations. (<hi rend='italic'>Schäffle</hi>.) +Without credit, there would be very little place for speculation +proper. +</p> + +<p> +We may see how the possibility of giving and receiving credit +promotes wealth, by contemplating the poorer classes, whose +poverty, both as cause and effect, is very closely related to the +absence of credit. And here we have a suggestion of the reverse +to the bright side of the picture of credit, analogous to +that mentioned in § <ref target="Section_62">62</ref> of the coöperation of labor, +viz.: that it tends to intensify inequality among men. The man who +is distinguished by the amount of his wealth, or by his position +is naturally known to a much wider circle than others +are. From which it follows, that he may, by the way of credit, +increase his power, already so much greater in the economic +world, by a much larger multiplier.<note place='foot'>We shall, in the books to follow +this, inquire with great care, what are the means best calculated to remedy this +dangerous tendency. We need only remark here, that it is to be found in a judicious +association of small capitalists, and also in the capitalization, so to speak, of +personal qualities. A well organized society of work-men, without capital, may indeed +obtain credit, as for instance, the Schultze-Delitsch societies, the Russian +<hi rend='italic'>artel-schnicks</hi> (market-aid societies) etc. prove. +(<hi rend='italic'>Frühauf</hi>, Die russ. Artels in <hi rend='italic'>Faucher's</hi> +Vierteljahrsschrift, 1868, I, 106 ff.) We may also mention the +greater credit accorded to a land-owner the moment he becomes a member +of a land-loan association as compared with what he could obtain before he +had joined it. The popular belief of the ancient Egyptians afforded them a +very great instrument of credit in the pledging of the remains of their ancestors. +(<hi rend='italic'>Herodot.</hi>, II, 136.)</note> Hence, it need not +<pb n='274'/><anchor id='Pg274'/> +surprise us, that the great obtain credit from those in a lower +position, at least as frequently as they give them credit in turn. +</p> + +<p> +On the side of the creditor, the possibility of making loans +is a powerful incentive to frugality. Were there no credit, +those who were not in a condition to employ their capital productively +would make savings only within very narrow +limits.<note place='foot'><hi rend='italic'>B. Hildebrand</hi> is of opinion that the +Political Economy of the future may be characterized as credit-economy, in the same way +as the Economy of the present may be called money-economy, and that of the past as +barter-economy of barter. (National Œkonomie der Gegenwart und Zukunft, I, +276 ff.) <hi rend='italic'>Hildebrand's</hi> view is correct in so far as that, with +every advance in civilization, credit comes to have absolutely and relatively an ever +increasing importance, although in the middle ages, especially under feudal forms +(<foreign lang='de' rend='font-style: italic'>Lehensformen</foreign>), there were +numberless operations in credit. Otherwise, however, <hi rend='italic'>Hildebrand's</hi> +three kinds of economy are, by no means, coördinated. +While barter and purchase through the instrumentality of money, in every +instance, entirely exclude each other, it is impossible to imagine a credit-transaction +of which the promise of a barter-performance or of a money-performance +does not constitute the base. During a <q>money-economical +(<foreign lang='de' rend='font-style: italic'>geldwirthschaftlichen</foreign>) period</q> +[i.e., one during which money is the medium of exchange, and not notes; and when barter +does not obtain.—<hi rend='italic'>Translator</hi>.] +the service rendered by money as a medium of exchange may, for the most +part, be supplanted by credit. Money, as a measure of value, still remains +the substratum of credit itself. (See <hi rend='italic'>Knies</hi> in the Tübinger +Ztschr., 1860, 154 ff.; and in the Freiburger Programm, 9 Sept., 1862, 19.) Earlier yet, +<hi rend='italic'>A. Wagner</hi>, Beitr. zur Lehre von den Banken, 1857 ff. Among the +most practical propositions of Saint Simonism is that of a <foreign lang='fr' +rend='font-style: italic'>système genéral des banques</foreign>, +intended to administer all the goods of the nation, and to loan them to individuals +engaged, in production. (<hi rend='italic'>Bazard</hi>, 205 ff.)</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XCI. Debtor Laws.'/> +<index index='pdf' level1='Section XCI.'/> +<head type='sub'>Section XCI.</head> +<head>Debtor Laws.</head> + +<p> +Private credit is always conditioned, and in a great many +ways, by the situation of the whole nation's business; in other +<pb n='275'/><anchor id='Pg275'/> +words, by their politico-economical situation. It is especially +in the higher stages of civilization, that one bankrupt may +easily drag numberless others down with him; and where the +laws are bad or powerless, not even the wealthiest man can +predicate his own solvency for any length of time in advance. +One of the most important conditions of credit is the certainty +that, if the debtor's good will to meet his obligations should +fail, it shall be supplied by the compulsory process of the +courts. Hence, the importance of a judicial procedure, at +once impartial, enlightened, prompt and cheap.<note place='foot'>It is destructive +of credit to allow the debtor to await several decrees or +judgments before his liability is established; to allow him, on easy terms, +delays, reversals of judgment, the costs of the case etc. The term within +which a creditor might bring in his claim before the meeting of creditors in +the Amsterdam Boedel-chamber was formerly thirty-three and a third years. +(<hi rend='italic'>Büsch</hi>, Darst. der Handlung, Zusatz, 82.) In the +presidency of Bengal there were, in 1819, 81,000 cases in arrears, and in 1829, +140,000. Westminister Review, XIX, 142.</note> The more +vigorous the laws relating to debt are in preventing dishonesty +on the part of the debtor, the more advantageous are they to +honorable and honest debtors. Adam Smith has rightly said, +that in countries in which creditors are not completely protected +by the courts, the honorable man who borrows money +is in the same condition as the notoriously dishonest man or the +spendthrift, in better governed countries. He finds it more difficult +to borrow and is obliged to pay a higher rate of interest.<note place='foot'>And yet +<hi rend='italic'>Melon</hi> is of opinion that the state should favor the debtor as +much as possible. (Essai politique sur le Commerce, ch. 12, 18.) This was +the view entertained on this subject by the older practitioners. In Bengal, +the <hi rend='italic'>dhura</hi>, a species of <q>judgment of God,</q> in which +the party who could hold out longest against hunger was declared the victor, was the +only means to compel a debtor to pay his debt. As a consequence, the Bengal peasant +could not borrow money at less than 60 per cent. per annum. Edinburgh +Review, XXII, 67. On the damages attending the credit-laws and credit-courts +of Russia, by which all foreign goods are rendered exceedingly dear, +see <hi rend='italic'>v. Sternberg</hi>, Bemerkungen über R., 100 ff. In a country +in which a great many powerful personages are above the laws, an incorporated loaning +bank may be an indispensable necessity. (<hi rend='italic'>Storch</hi>, Handbuch, II, +p. 23 ff.) In Naples, even as recently as 1804, no debtor could be arrested during the +last six months of the queen's pregnancy. At a previous period, one might +fail in business there and escape all punishment by exposing the hindermost +part of himself in a nude state publicly before a column of the +<hi rend='italic'>Vicaria</hi>. (<hi rend='italic'>Rehfues</hi>, Gemälde von Neapel, +I, p. 203 seq., 222.) In Schwytz, the rate of interest is so high, because the law +allows the debtor to pay his creditor, whether the latter will or not, in articles of +household furniture, clothes etc., estimated at a very high value. +(<hi rend='italic'>Hermann</hi>, Staatsw. Untersuchungen, 202.) It has now become quite +usual in the United States, on account of the many delays granted to the debtor by +<q>democratic</q> laws introduced there, instead of mere mortgage, to give full warranty +deeds when capital is loaned. By this means, the creditor is in danger, when misfortune +overtakes him, to see himself compelled to let his property go at one-fourth of its +value.</note> +Rigorous debtor laws, on the other hand, diminish in +<pb n='276'/><anchor id='Pg276'/> +the whole nation the amount of <q>bad debts,</q> that is, a not insignificant +portion of the cost of production. They, at the +same time, promote, as far as it is in the power of laws to do +it, national honor and the mutual confidence of man in man. +The excellence of their debtor laws, in their most flourishing +period, was one of the principal elements which contributed to +make Athens and Rome of such importance in the history of +the world.<note place='foot'>See the Heliast oath in <hi rend='italic'>Demosth.</hi>, +adv. Timocr., 746. The Roman system of credits in the time of Polybius was much better +than the Carthaginian. <hi rend='italic'>Polyb.</hi>, VI, 56, XXXII, 13.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XCII. History Of Credit Laws.'/> +<index index='pdf' level1='Section XCII.'/> +<head type='sub'>Section XCII.</head> +<head>History Of Credit Laws.</head> + +<p> +In the history of laws relating to credit, we may distinguish, +in a great many countries, three stages of development. +</p> + +<p> +A. The laws, in the first stage, are very severe. In the +Germanic middle age the insolvent was disgraced. He became +the slave of his creditor (<foreign lang='de' rend='font-style: italic'>zu Hand und +Halfter</foreign>), who might imprison him, fetter him (<foreign lang='de' +rend='font-style: italic'>stöcken und blöcken</foreign>), and +probably kill him. A Norwegian law allowed the creditor, +when his debtor would not work and his friends would not +ransom him, to take him before the court, and <q>to lop off from his body what +part he will, above or below.</q><note place='foot'>Sachsenspiegel, III, 39. +<hi rend='italic'>J. Grimm</hi>, Deutsche Rechtsalterthümer, 612 ff. +<hi rend='italic'>Dahlmann</hi>, Dänische Gesch., II, 245, 339. +<hi rend='italic'>Hermann</hi>, Russ. Gesch., III, 357. On slavery for debt among +the Malays, see Ausland, 1845, No. 157.</note> To judge of +<pb n='277'/><anchor id='Pg277'/> +these provisions correctly, it is necessary to bear in mind the +many ways in which family resources were at this time bound +and tied up, and not forget <q>the power of defiance in these +iron natures.</q><note place='foot'><hi rend='italic'>Beaujour</hi>, Tableau +du Commere en Grèce, II, 176.</note> (<hi rend='italic'>Niebuhr</hi>.) +</p> + +<p> +B. The canon law introduced milder principles. Gregory +the Great had already prohibited the holding on to the body +of the debtor.<note place='foot'>C. 2 X. De Pignor. An appropriate +provision in a priestly government. <hi rend='italic'>Diodor.</hi>, I, +79.</note> On this account, during the latter portion of +the middle ages, it was customary to stipulate by contract that +the provisions of the ancient law should govern in this matter, +to submit to imprisonment etc.<note place='foot'>Staying in a place +by the debtor until the creditor is satisfied, and other +degrading stipulations, which, however, were prohibited by the police regulations +of the Empire in 1548, art. 17.</note> The influence of the Roman +law made it gradually more usual, in the case of insolvent +debtors, to demand no more from them than the assignment +of their property for the benefit of their creditors. This, however, +led to numerous frauds; and these became more frequent +in proportion as the laws governing the property of parties +while the marriage relation existed between them, and as executions +against landed property etc. were defective. +</p> + +<p> +C. Hence, in more highly civilized times, there has been a +return to the severity of earlier ages. Persons engaged in +commerce, especially those whose capital is so volatile, and to +whom time is a thing so precious, can scarcely dispense willingly +with personal imprisonment for debt. Hence, legislation +on bills of exchange, sanctioned especially by imprisonment +of the person, plays a very important part in the commercial +cities of the seventeenth century, as it did, naturally, much +earlier in Italy and the Netherlands.<note place='foot'><hi rend='italic'>Marten's</hi> +Ursprung des Wechselrechts, 1797. Statuta Mediol., 1480, fol. +238 ff. The municipal law of Florence unconditionally imprisoned the +father or grandfather for the debt of the son, when the latter engaged in industrial +pursuits with their consent. (Stat. Flor., I, 201.) In Bologna, the +brothers of a bankrupt who had constituted one household with him were +held responsible for his debts. (Statuti dell' Università de Mercantati della +Città di B., 1550, fol. 110.) The law of Geneva excluded from all positions of +honor the son who had left his father's debts unpaid. <hi rend='italic'>Montesquieu</hi>, +E. des Lois, XX, 16. The consequence was, that among the higher classes not a +creditor lost anything for centuries. (<hi rend='italic'>K. L. v. Haller</hi>, +Restauration der Staatswissenschaften, VI, 519.) Compare the <q>Nurenberger +Reformation</q> of 1479, fol. 61 and 68 of the edition of 1564.</note> Modern laws in +<pb n='278'/><anchor id='Pg278'/> +many cases punish the bankrupt whenever an examination of +his books, kept after approved methods, does not demonstrate +his innocence.<note place='foot'>Compare the R. P. O. of 1548, +art. 22. And so, by the Code de Commerce, III, 4, I, even the simple bankrupt in +contradistinction to the fraudulent bankrupt is punished, and every person unable to pay +his debts is declared a <emph>simple</emph> bankrupt, who, among other things, has made +excessive household expenses, or lost considerable sums by play etc. Compare +<hi rend='italic'>Sully</hi>, Mémoires, Livre XXVI, who declares it to be his most +wholesome law, that fraudulent bankrupts should, like thieves, be punished with death, +and that all their fraudulent assignments, gifts, etc., should be declared void. Further, +Ordonn. de Louis XIV., sur les Failletes, art. 11; <hi rend='italic'>J. de Wit</hi>, +Mémoires, 77 ff; <hi rend='italic'>v. den Heuvel</hi>, Sur le Commerce de la Hollande, +110 ff. Frederick William I., in 1715, threatened with the galleys all light-headed +bankrupts, and, in 1723, all those who, knowing their insolvent condition, should effect +further loans. <hi rend='italic'>Mylius</hi>, Corp. Const. March. II, 2, 31, 40. For +China, see <hi rend='italic'>Davis</hi>, The Chinese, I, 247 ff. <hi rend='italic'>Gr. +Soden</hi>, Nat. Oek., III, 231, demands that, in case of doubt, the guilt of the +bankrupt should always be presumed.</note> The great facility of fraudulent bankruptcy, +where commerce has attained a high degree of development +and complication; the absence of honor shown in engaging in +speculation for one's own gain with a stranger's capital, and +without the real owner's knowledge; the comparatively small +number of blameless and irreproachable bankruptcies,<note place='foot'>In England only +one-tenth of the number of bankrupts are considered innocent. +<hi rend='italic'>Elliot</hi>, Credit the Life of Commerce, 1845, 50 ff.</note> certainly +justify these provisions.<note place='foot'>The <foreign lang='fr' +rend='font-style: italic'>contrainte par corps</foreign> of debtors was abolished in +France in 1792, but restored in 1797. Even <hi rend='italic'>Turgot</hi> remarked that +since slavery had ceased there was no further fear (?) that the poor would be oppressed +by imprisonment for debt. (Sur le Prêt d' argent, § 31.) According to +<hi rend='italic'>Droz</hi>, the question is not one of weighing <q>freedom</q> against +<q>miserable money,</q> but the deprivation of a few of that freedom and the +non-fulfillment of obligations entered into, that is against the destruction of public +confidence.</note><note place='foot'><p>A similar development among the Greeks: +</p> +<p> +A. Rigorous slavery for debt, which Kypselos moderated at Corinth. +(<hi rend='italic'>Pausan.</hi>, V. 17, 2), and Solon abolished in Athens. +(<hi rend='italic'>Plutarch</hi>, Sol., 15. <hi rend='italic'>Demosth.</hi>, +de fals. Legat., 412.) +</p> +<p> +B. The reckless creation of debts as seen in Aristophanes; while outside +of Athens slavery for debt lasted yet a long time. (<hi rend='italic'>Hermann</hi>, +Griech. Privatalterth., § 57, 20.) In the time of Demosthenes, the merchant in arrears +in the payment of his debts was cast into prison, and the bottomry-debtor +who deprived his creditor of his security might be punished with death, +(<hi rend='italic'>Demosth.</hi> adv. Pharm., 922, 958), and this although the +<foreign lang='la' rend='font-style: italic'>cessio honorum</foreign> was introduced. +<hi rend='italic'>Hermann</hi>, § 70, 3. Compare <hi rend='italic'>Xenoph.</hi>, +Vectigg., 3, <hi rend='italic'>Demosth.</hi> adv. Apat., 892; adv. Lacrit., and adv. +Dionys. In Corinth, the state superintended expenses made by parties. This was part of +its credit-policy. (<hi rend='italic'>Athænæus</hi>, VI, 227.) For a remarkable +Rhodian law relating to debts, see <hi rend='italic'>Sext.</hi> Emp., Hypot. I, 149. +</p> +<p> +In Rome: +</p> +<p> +A. The chief characteristic of the ancient law in this matter was the +eventual sale of the person of the debtor on the getting of the loan (<foreign +lang='la' rend='font-style: italic'>nexum</foreign>); the power of the creditor to put +the <foreign lang='la' rend='font-style: italic'>addictus</foreign> to death or to sell +him in foreign parts; finally, the <foreign lang='la' rend='font-style: italic'>in +partes secanto</foreign>, in the concourse of creditors. Without these rigorous +provisions, the borrower might easily have evaded his debts, by the emancipation of his +son and turning over his property to him. (<hi rend='italic'>Niebuhr</hi>, Rom. Gesch., +II, 770 ff; <hi rend='italic'>Savigny</hi> in the Abb. der Berliner Acad., 1833. +<hi rend='italic'>Zimmern</hi>, Gesch. des röm. Privatrechts, III, 131 ff.) +</p> +<p> +B. Later, we find nothing of the execution of the debtor, or of the sale of +his person; but he might be compelled to do slave labor for his creditor +without any protection against ill-treatment. Slavery for debt was restricted +by the Lex Poetelia. (<hi rend='italic'>Niebuhr</hi>, III, p. 178; +<hi rend='italic'>Mommsen</hi>, III, 494.) The Prætorian +law introduced the custom of putting the creditor in possession of the goods +of the debtor, with power of sale, which proceeding rendered the debtor infamous. +See several passages in <hi rend='italic'>Walter.</hi>, Röm Rechtsgesch, 763 ff; +<hi rend='italic'>Tertull.</hi>, Apol., 4; Tab. Herac. I, 115 ff. Later, Cæsar's Lex +Julia permitted the honest debtor to escape imprisonment by the assignment of his goods. +</p> +<p> +C. The moneyed oligarchy which prevailed in Rome caused the adoption +of exceedingly severe measures against delinquent debtors. +(<hi rend='italic'>Plut.</hi>, Lucull., 20. <hi rend='italic'>Cic.</hi>, +ad. Att. V. 21, VI.), although its members themselves incurred +debts in the most reckless manner. Cæsar, in the year A.C. 62, excluding +his active (<hi rend='italic'>activen</hi>), owed debts to the amount of 25,000,000 +sesterces; M. Antonius, in the year 24, 6,000,000; in the year 38, 40,000,000; +Curio, 60,000,000; Milon, 70,000,000. (<hi rend='italic'>Mommsen</hi>, Römische +Geschichte, III, 486.) Compare <hi rend='italic'>Gellius</hi>, XX, 1, XV, 14.</p></note> +</p> + +</div> + +<pb n='279'/><anchor id='Pg279'/> + +<div> +<index index='toc' level1='Section XCIII. Means Of Promoting Credit.'/> +<index index='pdf' level1='Section XCIII.'/> +<head type='sub'>Section XCIII.</head> +<head>Means Of Promoting Credit.</head> + +<p> +One of the most efficient means of promoting credit consists +in legislation intended to dry up the source of bad debts, +by placing obstacles in the way of reckless or usurious credits +<pb n='280'/><anchor id='Pg280'/> +for objects of luxury or pleasure, to bad customers.<note place='foot'>Whenever +a new shop-keeper, who sells goods on monthly credits, settles +in a district, the number of poor persons invariably increases. +(<hi rend='italic'>McCulloch</hi>, Commercial Dictionary.) The +ruinous credit given by the Jews to the Westphalian peasants +begins with an account for the goods which they have +succeeded in pressing upon them, after five or six years have elapsed. The +Jew seldom sues accounts at law; but he besieges the debtor and discovers +where his last head of cattle and his last little supply of provisions are to be +found. As he is willing to accept everything that has any value, sometimes +in payment of arrears, and sometimes in payment for some new piece of trash, he is +sure to obtain his dues in the end, but not until his victim, who is sunk deeper +and deeper in the abyss of debt by every <q>accommodation,</q> is entirely ruined. +(<hi rend='italic'>Schmerz</hi>, Rheinish-Westphäl. L.W., 396 ff.)</note> But the +application of these laws should be clear and simple as to +their matter, and require no inquiries, relating to the person, +impracticable for a business man to make.<note place='foot'>In the +lower and middle stages of civilization, we find a multitude of +laws by which minors, students etc., but especially land-owners are limited +to a minimum of credit, which, however, varies very much with the person, +and is subjected to a number of embarrassing forms, the consent of a third +person, for instance etc. (Compare Bayerische L.O. von 1553, fol. 83.) +Such laws, however, give as much room to the play of dishonesty as they +take away from that of want of reflection.</note> Thus, for instance, +a short period of limitation established by statute in +the matter of advances made for ordinary money-claims is +a beneficial restraint, as well on the creditor as on the debtor, +since it prevents the accumulation of a multitude of small +debts which almost imperceptibly but at the same time irresistibly +overpower the debtor under their weight.<note place='foot'>On the municipal regulations +(<foreign lang='de' rend='font-style: italic'>Städteordnungen</foreign>) of the 14th +and 15th centuries, which compelled Jewish creditors especially to have their evidences +of indebtedness redeemed within from every two to five years, see +<hi rend='italic'>Stobbe</hi>, Juden im Mittelalter, 129. Compare further the Würtemberg +L. O. of 1515, Statut. Ferrar, ed. 1650, lib. II, rub. 37, 289. According to the other +provisions of the laws in North America, some book accounts were required +to be sued on within six and others within seventeen years. +(<hi rend='italic'>Ebeling</hi>, Gerchichte und Erdberschreibung der v. Staaten, II, +247, 298.) The Prussian law of March 31, 1838, provides a period of limitation of three +years for all ordinary commercial debts. A similar law was passed in the Kingdom of +Saxony, in 1846. In London, there has been found a great number of hatters, +tailors, boot and shoe dealers etc., whose books showed credits of more +than £4,000, most of them not to exceed over £10. How much of all this +must be lost entirely, and how that loss must increase the sums paid for +boots, shoes and hats by the prompt payer! (<hi rend='italic'>McCulloch</hi>, v. +Credit.) We find, even in Athens, that the period of limitation was shortened in the +interest of credit, and that in the case of minors, it did not exceed five years. +(<hi rend='italic'>Demosth.</hi> adv. Nausim., 989.) Security for a debtor not over one +year. (<hi rend='italic'>Demosth.</hi>, adv. Apatur., 901.) The prohibition of Zaleukos +to issue any evidences of debt whatever goes much farther. +(<hi rend='italic'>Zenob.</hi>, Proverb. V, 4.)</note> Another +<pb n='281'/><anchor id='Pg281'/> +efficient means is associations of business men to circulate lists +of bad debtors, and to prosecute their own demands in common.<note place='foot'>Compare +the report of the Dresden Handelskammer, 1864, 11.</note> +On the other hand, experience has shown that imprisonment +for debt, as a means of enforcing a creditor's claim, +where the amount of the debt is very small and such as only +very poor debtors are apt to incur, is of little service. It is +even injurious, because a great many sellers would rely on +that means of compelling payment in the future instead of demanding +it immediately, as they should do in the interest both +of themselves and of their customers. As a rule, it is only +rich creditors who can resort to it with success, a class who +compel payment through this means by wringing it from the +debtor's relations more frequently than from the debtor himself. +The working out of debts in correctional institutions +seems, for the same reasons, to fail of its object, since even +well governed institutions scarcely cover their current expenses from the +income derived from this source.<note place='foot'><hi rend='italic'>A. Mayer</hi>, +in <hi rend='italic'>Faucher's</hi> Vierteljahrsschrift, 1865, IV, 65.</note> The +inequitable character of imprisonment for debt lies in this, that +it punishes the unfortunate debtor as severely as it does the +malicious one. It must be clearly distinguished from the imprisonment +recognized by the courts as a punishment for reckless +or fraudulent bankruptcy.<note place='foot'>We learn from +the debates in the English parliament of February 9, 1827, that, +in two years and a half, there were, in London and its environs, +70,000 cases of imprisonment for debt, the costs of which were from £150,000 +to £200,000. In 1831, there were in one debtors' prison 1,120 prisoners, who +owed on an average £2 3s. 2d. (<hi rend='italic'>McCulloch</hi>, l. c.) There +was, in 1792, a case of a woman who, for a debt of £19, remained in prison 45 +years, and others like it. (See <hi rend='italic'>Archenholtz</hi>, Annalen, IX, +87 ff; X, 169 ff, XIII, 125.) In England in 1844, arrest for sums less than £19 was +prohibited. <hi rend='italic'>Johnson</hi> had already proposed a similar provision. +(Idler, 1758, Nos. 22 and 38.) Imprisonment for debt was abolished in France, England and +Austria in 1867; in the North German Confederation, on the 29th of May, 1868, but arrest +for security's sake was retained. <hi rend='italic'>Sismondi</hi> finds fault with nearly +all laws in the premises, because they attack the person of the debtor rather than his +personal property, and his personal, rather than his immovable, property. He +would have all this just the contrary of what it is. The first interferes with +the very source of wealth, the productive power of labor; the second causes +goods to be sold much below their value. Neither of these evils attends the +last. (<hi rend='italic'>N. Principes</hi>, I, 250.)</note> We must pass a judgment +<pb n='282'/><anchor id='Pg282'/> +similar to that on the imprisonment of the person of the debtor +on the seizure of his wages not yet due, so far, at least, as an +amount absolutely necessary to save himself and family from +want, is not excepted. The prohibition of such seizure, beyond +this, would amount to a declaration that all workmen +without capital, even the best, should be considered unworthy +of credit.<note place='foot'>A law of the North +German Confederation allows the pledging of future +wages, only in the case of public officers, and those holding permanent places +in the service of private parties, whose salaries are over 400 thalers per annum. +The original draft had excepted only the things necessary to workmen +and those directly depending on them; while the law as passed makes the +prohibition general. This was undoubtedly done for the convenience of employers +as well as of courts; as for instance in the circuit of Dortmund, +there were, in one year, 10,000 cases in which wages were garnisheed. (Annalen +des N.D. Bundes und Zollvereins, 1869, 1071 ff.) But the recklessness +of those workmen whose wages are below the average, might have been +just as well guarded against without dragging those whose wages are above +the average down to their level, if a distinction had been made between production-credit +and consumption-credit, and the latter had been limited by providing +that no suit should be instituted for supplies made to public houses, +taverns etc.</note> We may also include in this category +such laws as except from execution the necessary tools of a +tradesman, since to deprive him of them would be to prevent +<pb n='283'/><anchor id='Pg283'/> +his employing even his labor to satisfy<note place='foot'>In the second book +of <hi rend='italic'>Moses</hi>, 22, 25 ff., and the fifth, 24, 6. A very old +Norman law provides that in actions for debt, execution should not issue +against effects of the debtor which are indispensably necessary to him to +maintain his position, such as the horses of a count or the armor of a knight. +(Dialog. de Scaccario.) Magna Charta extended this provision so as to include +the agricultural implements and cattle of the peasantry. The moment +these laws, in consequence of a false principle of humanity, except anything +but what is absolutely necessary, they injure credit. Thus, for instance, in +Brazil, a law of 1758, providing that nothing immediately employed in +or directly necessary to the production of sugar should be seized on execution, +caused great injury to the production of sugar. (<hi rend='italic'>Koster</hi>, +Travels in B., 1816, 356 ff.)</note> his creditors' +claims. +</p> + +</div> + +<div> +<index index='toc' level1='Section XCIV. Letters Of Respite (Specialmoratorien).'/> +<index index='pdf' level1='Section XCIV.'/> +<head type='sub'>Section XCIV.</head> +<head>Letters Of Respite (Specialmoratorien).</head> + +<p> +<hi rend='italic'>Special letters of respite</hi> (<foreign lang='de' +rend='font-style: italic'>Specialmoratorien</foreign>) are a suspension +of the laws relating to debt, made in favor of an individual. +(<foreign lang='de' rend='font-style: italic'>Quinquennalia.</foreign>) +They were intended to protect not only the debtor, but also the aggregate of creditors +against the short-sighted severity of one of their number. They were +wont to be given especially when the debtor showed that immediate +execution would not only have the effect of ruining +himself, but of sending his creditors away empty handed; +while, if time were given him, he would be able to satisfy +every one.<note place='foot'>§ 2, Cod. De Prec. Imper. Off., I, 19. +The diets of the Empire had granted such letters in the fourteenth +century. (<hi rend='italic'>Wachsmuth</hi>, Europ. Sittengesch., +IV, 690.) They were granted, as a rule, only with the previous knowledge +of the Emperor, by the police ordinances of the Empire of 1548, art. 22.</note> +But the granting of such letters has, in recent +times, been prohibited<note place='foot'>So in Austria, +Saxony, Brunswick, the electorates of Hesse and Baden. +In Prussia, they could be granted only after a juridical decree to that effect; +and an appeal to a superior court was allowed to reverse or affirm it. Compare +<hi rend='italic'>Mittermaier</hi> in the Archiv. für civilist. Praxis, XVI, +and also <hi rend='italic'>P. de la Court</hi>, Aanwysing der politike Gronden +en Maximen van Holland etc., 1669, I, ch. 25. Nürnberg obtained as a privilege, +in 1495, that no <hi rend='italic'>moratorium</hi> should be valid as against +its citizens. (<hi rend='italic'>Roth</hi>, Geschichte des Nürnb. Handels, +I, 86.)</note> in nearly all countries as arbitrary, and +<pb n='284'/><anchor id='Pg284'/> +as a species of cabinet-justice. Nor should the granting of +them be compared with the pardoning power. In the case of +a pardon, the offended State forgives. In this case it sacrifices +the unquestionable right of one party to the very doubtful advantage +of another. Where such letters are granted in great numbers, credit cannot +fail to suffer. <q><foreign lang='de' rend='font-style: italic'>Quinquinnellen gehören +in die Hollen!</foreign></q> +</p> + +<p> +Yet in troublous times, when a great many debtors are insolvent +at the same time, the question of modifying the laws +relating to debt, temporarily, has been mooted. It has been +urged on such occasions, that it would be a matter of enormous +difficulty to treat, <foreign lang='la' rend='font-style: italic'>lege artis</foreign>, +thousands as bankrupts at once; that thousands +of businesses would have to be closed, their +stocks cast upon the market at mock prices, and their employees +thrown out of employment. But, if certain privileges +were to be accorded to all who should declare themselves unable +to meet their obligations before a certain day, it would +be known, at least, that the others were in a solid condition; +and this would have the effect to strengthen the credit which +had been before universally shaken. We must, however, +leaving all cases of abuse out of the question, remember, that +a really unrightful favor, granted to the debtor, may possibly +entail the ruin of his creditor. Besides, the uncertainty of +the law would have a much worse effect on credit than uncertainty +as to the personal status of individuals.<note place='foot'>Compare +the discussions in the French National Assembly, in the month +of August, 1848. It is much less disadvantageous in times of great commotion, +when all business is brought to a stand still, to extend the time in which +bills of exchange etc. are payable. Such a measure prevents a number of +bankruptcies which the real balance of debts due to one and owing by him +does not render necessary.</note> Where, as is +the case generally in inferior stages of civilization, debtors and +creditors form two distinct classes, the question of right is not, +indeed, changed, but there is a solid basis afforded for the +political admeasurement of opposing interests. In another +<pb n='285'/><anchor id='Pg285'/> +work I have shown how, after great wars, land owners, who +became involved in debt, have been protected against capitalists. +(See <hi rend='italic'>Roscher</hi>, Nationalökonomik des Ackerbaues, +§ 137, ff.)<note place='foot'>In the persecution of the Jews in the middle ages, +the so-called <foreign lang='de' rend='font-style: italic'>Brief-todten</foreign> +(letter-killing), or the destruction of titles, was very common. In +1188, the French government released all crusaders from the payment of interest +on their debts, and granted them an extension of three years' time to +pay off the principal. (<hi rend='italic'>Sismondi</hi>, Hist. des Français, VI, 82.) +Similar compulsory measures were provided against the Jews and usurers in 1223 (Ibid, +VI, 539 ff.); and in 1299 (Ordonnances, I, 1331), on the formal request of the +nobility. (Ordonnances, II, 59.) Again, in 1594, there was a release of one-third +of the interest on all national and private debts. (<hi rend='italic'>Sismondi</hi>, +XXI, 318.) The general <hi rend='italic'>moratorium</hi> of the Milanese for a term of +eight years, introduced in 1251, after their war with France, was of an essentially +different character. (<hi rend='italic'>Sismondi</hi>, Geschichte der italienischen +Republiken, III, 155.) The same is true of the general <hi rend='italic'>indult</hi> +granted by Philip II. in Belgium. (<hi rend='italic'>Boxhorn</hi>, Disquisitt. +politicæ, 241 ff.)</note><note place='foot'>The abolition or release of debts, +so frequent in ancient revolutionary times, reminds us, in +many ways, of the crises precipitated in modern times +by paper money and produced by the state. The ancestors of Alcibiades +and Hipponikos laid the foundation of an immense fortune, in Solon's time, +by purchasing land in large quantities with money borrowed from several +citizens, a short time before the abolition of debts. +(<hi rend='italic'>Plutarch</hi>, Sol., 15.)</note> +</p> + +</div> + +</div> + +</div> + +<pb n='287'/><anchor id='Pg287'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Book II. The Circulation Of Goods.'/> +<index index='pdf' level1='Book II.'/> +<head type='sub'>Book II.</head> +<head>The Circulation Of Goods.</head> + +<pb n='289'/><anchor id='Pg289'/> + +<div> +<index index='toc' level1='Chapter I. Circulation In General.'/> +<index index='pdf' level1='Chapter I.'/> +<head type='sub'>Chapter I.</head> +<head>Circulation In General.</head> + +<div> +<index index='toc' level1='Section XCV. Meaning Of The Circulation Of Goods.'/> +<index index='pdf' level1='Section XCV.'/> +<head type='sub'>Section XCV.</head> +<head>Meaning Of The Circulation Of Goods.</head> + +<p> +The more highly developed the division of labor is, the +more frequent and necessary do exchanges become. While +the hermit engaged in production thinks only of his own wants, +and the mere housekeeper of the wants of his household, the +man who is part of a nation and who plays a part in its general +economy, must bear in mind the <hi rend='smallcaps'>MARKET</hi> in which goods +of one kind are exchanged against goods of other kinds. The +greater, more various and more changeable the conditions of +this market are, the greater are the intellectual faculties demanded +to engage in it successfully, and to the advantage of +everybody concerned in it.<note place='foot'>Enormous +consumption of wax in the churches of the middle ages. In +the cathedral of Wittenberg alone, a short time before the Reformation, +more than 35,000 pounds of wax candles etc. were burned yearly. At the +same time, honey was generally used instead of sugar. How much more +important, therefore, at that time must bee-culture have been, considered +from the point of view of circulation as compared with what it is to-day. +And so in Catholic countries, a difference in the external manifestation of religion +causes the relative importance of the consumption of fish to increase +and decrease. In 1803 there was little demand in France for ivory crucifixes, +rosaries etc. In 1844, the demand for them and for <hi rend='italic'>prie-Dieu</hi> +for the bed-room etc. was increased. (<hi rend='italic'>Mohl</hi>, +Gewerbwissenschafliche Reise, 101.) To engage successfully in the sale of sugar in +Persia, it is necessary to know that in that country it is liked only in little +hat-shaped lumps, which are used only as semi-voluntary gifts; and that, in such case, +custom fixes the number of lumps. (<hi rend='italic'>Steinhaus</hi>, Russlands +commercielle etc. Verhh., 151.) In the Levant, workmen prefer bars of iron which are +small and of varied form because they find it difficult to manipulate the large ones. +The English bear this in mind much better than the Russians. +(<hi rend='italic'>Steinhaus.</hi>) A merchant sending wood to Southern France must be +acquainted with the form of the staves used in the manufacture of barrels there. Compare +<hi rend='italic'>Büsch</hi>, Geldumlauf, VI, 2, 2.</note> Goods intended to be exchanged +<pb n='290'/><anchor id='Pg290'/> +are called commodities. By the circulation of commodities is +meant their going over from one owner to another.<note place='foot'>The +circulation of goods compared to the circulation of the blood: by +<hi rend='italic'>Mirabeau</hi>, Philosophie Rurale, ch. 3. +<hi rend='italic'>Turgot</hi>, Sur la Formation etc. § 69. +<hi rend='italic'>Canard.</hi>, Principes, ch. 6.</note> Among +the principal causes of circulation, we may mention the difference +in the nature and civilization of countries and peoples, +the distinction between city and country, the division of people +into classes etc.<note place='foot'><hi rend='italic'>Eiselen</hi>, +Volkswirthschaftslehre, 98 ff. If in ancient times commerce +played a much less important part than it does among the moderns, it was, as +<hi rend='italic'>Montesquieu</hi> says, because the whole commercial world +was then more uniform in climate and the character of its products than it +is now. (Esprit des Lois, XXI, 4.)</note> The rapidity of circulation depends, on the +one hand, on the quantity of commodities, and on the other, on +the degree to which the division of labor has been carried. In +both respects it is, therefore, an important indication of the +wealth of the nation, and of the world. +</p> + +<p> +Different commodities have very different degrees of capacity for circulation +(<foreign lang='de' rend='font-style: italic'>Circulationsfähigkeit</foreign>), +that is, of certainty of finding purchasers, and of facility of seeking purchasers. +The smaller, compared with its value, the volume and weight +of a commodity are; the longer and more conveniently it can +be stored away; the more invariable and well-known are its +value in use and value in exchange: the more readily does it +go from one place to another, the more easily is it transmitted +from one period of time to another and from the possession of +one person into the possession of another. Thus, for instance, +the precious metals circulate more rapidly than industrial products; +<pb n='291'/><anchor id='Pg291'/> +these in turn more than raw material,<note place='foot'>Of the +successive steps, sheaves, corn, flour, bread,—flour has the greatest +capacity for circulation. And, indeed, the last operation of labor on a +great many goods, because of their consequent more narrowly specialized +utility, is accompanied by a decrease in their capacity for circulation. As an +illustration, we may mention ready-made clothing as compared with cloth. +The capacity for circulation of a commodity is very much advanced when +the demand is wont to increase with the supply, as is the case with gold and +silver, but not with learned books, optical instruments etc. Many commodities +have but little circulating capacity, because no one desires to purchase them but at +first hand. See <hi rend='italic'>Menger</hi>, Grundsätze, I, 245 ff.</note> and +immovable property circulates least rapidly of all. An improvement in the +means of transportation naturally increases the capacity of circulation +of the entire wealth of a people, and especially of those +commodities which were not before transferable as well as +of those of which the cost of transportation constituted a peculiarly +large component part of the price.<note place='foot'><hi rend='italic'>Knies.</hi>, +Die Eisenbahnen und ihre Wirkungen, 1853, 79.</note> The greater the +capacity for circulation of any kind of goods, the greater is +the power of control of its owner in the world of trade. If +we compare two men, each of whom possesses a million of dollars, +but one of whom has that million in money and the other +in land, we shall find that the former is able, for present purposes, +such as loaning to the state in case of need, aiding a +conspiracy etc., to command resources much more readily and +effectively than the latter. Under the ordinary circumstances +of a nation's economy, we find that the owner of money is +very seldom in want of bread, fuel or clothing, whereas very +many owners of other property may be in want of money.<note place='foot'>Compare +<hi rend='italic'>Schmitthenner</hi>, I, who calls attention and with reason to the +importance of loans on chattel mortgages. But <hi rend='italic'>Berkeley</hi>, Querist, +No. 265, remarks that a squire with a yearly income of £1000 can, <q>upon an +emergency,</q> do less good or evil than a merchant with £20,000 ready money.</note> +True, resources which may, so to speak, take the offensive +most energetically, offer less resistance to unforeseen misfortune. +The possessor of such resources is in a condition to lose +his all on the turn of a single die. As civilization advances, +the circulating capacity of a nation's wealth increases.<note place='foot'>A +very important difference between Russia and England.</note> +</p> + +</div> + +<pb n='292'/><anchor id='Pg292'/> + +<div> +<index index='toc' level1='Section XCVI. Rapidity Of Circulation.'/> +<index index='pdf' level1='Section XCVI.'/> +<head type='sub'>Section XCVI.</head> +<head>Rapidity Of Circulation.</head> + +<p> +With an advance in a people's public economy, we find an +increased rapidity of circulation connected, both as cause and +effect. Every improvement, every thing which shortens the +process of production, must facilitate and accelerate the circulation +of commodities. And so, the perfecting of the means +of transport of commodities, of the media of exchange and of +credit, an increase in the number of middlemen who make it +their business to purchase in order to sell again. On the other +hand, the more rapid the circulation of wealth, the more can +it promote production. The more rapidly, for instance, the +manufacturer of cloth exchanges his wares for money, the +more rapidly may he employ the money in the purchase of +new tools and the hiring of new labor; and the sooner may he +appear in the market with new cloth. It is here precisely as +it is in agriculture, which is more productive where the seed returns +several times in a year (several crops<note place='foot'><hi rend='italic'>Storch</hi>, +Handbuch, I, 273 ff. There is also a useless circulation which is +not calculated to promote the division of labor, but to employ idle time or +idle capital, as in the case of games of hazard, speculation in stocks, wheat +etc. Even impoverishing consumption may produce rapidity of circulation, +as in Germany during the war years 1812 and 1813. (<hi rend='italic'>F. G. Schulze</hi>, +N. Œkonomie, 1856, 667.) Relying on this fact, <hi rend='italic'>Hume</hi> (1752) on +Public Credit, Discourses, No. 8, argues in favor of the old opinion, that all +circulation is wholesome and to be encouraged. <hi rend='italic'>Boisguillebert</hi>, +Traité des Grains, I, 6, went so far as to laud war because it accelerated the +circulation of wealth. On the necessity of a <foreign lang='fr' +rend='font-style: italic'>circulation sans repos</foreign>, see ibid., II, 10. In a +similar way <hi rend='italic'>Law</hi>, Trade and Money, 1705, and +<hi rend='italic'>Dutos</hi>, Réflexions Politiques sur le Commerce, +over-valued the circulation of wealth as such. Concerning the Mercantile +System, see § 116. <hi rend='italic'>Darjes</hi>, Erste Gründe der Cameralwissenschaft, +1768, 531. And even <hi rend='italic'>Büsch</hi>, Geldumlauf, I, 29, 32 ff., III, 96, +who in other places nearly always overlooks real production and sees only the circulation +of money caused thereby. Thus he calls the poor when they are helped in money, and spend +it, useful members of society! (IV, 32, 39. Similarly, <hi rend='italic'>v. +Struensee</hi>, Abhandlungen, 1800, I, 282 ff., 400 ff.)</note>) to the hand of +<pb n='293'/><anchor id='Pg293'/> +the peasant than it is where this happens only once. The +nearer the members of the commercial organism are to one +another, the more rapid is circulation wont to be. Hence, it +is more rapid in industry than in agriculture; in retail trade +than in wholesale; in large cities than in the country; among a +dense population than among a sparse population. +</p> + +<p> +The <emph>regularity</emph> of circulation increases with economic culture. +Its concentration at large terminal points, its interruption +by bad seasons of the year, belong to the lower stages of +the political economy of a people; although bad harvests, +floods, wars, revolutions etc. may, at any time, lead to a sluggishness +or to an arrest of circulation. +</p> + +</div> + +<div> +<index index='toc' level1='Section XCVII. Freedom Of Competition.'/> +<index index='pdf' level1='Section XCVII.'/> +<anchor id="Section_97"/> +<head type='sub'>Section XCVII.</head> +<head>Freedom Of Competition.</head> + +<p> +But it is especially the freedom of circulation that increases +with an advance in civilization, and this advance, like the two +preceding, first affects the home or inland circulation. Freedom +of competition, the freedom of commerce and industry, +technical expressions used to designate freedom in general in +the domain of a nation's economy, is the natural conclusion +drawn from the principles of individual independence and of +private property. Hence its development is as slow as the +development of these, and attains its full growth only in highly +cultivated nations, their colonies and dependencies. In very +low stages of economic development, the circulation of goods +is hampered by the absence of legal security; later, by privileges +accorded to a great number of families, corporate +bodies, municipalities, classes, etc., and later yet by the mighty +guardianship which the state exercises by its power of legislation +and even of education.<note place='foot'>As, for instance, happened in +France in 1577, when all commerce, and in 1585 all industry, were declared +to be <foreign lang='fr' rend='font-style: italic'>de droit domanial</foreign>. +Louis XIV. was of opinion that the king was absolute master of all private +property of priests and people. (Mémoires histor. de Louis XIV., II, 121.) +Compare <hi rend='italic'>Duclos</hi>, Mémoires, I, 14 ff.</note> +Each one of these epochs constitutes +<pb n='294'/><anchor id='Pg294'/> +the end of the preceding one, and is milder than it was. +Finally comes the period of complete freedom, when every +man is permitted to manage his own affairs even with injury +to himself, provided the injury is confined to himself. +</p> + +<p> +The later times of the Roman Empire are the best illustration +of how, with the decline of the conditions which must precede +freedom of competition, that freedom itself decays.<note place='foot'>Compare +Theod. Cod., V, 9, 1; Just. Cod., X, 19, 8; XI, 47, 21, 23; XI, 50, +51, 52, 55, 58. How full the really classic period of the Roman jurists was +of the idea of freedom of competition, we see in <hi rend='italic'>Paullus</hi>: +L. 22, § 3, Dig. XIX, 2. The provisions concerning <foreign lang='la' +rend='font-style: italic'>lœsio enormis</foreign> appear first in the time +of Diocletian. (Just. Cod., IV, 44, 2.)</note> +</p> + +<p> +Freedom of competition unchains all economic forces, good +and bad. Hence, when the former preponderate, it hastens +the time of a people's grandeur, as it does their decline where the +latter gain the upper hand.<note place='foot'><hi rend='italic'>Benjamin Franklin</hi> +says that the freer the form of government is, the +more the people show themselves in their true aspect. Ancient Rome, with +the early development of its rational disposition, soon learned to favor freedom +of commercial intercourse. Compare <hi rend='italic'>Mommsen</hi>, Römische Geschichte, +I, passim. This was, certainly, an element of its greatness, but also of the +proletarian evils developed in it an early date, and which were weighed down +only by the absolute growth of the state and the development of its economic +interests during centuries.</note> We may say of economic freedom +what may be said of all other freedom, that the removal of +external constraint can be justified and produces the greater +good of the greater number only where a stern empire over self +takes its place. Without this it would not prevent or avoid idleness, +usury or over-population. Freedom must not be simply +negative. It must be positive. If on account of the immaturity +or over-maturity of a people, there be no sturdy middle +class among them, unlimited competition may become what Bazard +calls a general <foreign lang='fr' rend='font-style: italic'>sauve-qui-peut</foreign> +(let the devil take the hindmost); what Fourier designates as a +<foreign lang='fr' rend='font-style: italic'>morcellement industriel</foreign>, +and a <foreign lang='fr' rend='font-style: italic'>fraude commerciale</foreign>; +what M. Chevalier denominated <q>a battle-field on which the little are devoured by the +<pb n='295'/><anchor id='Pg295'/> +big;</q> and in such case, as Bodz-Reymond says, the word +competition, meaning simply that each one is permitted to run +in whatever direction he may see a door open to him, is but +another and a new expression for vagabondizing. But here +the evil does not lie in too great competition, but in this, that +on one side there is too little competition.<note place='foot'>Nor +must it be forgotten that competition raises prices as well as lowers +them. The expressions higher price and lower price denote only different +sides of the same relation. <hi rend='italic'>M. Chevalier</hi> is of opinion that +our present breathless competition is characteristic only of a period of transition +prolific in new inventions, a competition soon to be followed by peace. (Cours, II, +450 ff.)</note> The opposing principle +of competition is always monopoly, that is, as John Stuart +Mill says, the taxation of industry in the interest of indolence +and even rapacity; and protection against competition is +synonymous with a dispensation from the necessity to be as +industrious and clever as other people. +</p> + +<p> +A protection of this nature, sufficiently effective to attain its +end, would not fail to arrest the efforts of those who had accomplished +something, and even to turn them backward. +That freedom of competition is a species of declaration of war,<note place='foot'>Ἀγαθὴ +ἔρις: Hesiod., Opp., 10 ff.</note> +among men considered as producers, is certain; but, at the +same time, it makes all men considered as consumers members +of one society, in which all the members are equally interested, +a fact too much overlooked by socialists.<note place='foot'><q>Whoever +speaks of competition suppresses the existence of a common +aim,</q> says <hi rend='italic'>Proudhon</hi>, although he adds, after +<hi rend='italic'>Bileam's</hi> way, that to cure the +evils of competition by competition, is as absurd as to lead men to liberty +by liberty, or to cultivate the mind by cultivation of the mind.</note> It is the +means especially by which the greatest and ever increasing +portion of the forces of nature are raised to the character of +the free and common property of the human race.<note place='foot'>Compare +<hi rend='italic'>Bastiat</hi>, Harmonies économiques, ch. 10.</note> <q>Man is +not the favorite of nature in the sense that nature has done +everything for him, but in the sense that it has endowed him +with the ability to do everything for himself. The right of +freedom of competition may, therefore, be considered both +<pb n='296'/><anchor id='Pg296'/> +the protection and the image of this provision of nature.</q> +(<hi rend='italic'>Zachariä.</hi>)<note place='foot'>If +all classes were protected against competition, no class would derive +any advantage from it, since a <q>universal privilege</q> is an absurdity. If only +certain classes or individuals are protected, it is done at the cost of all others.</note> +</p> + +<p> +The person, therefore, who claims or asserts an exception +from the rule of free competition, has to prove his position in +every individual case, since the burthen of proof is on him. +But the duty of interference on the part of the state is positively +pointed out where any interest common to the whole +people is not in a condition to assert itself; and negatively, +when the custom which hitherto had prevented an undoubted +abuse has grown too weak to continue to perform that service. +In <emph>both</emph> regards I would call attention to the protection of factory +children against the concurrent selfishness of their parents +and masters.<note place='foot'>The question should not be +formulated thus: <q>Caprice or rule?</q> but <q>Rule of morals, +or rule of law?</q> <hi rend='italic'>Schmoller</hi> against +<hi rend='italic'>v. Treitschke</hi> in <hi rend='italic'>Hildebrand's</hi> +Jahrbb.</note><note place='foot'><p>Concerning the arguments by which +the commercial restrictions of the middle ages were defended, see below. They were, +for the most part, well founded for the age in which they were advanced. A judicious +education will often be compelled to provide limitations, but always with the intention, +by this means, of making possible a really greater independence. Thus the +current of commerce may be too weak in a poor and thinly settled country +in order that supply and demand should always and everywhere meet and be +satisfied. Under such circumstances, their artificial concentration at certain +points is among the most efficient means of promoting the economy of the +whole people. The policy of freedom of commerce was recommended even +in the seventeenth century by <hi rend='italic'>J. Child</hi>, by +<hi rend='italic'>North</hi> and <hi rend='italic'>Davenant. W. Roscher</hi>, +Zur Geschichte der englisch. Volkswirthschaftslehre, 65 ff., 85 ff., 113 ff., 142 +ff. And earlier yet, in Holland, by <hi rend='italic'>Salmasius</hi>, De Usurus, +1638, 583 and <hi rend='italic'>de la Court</hi>. Compare Tübinger Ztschr., 330 ff. +Thus <hi rend='italic'>Boisguillebert</hi> says: <foreign lang='fr' +rend='font-style: italic'>Il n'y avait qu'à laisser faire la nature et la libertê, +qui est le commissionaire de cette même nature</foreign>. (Factum de la France, 1707, +ch. 5.) See, also, Dissertation sur la Nature des Richesses, ch. VI; Détail de +la France, 1697, II, ch. 13; Tr. des Grains, II, 8. For the most part dictated by a +reaction against Colbertism. +</p> +<p> +See further, <hi rend='italic'>Mélon</hi>, Essai Politique sur le Commerce, 1734, ch. +2. <hi rend='italic'>M. Decker</hi>, Essay on the Causes of the Decline of Foreign +Trade, 1744, 31 ff, 106 ff. <hi rend='italic'>J. Tucker</hi>, Essay on the advantages +and disadvantages which respectively attend France and Great Britain with regard to +Trade, 1750. <hi rend='italic'>Forbonnais</hi>, Elémens du Commerce, 1754, I, 63. +<hi rend='italic'>Genovesi</hi>, c. I, 17, 3, is of opinion that at least in case of +doubt, commerce stood more in need of freedom than of protection. +<hi rend='italic'>Verri</hi>, in his Meditazioni, goes still farther. The Physiocrates, +with their <foreign lang='fr' rend='font-style: italic'>laissez aller</foreign> and +<foreign lang='fr' rend='font-style: italic'>laissez faire</foreign> recommend competition +as the best means to increase the net income of a people. According to +<hi rend='italic'>Dupont</hi>, 147 ff, éd. Daire, the province of legislation is +confined to declaring the laws of nature. His motto is: <foreign lang='fr' +rend='font-style: italic'>liberté and propriété</foreign>. <hi rend='italic'>Adam +Smith</hi> asks that the state should do only three things: insure protection against +foreign states, the administration of justice at home, the establishment and maintenance +of certain institutions of advantage to the whole community, but +which private interest could not establish for want of means to cover the expenses +attending them. (Wealth of Nations, V, ch. I, 2.) Hence he demands (III, ch. 2) the +abolition of all kinds of <foreign lang='la' rend='font-style: italic'>fidei +commissa</foreign>, of royalty in mines (I, ch. 11, 2), of all corporate and exclusive +privileges, of all protective duties etc. (IV, ch. I ff), but especially of the colonial +policy hitherto in vogue. (IV, ch. 8.) +</p> +<p> +The attacks of the Socialists on freedom of competition were begun by +<hi rend='italic'>Fichte</hi>, Geschlossener Handelsstaat, 126, in which it is called a +robber-system or system of spoliation. He would have the state have more solicitude for +human industry than if men were so many swallows. See further, +<hi rend='italic'>Sismondi</hi>, N. Principes, passim, who everywhere demands the +protection of the government for the weaker. <hi rend='italic'>Fourier</hi>, N. Monde +industriel, 396, who thinks that <foreign lang='fr' rend='font-style: italic'>le +monopole général</foreign> is always a <foreign lang='fr' +rend='font-style: italic'>preservatif contre le commerce</foreign>. +<hi rend='italic'>Bastiat</hi>, Harmonies économiques, ch. 10, has a very valuable +refutation of these follies. Recently, <hi rend='italic'>Rodbertus</hi>, Hildebrand's +Jahrbücher, 1865, II, 272, is of opinion that <q>social individualism</q> has ever had +in history the task of dissolving decaying societies, as, for instance, under the +Cæsars.</p></note> <hi rend='italic'>Supra</hi>, § <ref target="Section_39">39</ref>. +</p> + +</div> + +<pb n='297'/><anchor id='Pg297'/> + +<div> +<index index='toc' level1='Section XCVIII. How Goods Are Paid For.—The Rent For +Goods.'/> +<index index='pdf' level1='Section XCVIII.'/> +<anchor id="Section_98"/> +<head type='sub'>Section XCVIII.</head> +<head>How Goods Are Paid For.—The Rent For Goods.</head> + +<p> +Payment for goods (§ <ref target="Section_1">1</ref> ff.) of any kind can be made only in +other goods.<note place='foot'>Whoever would sell to others must purchase of them. +(<hi rend='italic'>Child.</hi>, Discourse of Trade, 358.) Similarly +<hi rend='italic'>Temple</hi>, Works III, 19, and <hi rend='italic'>Becher</hi>, Polit. +Discurs, 1547. This view seems to have become the national one first in Holland. +Compare also <hi rend='italic'>Quesnay</hi>, 71 and <hi rend='italic'>Mirabeau</hi>, +Philosophie rurale, 1763, ch. 2.</note><note place='foot'>We often hear it said: +<q>nothing sells because there is no money.</q> But +the real cause here is, in most instances, not a want of money, but a want of +other goods which might serve as a counter-value. In bad times, for instance, +there is many a weaver who would consider himself fortunate, even +if he could get no money for his cloth, to obtain instead, meat, bread, wood, +raw material etc. If money only were wanting, that might easily be as favorable +a symptom in commerce, as when there are not enough shops, +steamers etc., to carry on the business of the country. Compare +<hi rend='italic'>North.</hi>, Discourses upon Trade, 1691, 11 seq., but +especially <hi rend='italic'>J. B. Say's</hi> celebrated theory +of Markets, traité I, ch. XV.</note> Hence, the greater, more varied, and the better +<pb n='298'/><anchor id='Pg298'/> +adapted to satisfy wants, production is, the more readily +does any product find a remunerative market; more readily in +England, for instance, in spite, or rather, because of, the great +competition there, than in Greenland or Madagascar. From +this it follows that, as a rule, a person is in a better condition +to purchase more goods in proportion as he has produced +more himself. According to official accounts, the average +value of a harvest of wheat and potatoes in Prussia was formerly +332,500,000 thalers. In the year 1850, however, it was +only 262,000,000 thalers. As a matter of course, the country +people in that year could not purchase from the cities as much +as in ordinary years, by a difference of 70,000,000 thalers. +This illustrates how every class of people, who live by finding +a free market for their products, are interested in the prosperity +of all other classes. As Bastiat says: <q>All legitimate interests +are harmonious.</q> The more flourishing a city, the +better off are the towns around it, which furnish it with provisions; +and the richer these towns, the more flourishing is +the industry of the city which ministers to their wants.<note place='foot'>See +<hi rend='italic'>Humboldt's</hi> observations as to how, in Spanish America, agriculture +in the vicinity of the mines increases and decreases with the wealth of the +latter. (N. Espagne, III, 11 ff.) See also <hi rend='italic'>Harrington</hi> (ob. 1677), +On the Prerogative of a Popular Government, I, ch. 11; <hi rend='italic'>Cantillon</hi>, +Nature du Commerce, 16. And so <hi rend='italic'>Stein.</hi>, Lehrbuch, 122 seq., points +out how great enterprises produce especially for the consumption of the small +householder without capital, and how, therefore, the flourishing condition of the one +determines that of the other.</note> It is +important that this fact should be borne steadily in mind, +especially in times of advanced civilization, when the feeling +that we all have interests in common, is too apt to grow dormant. +Nothing can better serve to awaken it again when it +has become so. A nation, says Louis Blanc, in which one portion +of the people is oppressed by another, is like a man +<pb n='299'/><anchor id='Pg299'/> +wounded in the leg. The healthy limb is prevented by the +sick one from performing its functions.<note place='foot'>Those +indeed who live by the spoliation of others, as robbers, deceivers +etc. are interested in the economic prosperity of the latter only so long as +their spoliation of them is not endangered. Only to this extent can it be +claimed with <hi rend='italic'>Fr. List</hi> that the nobility of the Middle Ages, in +obeying the selfish calculation which led to the oppression of the peasantry, engaged in +as bad a speculation as a manufacturer of our day would who should feed +his steam-engine with nothing but saw-dust or scraps of old paper. The +cities of the middle ages had a much more undoubted economic interest in +the emancipation of the peasantry as a class than the nobles or the clergy.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section XCIX. Freedom Of Competition And International +Trade.'/> +<index index='pdf' level1='Section XCIX.'/> +<head type='sub'>Section XCIX.</head> +<head>Freedom Of Competition And International Trade.</head> + +<p> +Does the same rule apply to the commercial intercourse of +nations? Where the feeling that all mankind constitute one +vast family is stronger than that of their political and religious +diversity; where the sense of right and the love of peace have +extinguished every dangerous spark of ambition for empire +and all warlike jealousy; where, especially, their economic +interests are rightly understood on both sides, a real conflict +between the interests of two nations must always be a phenomenon +of rare occurrence, and an exception to the general +rule, which should not be admitted until it has been clearly +demonstrated to exist.<note place='foot'><p>Such +exceptions there certainly are, even if it were not true <q>that the +most godly cannot rest in peace unless he is acceptable to his ungodly neighbor.</q> +Nations that furnish the same products as we do may, indeed, <q>spoil +our market,</q> just as at home the selfish shoemaker may desire the prosperity +of all wearers of shoes, that is of all other industries, but not that of all +other producers of shoes. The view that long prevailed, that one man's gain +was always some other man's loss (<hi rend='italic'>Th. Morus</hi>, Utopia 79, ed. +Colon. 1555; <hi rend='italic'>Baco.</hi>, Sermones fideles, cap. 15; +<foreign lang='la' rend='font-style: italic'>quid-quid alicubi adiicitur, alibi +detrahitur</foreign>; <hi rend='italic'>M. Montaigne, Essais</hi> I, 21: <foreign +lang='fr' rend='font-style: italic'>les prouficit de l'un est le dommage de +l'autre</foreign>) prevailed much longer in international affairs where observation is +much more difficult than in national affairs; although even here, <hi rend='italic'>P. +de la Court</hi>, Maximes politiques, 1658, contrasts the economic interest of Holland +with that of the rest of the Netherlands and prefers it to theirs. Even +<hi rend='italic'>Voltaire</hi> says: <q>The desire of the greatness of the Fatherland +includes the desire of evil to our neighbor. Evidently no country can gain except what +another loses.</q> (Dict. philosophique, v. Patrie.) Compare, however, the +<foreign lang='fr' rend='font-style: italic'>peut-être</foreign> in his Histoire +de la Russie, I, 1, on the occasion of the English-Russian treaty of commerce. +Similarly, <hi rend='italic'>Galiani</hi>, Della Moneta, I, 1, IV, 1; +<hi rend='italic'>Verri</hi>, Opuscoli, 335, and recently <hi rend='italic'>v. +Cancrin</hi> who says that <q>in every-day life, property is acquired only +at some other person's expense.</q> (Weltreichthum, 1821, 119. Oekonomie der +menschl. Gesellschaft, 1845, 23.) The cosmopolitan view +(<hi rend='italic'>Xenoph.</hi>, Cyrop., III, 2, 17. Hier., 10) which prevails in Adam +Smith's school was introduced by <hi rend='italic'>Hume</hi>, Essays, 1752, On the +Jealousy of Trade. <hi rend='italic'>Quesnay</hi>, Encyclopédie, v. Grains, 294, ed. +Daire; <hi rend='italic'>A. Smith</hi>, Theory of moral Sentiments, 1759, p. 6, sec. +2, ch. 2. <hi rend='italic'>Pinto</hi>, Lettre sur la Jalousie de Commerce, 1771, and +<hi rend='italic'>J. Tucker</hi>, Four Tracts on commercial and political Subjects, +1776, 34 ff and 42 ff. <q>The system of states exercises no influence whatever on the +world's commerce.</q> (<hi rend='italic'>Lotz</hi>, Handbuch I, 11.) More recently, +<hi rend='italic'>R. Cobden</hi>, in his Russia, +Edinb., 1836, among others argued, that the conquest of Turkey by the Russians +would be useful to England, because then more (?) English products +would probably be sold there. Russia would become no stronger thereby, as +conquests always injure the conqueror more than they benefit him. The +idea of European equilibrium is therefore a chimera, because no state can +be prevented from having an internal growth, as great as may be. Thus, in +the summer of 1853, we heard the London Times sometimes preach that +every cannon-shot fired by the English at the Russians might kill an English +debtor or an English customer. The Venetians entertained a similar view +at the beginning of the fifteenth century. Compare <hi rend='italic'>M. Sanudo</hi> +in <hi rend='italic'>Muratori</hi>, +Scriptores, XXII, 950 ff. See above, § <ref target="Section_12">12</ref>. +</p> +<p> +Moreover, Malthus had recognized that there were natural rivalries between +nations which produced exceptions to Tucker's laws. (Principles, +Preface.) Similarly <hi rend='italic'>Garve</hi>, in Cicero's Pflichten (1783), +III, 146 ff.</p></note> Highly cultivated nations generally +<pb n='300'/><anchor id='Pg300'/> +look upon the first steps in the civilization of a foreign people +with a more favorable eye than they do on the subsequent progress which +brings such nations nearer to themselves.<note place='foot'><hi rend='italic'>B. +Franklin</hi>, Works, vol. III, 49. <hi rend='italic'>Sismondi</hi> claims for +all civilized nations the right of interfering with the governments of other nations +with whom they have or might have commercial relations, and of insisting that they +shall have a good government under which commerce may freely develop. +(N. P. VII, ch. 4.)</note> +Yet the realization of the above mentioned conditions on all +sides is something so improbable, unpatriotic <q>philanthropy</q> +something so suspicious,<note place='foot'>As for instance when the <foreign lang='fr' +rend='font-style: italic'>ami des hommes</foreign> says that he felt towards an Englishman +or a German as he did towards a Frenchman with whom he was +not acquainted. <hi rend='italic'>Mirabeau</hi>, Philosophie rurale, ch. 6.</note> +the greater number of mankind +<pb n='301'/><anchor id='Pg301'/> +so incapable of development except under the limitations of +nationality, that I should observe the total disappearance of +national jealousies only with solicitude. Nothing so much +contributed to the Macedonian and Roman conquests as the +cosmopolitanism of the later Greek philosophers.<note place='foot'>Thus, for instance, +the Stoic, Zeno: <hi rend='italic'>Plutarch.</hi> De Alex, fort, 1, 6.</note> +</p> + +<p> +As all commerce is based on the mutual dependence of the +contracting parties, we need not be surprised to find international +commerce so dependent. But this dependence need +not, by any means, be equally great on both sides. Rather +is the individual or the nation which stands in most urgent +need of foreign goods or products the most dependent. Hence, +it seems that, in the commercial intercourse between an agricultural +and an industrial people, in which the former furnish +food and the raw material of manufactures, and the latter +manufactured articles, the latter are the more dependent. In +case of war, for instance, it is much easier to dispense for a +long time with manufactured articles than with most articles +of food.<note place='foot'>Compare even <hi rend='italic'>Lauderdale</hi>, +Inquiry, 274 ff.</note> However, this condition of things is very much +modified, for the better, by all those circumstances on which +the dominant active commerce of a nation depends. It is, for +instance, much easier for the English, on account of their +greater familiarity with, and knowledge of the laws and nature +of commerce, on account of their business connections, their +capital, credit and means of transportation, but more particularly +on account of the greater capacity of circulation of their +national resources, to find a new market in the stead of one +that has been closed to them, than it is for the Russians with +their much more immoveable system of public economy.<note place='foot'>How +well, for instance, the English sustained Napoleon's continental +blockade, the evils produced by which were intensified by several bad harvests. +Its worst time did not, indeed, coincide with that of the struggle with +the United States. The ancient Athenians, during their contest with Philip +of Macedon, considered the question of the supplies from the Bosphorus +etc. as one of life and death. But this can be looked upon only as a cogent +proof of the small development which their commercial talents had received +at the time. How easily might they not, according to our ideas, have obtained +corn from Sicily or Egypt.</note> It +<pb n='302'/><anchor id='Pg302'/> +is true, however, that an effective blockade, which excluded +both of these nations from all the markets of the world, would +be much more injurious to England than to Russia. +</p> + +</div> + +</div> + +<pb n='303'/><anchor id='Pg303'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter II. Prices'/> +<index index='pdf' level1='Chapter II.'/> +<head type='sub'>Chapter II.</head> +<head>Prices.</head> + +<div> +<index index='toc' level1='Section C. Prices In General.'/> +<index index='pdf' level1='Section C.'/> +<head type='sub'>Section C.</head> +<head>Prices In General.</head> + +<p> +The price of a commodity is its value in exchange expressed +in the quantum of some other definite commodity, against which +it is exchanged or to be exchanged. Hence, it is possible for +any commodity to have as many different prices as there are +other kinds of commodities with which it may be compared.<note place='foot'>According +to the acute analysis of language made by <hi rend='italic'>F. J. Neumann</hi>, +Tübinger Ztschr., 1872, 317 ff., the word <q>price</q> has reference to an actual +purchase or sale, while the expression <q>value in exchange,</q> generally called +simply value, is based upon a valuation, or intimates in a general way that an +object possesses value; value in exchange is, so to speak, the average of several +price-determinations. Price, according to <hi rend='italic'>Schäffle</hi>, is the +external consequence of value in exchange, a means of representing the latter. (N. Œk., +III, Aufl., I, 218.) Only through the difference between value in exchange +(universal possibility) and price (special reality) is the <foreign lang='la' +rend='font-style: italic'>laesio enormis</foreign> of the jurists possible. +(<hi rend='italic'>Schmitthenner</hi>, Staatswissenschen, I, 416.)</note> +But whenever price is spoken of, we think only of a comparison +of the commodity whose value is to be estimated, with the +commodity which, at that time and place, is most current and +has the greatest capacity for circulation. (Money.)<note place='foot'>By +market price, <foreign lang='fr' rend='font-style: italic'>prix courant</foreign>, +is meant the money-price of commodities, determined by competition.</note> When +two commodities have changed their price-relation to each +other, it is not possible, from the simple fact of such change +of relation, to determine on which side the change has taken +place. If we find that a commodity A stands to all other +commodities, C, D, E etc., in the same relation as to price as +<pb n='304'/><anchor id='Pg304'/> +before, while commodity B, compared with the same, has +changed its place in the scale of prices, we may infer that +B, and not A, has left its former position.<note place='foot'>A +problem very similar to that of the motion of bodies in space.</note> +</p> + +<p> +The words costly and dear, as contradistinguished from +common and cheap, both indicate a high price. We, however, +call a commodity costly whose price, compared with +that of other similar commodities, is high. On the other +hand, we call a commodity dear when we compare it with +itself, and with its own average price in other places and at +other times.<note place='foot'><hi rend='italic'>Lotz</hi>, Handbuch, 50 +ff., calls those commodities costly which are obtained +only at a high cost of production, and dear, those whose price is above the +cost of production.</note> +</p> + +<p> +In individual cases, the price of a commodity is determined +most usually, and at the same time most superficially, by custom; +people ask and pay for a commodity what others have +asked and paid for it. If we go deeper and inquire what +originated this customary price and may continually change +it, we come to the struggle of interests between buyers and +sellers. And if science would analyze the ultimate elements +of the incentives to this struggle and the forces engaged in it, +it is necessary that it should keep in view the entire economy +of the nation, and even all national life. +</p> + +</div> + +<div> +<index index='toc' level1='Section CI. Effect Of The Struggle Of Opposing Interests On +Price.'/> +<index index='pdf' level1='Section CI.'/> +<anchor id="Section_101"/> +<head type='sub'>Section CI.</head> +<head>Effect Of The Struggle Of Opposing Interests On +Price.</head> + +<p> +No where in the public economy of a people are the workings +of self-interest so apparent as in the determination of +prices. When the price of a commodity is once fixed by the +conflict of opposing interests,<note place='foot'>Compare <hi rend='italic'>Canard</hi>, +Principes d'Economie politique, ch. 3. Almost simultaneously, +<hi rend='italic'>H. Thornton</hi>, 1802, Paper-Credit of Great Britain.</note> +the self-seeking of every individual +dictates that he should thereby gain as much as possible +<pb n='305'/><anchor id='Pg305'/> +of the goods of others, and lose as little as possible of his own. +In this struggle, the victory is generally to the stronger, and +the price is higher or lower, according to the superiority of +the buyer or seller.<note place='foot'>See <hi rend='italic'>Jackson's</hi> +Account of Morocco, 284, for cases in which, in the Sahara, +when the burning winds of the desert had dried up the water in the leathern +bottles of the caravan, a drink of water cost from $10 to $500.</note> +But who, in such case, is the stronger? +Political or physical superiority can turn the balance one way +or another only in very barbarous times, and especially in +times when legal security is small.<note place='foot'>The North +American aborigines very frequently consent, in their exchanges, +to take any offer made to them by their equals, however insufficient +it may be, because they fear revenge. <hi rend='italic'>Schoolcraft</hi>, +Information etc., II, 178. As to the effects of cunning, the Tungusi, when +they get a glass of brandy from the Russians, grow almost idiotic, and give away +their goods at mock-prices in drink. (<hi rend='italic'>v. Wrangell</hi>, Nachrichten, +I, 233.) In the higher stages of civilization, on the other hand, very distinguished +people are, by no means, privileged because of their position, in the struggle for +prices. In modern times, claims (<foreign lang='fr' +rend='font-style: italic'>reclamen</foreign>) have taken the place of greater physical or +political power. Compare <hi rend='italic'>E. Hermann</hi>, Leitfaden der +Wirthschaftslehre 1870, 91 ff.</note> As a rule, it is the party +in whom the desire of holding on to his own commodities is +strongest, and who is least moved by the want of the wares +of others. As in every conflict, confidence in self, sometimes +even unbounded confidence in self, is an important element of +success. A party to a contract of sale or barter, who considers +his immediate position decidedly stronger than that of +the other party, will scarcely depart from his demands. Hence +it is, that in exchange, one party so frequently holds back +until the other has expressed his terms.<note place='foot'>Thus +<hi rend='italic'>Galiani</hi> says, that before one of the two parties has expressed his +want to buy or to sell, the pans of the scales are in equilibrium. The first +that speaks breathes on one of them, and it drops. (Dialogue sur le Commerce +des Bleds, 1770, No. 6.) This has been verified in a striking manner +in California, where the most valuable commodities were often purchased at +auction at the lowest prices, while when purchased from merchants and +even the most wretched shopkeepers, they were sold enormously dear. +(<hi rend='italic'>Gerstäcker</hi>, in the Allg. Zeitg., May, 1850.) Thus there were +harvested in France, in 1817, 48,000,000 hectolitres of wheat, valued at 2,046,000,000 +francs, in 1820, 44,500,000 hectolitres valued at 895,000,000 francs. +(<hi rend='italic'>Cordier.</hi>) This vast difference in price existed, because in +1817, the whole world was still trembling under the impression made by the failure of the +crops in 1816, while in 1820, the feeling of comfort and security caused by the rich year +1819, still prevailed. Low prices at forced sales under decree etc. See below, +§ 5. That travelers are so frequently taken advantage of in effecting +changes of money is explainable partly by their urgent wants, which are well +known to the opposite party, and partly by their supposed ignorance in the +matter. And so, at auction sales, out-bidding one another has something +very seductive in it for ignorant or hot-headed purchasers.</note> How different is the +<pb n='306'/><anchor id='Pg306'/> +price of the same pieces of land which a new railroad enterprise +is compelled to pay and the prices it would get for them, +from the adjoining owners, in case of the dissolution of the +company. +</p> + +<p> +But the struggle to raise prices or to lower them, which is +always going on, undergoes modifications of every description +among all really commercial nations, partly through the influence +of the public conscience, which brands as inhuman +and blameworthy the spoilation of the opposing party by acts +which the laws do not reach. And this consideration by the +public conscience is all the more severe in proportion as real +competition in the article sold is wanting.<note place='foot'>It +was considered immoral by his contemporaries, when William the Conqueror +introduced the custom of farm-letting to the highest bidder. (<hi rend='italic'>A. +Thierry</hi>, Conquête de l'Angleterre, II, 116, éd. Bruxelles.) It is repugnant +to poetic and delicate minds to think that everything has a price exactly +fixed. (§ 2.) I need only refer to the picture of Helen which Zeuxis +exhibited for money, which act of his was characterized, by his cotemporaries, +as a species of prostitution. <hi rend='italic'>Val. Mac</hi>, III, 7. +<hi rend='italic'>Ælian</hi>, V, 4, IV, 12. <hi rend='italic'>Socrates</hi> +judgment on the payment of the sophists. <hi rend='italic'>Xenoph.</hi>, Memor., I, +6, 13.</note> But the chief modification +in this struggle is produced by the fact, that where +civilization has advanced farthest, every commodity is offered +for sale by a great many and wanted by a great many.<note place='foot'>Competition +has only a negative influence on prices, inasmuch as it modifies +the extreme operation of the other grounds of their determination. +<hi rend='italic'>Thornton</hi>, Paper Credit. <hi rend='italic'>Lotz</hi>, +Revision, 1811, I, 74 ff, 241 ff.</note> As +soon as several seek the same object, there naturally results a +rivalry among them, which induces each to attain the desired +end, even by the making of greater sacrifices than others. +<pb n='307'/><anchor id='Pg307'/> +The greater the supply of a commodity is, as compared with +the demand for it, the lower is its price; the greater the demand +as compared with the supply, the higher it is. And, +indeed, there is question here, not only of the <emph>mass</emph> of things +supplied or demanded, but also of the <emph>intensity</emph> of the supply +and demand.<note place='foot'>The expression, <q>intensity of demand,</q> in +<hi rend='italic'>Malthus</hi>, Principles, ch. 2, sec. 2. As early a writer as +<hi rend='italic'>Sir J. Stewart</hi> calls attention to the difference between +large and high and small and low demand. A high demand will always +raise the price, as when, for instance, two wealthy virtuosi compete at an auction. +<foreign lang='la' rend='font-style: italic'>Paucorum furore pretiosa</foreign>, +as Seneca says. An English penny of the time of Henry VII, once sold, on such an +occasion, for £600. In 1868, at the Lafitte auction, seven bottles of wine sold to +Rothschild at 235 francs a piece after the +<foreign lang='fr' rend='font-style: italic'>Maison dorée</foreign> had offered 233. +(N. freie Presse, Dec. 17, 1868.) A +great demand has frequently no result but to increase the supply, and the +price rises only in so far as the demand is too sudden to permit a parallel +growth of the supply. (Principles, Book II, ch. 2, 10.) The present price +of tea could not remain unaffected, if ten different private merchants, competing +one with another, or the agent of a privileged commercial society, +should send orders to China for an equal quantity of tea. +(<hi rend='italic'>Verri</hi>, Meditazioni, IV, 8 ff.)</note> +</p> + +<p> +If the exchange-force of both contractants be equal, or, in +other words, if both, with equal knowledge, are interested in +the completion of the exchange, there results from this attitude +of the parties toward each other, what is called an equitable, +or average price, in which both meet with their deserts. +Here each is a gainer, since each has parted with the commodity +which was less necessary to him, and received in +exchange the commodity which was more necessary to him. +Looked at, however, from the stand-point, not simply of a +nation's but of the world's economy, the value given and the +value received are equal.<note place='foot'>Immense weight laid on the <foreign lang='la' +rend='font-style: italic'>æqualitas permutationis</foreign> (after +<hi rend='italic'>Aristot.</hi>, Eth. Nicom., V. 7,) in the ethics and economics of +the scholastic middle ages, and in the time of the Reformation. +Compare <hi rend='italic'>Melancthon</hi>, in Corp. Ref., +XVI, 495 ff, XXII, 230.</note><note place='foot'>A very barbarous theory +of price in <hi rend='italic'>Xenoph.</hi>, De Vectigg., 4. The ancients +made little progress in this respect, although there are not wanting ingenious +observations on certain phenomena of prices. (See <hi rend='italic'>Aristot.</hi>, (?) +Oecon. II; <hi rend='italic'>Cicero</hi>, De Off. III, 12 ff.) +<hi rend='italic'>Mariana</hi>, De Rege et Regis Institutione, +1598, III, explains price as the relation of value to quantity. According +to <hi rend='italic'>Locke</hi>, the price of a thing is determined by the relation +between <q>quantity</q> and <q>vent</q>: the increase or diminution of its useful +qualities influences it only so far as it alters that relation. (Considerations on the +Consequences of the Lowering of Interest etc, 1691, Works II, 20 ff.) +<hi rend='italic'>Law</hi>, on the contrary, says that the <q>vent</q> can never be +greater than the <q>quantity,</q> but that the <q>demand</q> may be. Wherefore, he +proposes the formula: quantity in proportion to the demand. (Trade and Commerce +considered, 1705, ch. 1.) In chap. 6, <hi rend='italic'>Law</hi> distinguishes +three elements in price: quality, quantity and demand. The expression <q>quantity</q> +is, certainly, very unsatisfactory. How many examples does not +<hi rend='italic'>Tooke</hi> (Thoughts and Details, on the +high and low Prices of the last thirty Years, 1823, part IV) give to illustrate +how, when the supply was smallest, prices were lowest and +<hi rend='italic'>vice versa</hi>! +It was so almost always after the market was over-filled, when a great many +speculators had lost and no one dared to purchase anew. +<hi rend='italic'>Montanari</hi> (ob. 1687) furnishes us with an excellent theory of +prices. (Della Moneta, 64 ff., Custodi.) And a still better one, <hi rend='italic'>Sam. +Pufendorf</hi>, Jus Naturæ et Gentium, 1672, V. 1, who must be considered the best +authority on the laws of prices before <hi rend='italic'>Stewart</hi>. +<hi rend='italic'>Boisguillebert</hi>, Traité des Grains, II, 1, 10. +<hi rend='italic'>Galiani</hi>, Della Moneta, I, 2, knows only the factors +<hi rend='italic'>utilità</hi>, and <hi rend='italic'>rarità</hi>, although in his +exposition of the latter, he discusses many points which would be called the cost +of production in our time. The wisdom of Providence has granted us the +most useful things in the greatest abundance to make them cheap. +<hi rend='italic'>Stewart</hi>, Principles II, 2, 4, rendered a great service to the +theory of prices, tracing back supply to the cost of production, demand to want and +ability to pay; and his deserves to be called the immediate predecessor of +<hi rend='italic'>Hermann's</hi> remarkable theory. (<hi rend='italic'>Hermann</hi>, +Staatsw. Untersuchungen, 66 ff.) For a peculiar theory of prices, see +<hi rend='italic'>Paganini</hi>, Saggio sopra il giusto Pregio delle Cose, 189 ff. +<hi rend='italic'>Neri</hi>, Osservazioni, 1751, 127. <hi rend='italic'>Gust. +Menger</hi>, Grundsätze, I, 179 ff., has made an interesting attempt to explain the +formation of prices in its simplest shape, in the supposition of a monopoly in the +seller, and by then going over to the subsequent modifications introduced by the +competition of many sellers.</note> +</p> + +<pb n='308'/><anchor id='Pg308'/> + +<p> +As a rule, the price-relation of two commodities is determined +by this relation of demand and supply,—by the desire +to possess and the difficulty of obtaining them. We must, +therefore, examine on what deeper relations supply and demand +themselves depend.<note place='foot'><q>Instead of separating, in the same matter, +the points of view of the buyer and seller, we may distinguish the consideration of +the thing to be acquired and the thing to be given by one and the same person.</q> +(<hi rend='italic'>Rau.</hi>) The possessor of the more current commodity appears +especially as demanding, that of the less current as offering or supplying, +(<hi rend='italic'>v. Mangoldt.</hi>)</note> In the case of the purchaser, the +<pb n='309'/><anchor id='Pg309'/> +value in use of the commodity and his own ability to pay constitute +the maximum limit of its price, which price may, however, +be modified by the cost of producing it<note place='foot'>This is for +free goods=0, for monopolized goods=1/0.</note> elsewhere or at +another time. In the case of the seller, the cost of production +is the minimum limit, which may, however, be extended +by the cost of procuring the commodity by the purchaser at +another time or place.<note place='foot'>The obvious fact that every price supposes a +comparison of two commodities, and that every buyer is, at the same time, a seller, has +been overlooked by only too many writers. And hence <hi rend='italic'>Dutot's</hi> +opinion, that, as all men buy and few only sell, the state, in case of doubt, should +favor the buyer. (Réflexions sur le Commerce et les Finances, 1738, 962, éd. Daire.) And +so the often-mooted question whether universal dearness or cheapness is more useful: the +latter advocated, for instance, by <hi rend='italic'>Herbert</hi>, Police générale des +Grains, 1755; <hi rend='italic'>Verri</hi>, Meditazioni, V; the former by +<hi rend='italic'>Boisguillebert</hi>, Traité des Grains, I, 7, II, 9; and by the +Physiocrates. (<hi rend='italic'>Quesnay</hi>, Maximes générales, Nr. 18 ff., I, +Problème Économique; also by <hi rend='italic'>A. Young</hi>, Polit. Arithmetics, +ch. 8.) The laity in Political Economy understand by dearness only the general +cheapness of the medium of circulation or exchange, and <hi rend='italic'>vice +versa</hi>.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CII. Demand.'/> +<index index='pdf' level1='Section CII.'/> +<head type='sub'>Section CII.</head> +<head>Demand.</head> + +<p> +The purchaser in his demand is wont to consider principally +the value in use of a commodity, according as it, in a higher +or lower degree, ministers to a necessary want, to a decency +or to a luxury. The difference of opinion as to which of +these categories any given want belongs depends not only on +the nature of the country and the customs of its people, but, +for the most part, also, on the prejudices of class and on personal +individuality.<note place='foot'>Thus, even a poor man in Naples +sometimes requires a glass of ice-water. The introduction of the +extensive use of snow into Sicily improved the condition of the public health. +(<hi rend='italic'>Rehfues</hi>, Gemälde von Neapel, I, 37 ff.) On the +other hand, furs, in the far north, are articles of prime necessity. Newspapers +in a free country satisfy a want much more urgent than in countries which +are not free. And so, <hi rend='italic'>Senior</hi> says that shoes are +<q>necessaries</q> to all Englishmen, since without them, their health would suffer. +To the lower classes of Scotland they are <q>luxuries.</q> Custom permits them to +go barefoot without hardship or degradation. For the middle classes of the same country, +they are <q>decencies.</q> Shoes are worn there, not to protect the feet but one's +civil position. In Turkey, tobacco is a decency and wine a luxury. The reverse +is the case in England. (Outlines, 36 ff.)</note> A reasonable man will employ only the +<pb n='310'/><anchor id='Pg310'/> +surplus of the first class in the satisfaction of wants of the +second, and again only the surplus of the second in the satisfaction +of wants of the third.<note place='foot'>As to the relativity of the +opposites of <q>temperance</q> and <q>excess,</q> every +person should attend to the following points: a, not to exceed one's income; +b, to provide for one's self and one's family; c, to lay by something for a +rainy day; d, to place one's self in a position to care for the poor; e, to indulge +in no pleasure injurious to body or mind; f, to give no bad example. +(<hi rend='italic'>Tucker</hi>, Two Sermons, 29 ff.) <hi rend='italic'>Menger</hi>, +Grundsätze, I, 92 ff., endeavors to compare the value in use +of different commodities from the point of view, that +the means of gratification of a less urgent want, when the more urgent wants +of the present are satisfied completely, should be preferred to the means of +over-gratifying the latter.</note> +</p> + +<p> +If the value in use of a commodity rises or falls, and surrounding +circumstances remain unchanged, its price also rises +or falls.<note place='foot'>Thus the price of many dark articles of apparel rises +in a moment of unexpected universal mourning. A very remarkable case in Paris, at the +death of Henry II. (<hi rend='italic'>Montanari</hi>, Delia Moneta, 85, Custodi.) On +the other hand, a change of fashion may greatly depress the price of many commodities. +Such a change may take place even in the case of precious stones; as, for +instance, now in London, a perfect emerald is most highly prized. +(<hi rend='italic'>King</hi>, Precious Stones and Metals, 1871.) The rise of many drugs +in times of cholera, and of leeches, for example, in Paris, 600 per cent. Rise of the +price of powder, horses etc. at the outbreak of a war, and of the price of iron +caused by extensive railroad building. In Circassia, a good shirt of mail was +formerly worth from 10 to 200 oxen: but since it was discovered not to be a +protection against cannon balls, its price fell 50 per cent. +(<hi rend='italic'>Bell</hi>, Journal of a Residence in Circassia, I, +403.)</note><note place='foot'>On <q>connected</q> (<foreign lang='fr' +rend='font-style: italic'>connexen</foreign>) goods, the use of one of which supposes the +use of the other, as, for instance, sugar and coffee, wood and stone used in +the construction of buildings, see <hi rend='italic'>Schäffle</hi>, Nat.-Oek, II. +Aufl., 179.</note> +</p> + +</div> + +<pb n='311'/><anchor id='Pg311'/> + +<div> +<index index='toc' level1='Section CIII. Demand.—Indispensable Goods.'/> +<index index='pdf' level1='Section CIII.'/> +<anchor id="Section_103"/> +<head type='sub'>Section CIII.</head> +<head>Demand.—Indispensable Goods.</head> + +<p> +When the supply of articles of luxury diminishes, the price +of them, it is true, rises. But as now there is a number of +purchasers no longer able to pay for them, the demand for +them also decreases, and their price, as a consequence, rises in +a less degree than might be inferred from the amount and condition +of the supply merely. And so, on the other hand, an +increase of the supply which lowers the price is wont, in the +case of pleasures capable of a wide extension, such as are ministered +to by fine roots, vegetables, etc., to produce an increase +of the demand, and this operates to arrest the falling price. +</p> + +<p> +It is quite otherwise, in the case of indispensable goods, as for +instance, wheat. When there is a want of such an article, men +prefer to dispense with all other articles, to some extent, rather +than to practice frugality in bread; and all the more, as bread +is not so much used as consumed rapidly, while clothes and +metallic articles last a long time. And even after an over-abundant +harvest, leaving voluntary waste out of the question, +consumption is increased by a finer separating of the flour, an +increase in the amount of corn fed to cattle, and the distillation +of spirits. Hence, demand and supply by no means run in +parallel lines at every moment; and indispensable articles tend +to greater perturbations in price than those which can be dispensed +with.<note place='foot'>Observed by <hi rend='italic'>Necker</hi>, Sur la +Législation et le Commerce des Grains, 1776. Compare <hi rend='italic'>Roscher</hi>, +Ueber Kornhandel und Theuerungspolitik, 1853, 1 ff. In Athens, for instance, the +<hi rend='italic'>medimnos</hi> of wheat cost ordinarily five drachmas, +but during the siege by Sulla it rose to 1000 drachmas. +(<hi rend='italic'>Demosth.</hi> adv. Phorm., 918. <hi rend='italic'>Plutarch</hi>, +Sulla, 13.) Compare II. Kings, 6, 25, 7, 1. In Paris during the siege by Henry +IV. it rose to 5000 per cent. of the ordinary price. +(<hi rend='italic'>Lauderdale</hi>, Inquiry, 60 ff.) During the siege of Breisach, +in 1638, a mouse was finally worth 1 florin, the quarter of a dog, 7 florins, a +quarter of wheat, 80 thalers. (<hi rend='italic'>Röse</hi>, Leben H. Bernhards, M., +11, 269.) Compare <hi rend='italic'>Strabo</hi>, V, 248 +seq.</note><note place='foot'>Wheat is still more indispensable than meat. Hence, in +the ten principal markets of Prussia, the price of rye rose much more from 1811 to 1860 +than the price of beef; the former between 0.32 and 1.03 silver groschens and the +latter between 2.32 and 4.94 silver groschens. (Annalen der preussischen +Landwirthschaft, 1869, No. 9.) And so in the Rhine district, the wine harvests +have undergone much greater changes in price than the prices of must, although +the years differed very largely in the quality of the yield. Thus the +crop of 1830 was only 225, that of 1868, 10,845 pieces, and yet the minimum +price between 1831 and 1865 was only from 3 to 58 flr. per ome. +(<hi rend='italic'>Engel</hi>, Preuss. Statist., Ztschr., 1871, 168 ff.)</note> +The price of grain, especially, varies in a ratio +<pb n='312'/><anchor id='Pg312'/> +very different from the inverse ratio of the amount of the +harvest;<note place='foot'>In England, the price of wheat has not unfrequently +risen from 100 to 200 per cent. when the harvest was from one-sixth to one-third under +the average, and when a supply from abroad had modified even this condition +of things. (<hi rend='italic'>Tooke</hi>, History of Prices, I, 10 ff.) +<hi rend='italic'>Tooke</hi> is of opinion that in a country with +poor-laws like those of England, a deficit of one-third in the +wheat crop, if there were no stores remaining and no importation from +abroad, would cause the price of wheat to rise, 500, 600, and even 1000 per +cent (p. 15.)</note> although a formula therefor expressed in figures, +like that of Gregory King, can never be applicable universally.<note place='foot'>See +<hi rend='italic'>Davenant</hi>, Political and Commercial Works, London, 1771, II, 224. +Tooke was somewhat acquainted with Davenant. According to this law, a +deficit in the harvest of 10 per cent. would raise the price of corn 30 per +cent.; one of 20 per cent. would raise the price of corn 80 per cent.; one of +30 per cent. would raise the price of corn 160 per cent.; one of 40 per cent. +would raise the price of corn 280 per cent.; one of 50 per cent. would raise +the price of corn 450 per cent.</note> +Farmers must everywhere and always withhold a certain +amount of their harvest for seed, for home use etc., from the +market. Only absolute necessity can induce them to draw on +the quantity thus laid by. But the ratio of this part to the +whole is very different in different countries.<note place='foot'>In England, +it is 38.8 per cent. of the supply that comes to the market. +(Quart. Review, XXXVI, 425.) In Belgium 40, and in Saxony at least 50 +per cent. (<hi rend='italic'>Engel</hi>, Jahrb. der Statistik etc. von Sachsen, +I, 276.) In Germany, the farmers consume on an average two-thirds themselves. +(<hi rend='italic'>v. Viebahn</hi>, Zoll.-v-Statist., II, 958.) With this +<hi rend='italic'>Plato</hi>, De Legg., VIII, agrees remarkably +well.</note> In the higher +stages of civilization, where payment in money has taken the +place of payment in produce, and all other kinds of payment, +and where the cultivator of the ground pays the wages of his +<pb n='313'/><anchor id='Pg313'/> +laborers almost exclusively in money, so that they, like all +others, purchase what bread they require in the market; a +given deficit in the harvest must be spread over a much larger +market supply; and prices, therefore, remain much less affected +than in the lower stages of civilization.<note place='foot'>On +the difference in this respect between England, Germany and northwestern +Norway, see <hi rend='italic'>Hermann</hi>, p. 71.</note> And so, it is clear +that a like bad harvest must affect prices very differently, if +there be a large importation or exportation of the means of +subsistence, and if several bad harvests, or several harvests +yielding more than the average have preceded. +</p> + +<p> +In another respect yet, the price of indispensable commodities +is very sensitive, because here the mere fear of a future +want of them has a far deeper and wider influence, than has +the fear of want of articles of luxury. No matter how good +the wheat crop may have been, if the weather afterwards +interferes with its harvesting, the price of wheat, in countries +in which the spirit of speculation is on the alert, will certainly +rise, because the prospect of the future crop then becomes +somewhat doubtful.<note place='foot'>Hence it not unfrequently +happens that grain grows dear not from any real want of it, +but because it is generally supposed that such want exists. For +an explanation of why it is that wheat and similar commodities have an almost +invariable price, when the average is taken of a long series of years, +see <hi rend='italic'>infra</hi> § <ref target="Section_129">129</ref>.</note> +</p> + +</div> + +<div> +<index index='toc' level1="Section CIV. Influence Of Purchaser's Solvability On Prices."/> +<index index='pdf' level1='Section CIV.'/> +<head type='sub'>Section CIV.</head> +<head>Influence Of Purchaser's Solvability On Prices.</head> + +<p> +The purchaser, besides the value in use of the goods he desires +to buy, considers his own solvability (<foreign lang='de' +rend='font-style: italic'>Zahlungsfähigkeit</foreign> = +ability to pay). It is only solvent demand which can influence +prices.<note place='foot'>Case in Naples in which after +a poor harvest the price of corn remained very low, because +the oil-harvest had also failed, and the poor could earn +nothing in that industry in which they were largely employed, and <hi rend='italic'>vice +versa</hi>. (<hi rend='italic'>Galliani</hi>, Della Moneta, II, 2.) Thus +<hi rend='italic'>Adam Smith</hi>, Wealth of Nations, I, ch. 7, distinguishes +between <q>effectual</q> and <q>absolute</q> demand. Similarly <hi rend='italic'>J. +Steuart</hi>, Principles I, ch. 18. Care should be taken to distinguish +in this respect between desire and demand.</note> For instance, among +a people made up almost entirely +<pb n='314'/><anchor id='Pg314'/> +of proletarians, there will be a great many cases of +starvation and death after a bad harvest, but the price of corn +will undergo only a slight increase.<note place='foot'>Thus, in the famine +in Ireland in 1821, during which potatoes rose to fabulous prices, but +wheat scarcely at all, and had therefore to be exported.</note> But where the greater +number of inhabitants own property, and where the wealthy +come to the help of the poorer classes by means of poor-rates +and acts of benevolence, it is scarcely possible to assign limits +to the increase of the price of corn. By a necessary connection, +when indispensable articles grow dear, the demand for +articles that can be dispensed with generally decreases, and +<hi rend='italic'>vice versa</hi>.<note place='foot'>In <hi rend='italic'>Tooke</hi>, +History of Prices (2d edition of the Thoughts and Details etc.), +we meet repeatedly with the assertion that when the price of wheat rises, the +price of colonial products and manufactured articles sinks, and <hi rend='italic'>vice +versa</hi>. Thus, in England, the price of the evidences of national debt increases from +two to three per cent. in fruitful years above what it is after a bad harvest. +(<hi rend='italic'>Lauderdale</hi>, Inquiry, 93.) The British nation paid for the +cotton it needed for their own consumption in 1845 over £19,500,000; in 1847 only +£9,500,000. (<hi rend='italic'>Banfield</hi>, Organization of Industry, 162.)</note> +Every merchant, engaged in an extensive business, +is interested in knowing in advance the results of the corn +crop. The higher the price of a commodity rises, the narrower, +of course, grows the circle of those who can pay +for it.<note place='foot'>Hence <hi rend='italic'>J. B. Say</hi> has said that +the disposable wealth of a people is like a pyramid, with the scale of prices +of the various commodities inscribed on its side. The higher a commodity is in +this scale of prices, the smaller is the corresponding section of the pyramid. +Compare <hi rend='italic'>Sir W. Temple</hi>, Essay on the Origin and Nature +of Government, Works I, 23 ff.</note><note place='foot'>This fact, in connection +with the preceding, explains the well known puzzle, +why the remnant of a piece of goods is comparatively cheaper than the +whole piece, while a small share in the public debt is dearer than a large one. +(<hi rend='italic'>Lauderdale</hi>, ch. 1.)</note> +</p> + +</div> + +<pb n='315'/><anchor id='Pg315'/> + +<div> +<index index='toc' level1='Section CV. Supply.'/> +<index index='pdf' level1='Section CV.'/> +<head type='sub'>Section CV.</head> +<head>Supply.</head> + +<p> +In the case of isolated chance exchanges, the seller, too, takes +into consideration, first of all, value in use, and compares the +satisfaction which the commodity to be parted with and that +to be received are able to afford. It is true that in making +this estimate, he is subject in the highest degree to error +and deception.<note place='foot'>Rhode Island was, it is said, bought from the +Indians in 1638 for a pair of spectacles. (<hi rend='italic'>B. Franklin</hi>, +Political ... Pieces, 1707.) According to <hi rend='italic'>Chalmers</hi>, it +was bought for 50 threads of coral, 12 hatchets and 12 overcoats. +(Political Annals of the U. States.) Compare <hi rend='italic'>Ebeling</hi>, II, +108. Holland cloths and opium were exchanged for a long time at Sumatra for gold dust +worth ten times their value. (<hi rend='italic'>Saalfeld</hi>, Geschichte des holl. +Kolonialwesens, I, 260.) The Hudson Bay Company realized, it is said, at the beginning of +this century, in trading with the Indians, a profit of 2000 per cent. +(<hi rend='italic'>Anderson</hi>, Origin of Commerce, a. 1751.) When Altai was +discovered, the natives gave as many sable-skins for a Russian kettle or boiler as +could be crammed into it. With 10 rubles in iron it was an easy easy matter to gain +500-660 rubles. <hi rend='italic'>Storch</hi>, Gemälde des russ., R., II, 16; +<hi rend='italic'>K. Ritter</hi>, Erdkunde, II, 557. Similar +cases among the Germans: <hi rend='italic'>Tacit.</hi>, Germ., 5.</note> +In the well ordered trade of a nation whose +economy is highly developed, the seller, who had this very +trade in view in his production, is wont to consider almost exclusively +the value in exchange of his commodity. +</p> + +</div> + +<div> +<index index='toc' level1='Section CVI. The Cost Of Production.'/> +<index index='pdf' level1='Section CVI.'/> +<head type='sub'>Section CVI.</head> +<head>The Cost Of Production.</head> + +<p> +As no one is willing to lose anything, every seller will consider +what his goods have cost him, and the cost of producing +or procuring them as the minimum price to be asked for +them.<note place='foot'>A seller not actually engaged in the business of selling for a +livelihood, and who has not purchased or produced with the intention of selling, is apt +to consider instead of this the market price, towards the determination of +which those actually engaged in trade have coöperated. Somewhat inaccurately, +the amount of the cost of production is called by <hi rend='italic'>Adam Smith</hi> and +<hi rend='italic'>Ricardo</hi>, <q>natural price,</q> by <hi rend='italic'>J. B. Say</hi>, +<foreign lang='fr' rend="font-style: italic">prix naturel</foreign>, also +<foreign lang='fr' rend='font-style: italic'>prix originaire</foreign>, because +the commodity at its first entrance into the world cost so much. +<hi rend='italic'>Sismondi</hi> and <hi rend='italic'>Storch</hi> call it +<foreign lang='fr' rend='font-style: italic'>prix nécessaire</foreign>, and +<hi rend='italic'>Lotz, Kostenpreis. P. Cantillon</hi>, +Nature de Commerce, 33 ff., understands by the <foreign lang='fr' +rend='font-style: italic'>prix intrinsique</foreign> of a commodity, +the amount of land and labor, taking the quality of both also into +consideration, necessary to its production.</note> +At the same time, the idea covered by the expression +<pb n='316'/><anchor id='Pg316'/> +cost of production, although it always embraces whatever disappears +from the resources of the producer to enter into production, +varies very much according as it is considered from +the point of view of the individual's, the nation's or the world's +economy. +</p> + +<p> +An individual who pays taxes to his government, and who +has rented land and employed labor and capital to engage in +production, must indeed, besides the capital he has used in +such production, call all his outlay in interest, wages, rent, +and taxes, by the name of cost of production;<note place='foot'>The +cheapest cotton thread is numbered from 60 to 80. The coarser is +dearer on account of the quantity of raw material in it, and the finer because +of the greater amount of labor in it. (<hi rend='italic'>Babbage.</hi>) For +similar reasons, the Venetian chains cost per <hi rend='italic'>braccio</hi>, +No. 0, the finest, 60 francs; No. 1, 40 francs; Nos. 2 and 3, 20 +francs; No. 24, coarsest, 60 francs. (<hi rend='italic'>Rau.</hi>)</note> since, unless +they all come back to him in the price of the commodity, the +entire enterprise can only injure him.<note place='foot'>If +a person engaged in production has himself furnished certain of the +elements of production; if, for instance, he has worked with his own hands, +employed his own capital etc., he is wont to charge as much for these as they +would be worth, if he hired himself out or loaned his capital.</note> +He will, of course, add +an equitable profit to remunerate him for his enterprise, since +without such profit, he would not be able to live or produce; +or else, he would be compelled to consume his capital. The +moment the current rates of taxation, interest, wages and rent +change in a country, the cost of production is also changed +in the case of the individual engaged in production, however +unaltered the technic process may remain.<note place='foot'>The +greater number of political economists consider the cost of production +only from the standpoint of the individual engaged in production. Thus +<hi rend='italic'>Darjes</hi>, Erste Gründe, 218 seq.; <hi rend='italic'>Ad. +Smith</hi>, Wealth of Nations, I, ch. 6. <hi rend='italic'>J. +B. Say</hi> calls even production an exchange in which the productive services +of natural forces, of labor and of capital are parted with in order to obtain +products. The estimate put upon the value of these services is the cost of +production. For some interesting examples as to how the cost of production, +in this sense, is calculated, see <hi rend='italic'>Hermann</hi>, I ed., 136 +ff.</note> But taking the +<pb n='317'/><anchor id='Pg317'/> +nation, or all mankind into consideration, we must not lose +sight of the fact that these three great sources of income, as +well as taxation, are not, rightly speaking, sources from which +income flows, but rather channels through which the aggregate +income of the nation or the world is distributed among +individuals.<note place='foot'><hi rend='italic'>Jacob</hi> translated by +<hi rend='italic'>Say</hi>, 1807, II, 450. <hi rend='italic'>Hufeland</hi>, +N. Grundelgung, I, 309.</note> Hence the wages of labor, for instance, which +afford the means of living to the greater part of the population, +cannot possibly be looked upon simply as a factor in economic +production. The people considered in their entirety have +the soil gratis. All saving made from rent, interest on capital, +or wages, is nothing but a change of the proportion in +which the results of production were distributed hitherto +among coöperators in production. Such a change may be +either advantageous or the reverse; but it is not a diminution of +the amount of sacrifice which the people in general must make +for purposes of production. Hence, in a politico-economical +sense, to the cost of production, belongs only the capital +necessarily expended in production, and which has disappeared +as a part of the nation's resources, abstraction made of the +personal sacrifices in behalf of production.<note place='foot'>Compare +<hi rend='italic'>L. Lauderdale</hi>, Inquiry, 124, against the Physiocrates. +(<hi rend='italic'>Riedel</hi>, Nat.-Oekonomie, 1838, I, 68.) A country which possesses +advantages over other countries, in respect to the cost of production of a commodity, +can offer it in the market cheapest. Where, for instance, with the employment of the +same amount of capital, a specially large quantity of wheat can be produced, +whether it be because of the unusual fertility of the soil, or because of the +<emph>extensiveness</emph> of agriculture (farming over a large area), wheat will, +the demand being the same, be specially cheap, whatever the proportion of the three +branches of income may have been. If relatively a great number of workmen +have been employed in its cultivation, each will receive smaller wages, +and <hi rend='italic'>vice versa</hi>.</note> The value of the +circulating capital which in the process is entirely used up, must, +<pb n='318'/><anchor id='Pg318'/> +of course, be entirely restored in the price, that of the fixed +capital used only to the extent that it has been used.<note place='foot'>Copper +and steel engraving affords an example of the different kinds of +wear of fixed capital, and the influence it may have on prices. +<hi rend='italic'>Canard</hi>, Principes, ch. IV, considers that one of the most +important elements in the cost of production is the length of time that capital must +<q>stagnate</q> for the sake of production.</note> +</p> + +<p> +The risk, which the producer runs until the commodity +produced is actually consumed must also be borne in mind.<note place='foot'>On +this risk depends, for instance, the high price of vanilla +(<hi rend='italic'>Humboldt</hi>, N. Espagne, IV, 10,), sparkling wines and articles +of fashion.</note> +There are things which are a real risk in small enterprises +that by the intervention of an insurance company, or where +the enterprises are large and insure themselves, become a +more or less variable portion of the cost of production. The +price of the product, in the latter instance, rises, by this means, +very regularly. In the former case, the rise depends partly +on the feeling of the people whether their pleasure in gain is greater than their +grief over a corresponding loss.<note place='foot'><hi rend='italic'>Mangoldt</hi>, +Lehre vom Unternehmergewinn, 1855, 81 ff. Compare <hi rend='italic'>v. +Thünen</hi>, Der isolirte Staat, II, 1, 80 ff.</note> +</p> + +<p> +Those enterprises which necessarily produce different products +at the same time deserve special consideration.<note place='foot'>Wool +and mutton, brandy and fattened cattle, calves and milk, honey and +wax, gas and coke, hens and eggs etc.</note> Here +we may speak of <q><emph>united</emph> costs of production,</q> and all that is +needed is that the aggregate of these costs should be covered +by the aggregate price of both products. This complicates +to a certain extent the calculations which the seller must make +to determine his minimum demand for each product. To ascertain +this, he must subtract from the united costs of production +the amount of value which he expects with certainty +for the other product.<note place='foot'><hi rend='italic'>Adam Smith</hi> +himself remarked that all artificial lowering of the price of +skins or wool must necessarily raise the price of the meat, and +<hi rend='italic'>vice versa</hi>. (Wealth of Nations, I, ch. 11, 3.) For a +very elaborate theory on this subject, see <hi rend='italic'>J. S. Mill</hi>, +Principles, III, ch. 16, § 1. Thus Australian wool did +not rise as much in price as the production of gold there might have led us +to suppose, for the reason that mutton rose to an exceedingly high price.</note> +</p> + +</div> + +<pb n='319'/><anchor id='Pg319'/> + +<div> +<index index='toc' level1='Section CVII. Equilibrium Of Prices.'/> +<index index='pdf' level1='Section CVII.'/> +<anchor id="Section_107"/> +<head type='sub'>Section CVII.</head> +<head>Equilibrium Of Prices.</head> + +<p> +Goods whose cost of reproduction,<note place='foot'>It is an +important and correct remark of <hi rend='italic'>Carey's</hi>, +that the price of a commodity depends much more on the cost of producing its like +than on its own cost of production, which already belongs to the +past.</note> that is, the highest necessary +cost of reproduction is the same, have uniformly the same +value in exchange. Every deviation from this level immediately +sets forces in motion which endeavor to restore the level, +just as the water of the sea seeks its level, notwithstanding +the mountains and abysses which the winds bring forth from +its bosom.<note place='foot'>Compare <hi rend='italic'>J. S. Mill</hi>, +III, ch. 3, § 1. A much too high price, caused by speculation, or a much too +low one, by depreciation, is regularly followed by an ebb or flow just as much +too great. (<hi rend='italic'>Tooke</hi>, History of Prices, III, 55.) +And <hi rend='italic'>Law</hi>, Trade and Money, 41, remarks that the price +of a commodity always tends to coincide with the <q>first cost.</q> This fact +<hi rend='italic'>Adam Smith</hi> expresses by saying that the cost of production is the +center about which the market price always gravitates. (I, ch. 7.) But here there is +still the error lurking, that the producer's profit is a part of the cost of production. +Compare <hi rend='italic'>Malthus</hi>, Definitions, ch. 6.</note><note place='foot'>The +English view, one very characteristic of the people, is that the equilibrium +of prices depends on this, that all commodities should have a value +equal to that of the labor they have cost. (Compare <hi rend='italic'>Aristot.</hi>, +Eth. Nicom., V, 5.) The same doctrine is to be found in its germinal state in +<hi rend='italic'>Hobbes</hi>, Leviathan, 24, 1651, and <hi rend='italic'>Rice +Vaughan</hi>, Discourse of Coin and Coinage, 1675. More exhaustively in +<hi rend='italic'>Petty</hi>, Treatise of Taxes and Contributions, 1679, +24, 31, 67. (Compare <hi rend='italic'>Locke</hi>, Civil government, II, § 40 ff.; +<hi rend='italic'>B. Franklin</hi>, Inquiry into the Nature and Necessity of a +paper Currency, 1729; Works, ed. Sparks, vol. II.) <hi rend='italic'>Adam Smith</hi> +admits this to be true only of the first beginnings of society, before the origin of +property in land and in capital. (Wealth of Nations, I, ch. 5.) Most largely developed +in <hi rend='italic'>Ricardo</hi>, Principles, ch. I, 4, 30. <hi rend='italic'>Marx</hi>, +Zur Kritik der polit. Œkonomie, 1859, 6, endeavors to improve on this by calling all +values in exchange <q>a determinate quantity of thickly curdled working-time,</q> +meaning by work an averaged <foreign lang='de' +rend='font-style: italic'>qualitätslose</foreign>, social work of production. +<hi rend='italic'>Per contra</hi>, compare <hi rend='italic'>Hufeland</hi>, N. +Grundlegung, I, 134, 156 ff.; and <hi rend='italic'>Malthus</hi>, Principles, ch. 2, +secs. 2, 3, who claims very earnestly that price is not determined by the cost of +production, but by the relation existing between demand and supply, the cost of +production influencing it only to the extent that it influences this relation. He +calls attention to the poor-rates by which the cost of production of labor is raised, but +its wages decreased; also to the case of bank notes etc. (<hi rend='italic'>Tooke</hi>, +History of Prices, V, 49 ff; <hi rend='italic'>J. S. Mill</hi>, Principles, III, ch. +16, 2.) For a very marked case of reaction against Adam Smith and Ricardo, see +<hi rend='italic'>Macleod</hi>, Elements, ch. 2, who, however, is much too one-sided +in considering only the amount necessary to the purchaser, and his means. Even +<hi rend='italic'>Condillac</hi> had said: <foreign lang='fr' +rend='font-style: italic'>une chose n'a pas une valeur, parcequ'elle coûte, mais elle +coûte (du travail ou de l'argent), parcequ'elle a une valeur</foreign>. (Commerce et +Gouvernement, 16.) <hi rend='italic'>Ricardo's</hi> +doctrine is more tenable than appears at first blush. We need only +to interline his theory of rent, admit that capital is accumulated labor, subtract +all objects constituting a natural monopoly, and not forget that the +intrinsic value of labor is one of the causes of the difference of price of +different sorts of labor. <hi rend='italic'>Ricardo</hi> does justice to value in +use even <foreign lang='fr' rend='font-style: italic'>en passant</foreign>. +A strange effort by <hi rend='italic'>McCulloch</hi> to make labor the cause of the +non-use of capital. (Principles, III, ch. 6, 2.) <hi rend='italic'>McCulloch</hi> +has not unfrequently exaggerated the half-truths of his doctrines to such an extent +as to produce unwittingly a <foreign lang='la' rend='font-style: italic'>reductio ad +absurdum</foreign>. According to <hi rend='italic'>Torrens</hi>, before any separation +of capitalists from workmen, price depends entirely on the work done, and +afterwards on the capital expended, inasmuch as wages, rent etc. are covered +by the capital of the person who engages in the enterprise. (Production of +Wealth, ch. 1.)</note> +</p> + +</div> + +<pb n='320'/><anchor id='Pg320'/> + +<div> +<index index='toc' level1='Section CVIII. Effect Of A Rise Of Price Much Above Cost.'/> +<index index='pdf' level1='Section CVIII.'/> +<head type='sub'>Section CVIII.</head> +<head>Effect Of A Rise Of Price Much Above Cost.</head> + +<p> +If the market price rises high above the cost of production, +producers make a profit greater than the average profit made +in the country. This induces them, by the appropriation of +new land and the employment of new labor and capital, to +increase their business. Other parties also engage in this +profitable department of trade. This competition not only +makes the means of production dearer, but must eventually, +by increasing the demand, reduce the price of the product to +the ordinary level of profit, that is to an equilibrium with other +commodities.<note place='foot'><foreign lang='fr' rend='font-style: italic'>Ce que l' +on appelle chereté, c'est l' unique remède à la chereté.</foreign> +(<hi rend='italic'>Dupont de Nemours.</hi>) Tenders of division in common, in England, +increase and decrease according to the higher or lower price of corn during the preceding +year. (<hi rend='italic'>Tooke</hi>, Thoughts and Details, III, 105 ff.) The cotton +famine after 1861 increased the price of flax-yarn in a short time fifty per cent., +although the raw material of flax did not rise in price, but only because care was not +taken to increase the number of flax-spinners. (<hi rend='italic'>Ausland</hi>, I, +1865.) However, there were in 1864, 490,000 flax-machine spindles in course of erection. +(Report of the Chemnitz Chamber of Commerce, 1864, 101.)</note> +Hence, in the beginning, every diminution of +<pb n='321'/><anchor id='Pg321'/> +the cost of production<note place='foot'>By the discovery, for instance, +of new natural forces, the invention of machines, improved division of labor, +improved roads etc. In France, in consequence of technic improvement, a quintal +of saltpeter fell from 100 to 9 francs. See a similar instance in +<hi rend='italic'>Chaptal</hi>, De l' Industrie française, II, 64, +70, 434.</note> turns to the advantage of the producer; +but afterwards and permanently to that of the consumers: an +economic law exceedingly beneficent in its operations, and not +unlike the action of positive legislation in the matter of patents. +There is no greater stimulus to the making of improvements +than the certainty of reward to the person who first introduces +one. The moment, however, that the improvement is +imitated by all producers, the advantage gained by it becomes +the common good of the whole nation.<note place='foot'><hi rend='italic'>Hermann</hi>, +Staatsw. Untersuchungen, 212.</note> These are, as J. B. +Say says, conquests made over the gratuitous productive force +of nature. As a consequence, the value in use of a people's +resources increases; generally, also, their value in exchange, in +so far as the production of the now cheaper goods increases +in a degree greater than their cost of production has diminished.<note place='foot'>The +highest but unattainable ideal of such progress would consist in this, +that all products should be obtained without cost. If this ideal were attainable, +every one would be infinitely rich and all wealth would be free, like the +air and the sunshine. (Compare <hi rend='italic'>J. B. Say</hi>, Traité, II, 2.) +The complete victory of mankind over nature would consist in that all men should be free +and all the forces of nature the slaves of man. (<hi rend='italic'>Smitthenner.</hi>) +<hi rend='italic'>Carey</hi> intimates something similar when he says that, with the +advance of civilization the tendency is for men to become more and more valuable and +commodities to have less of <q>value.</q></note> +</p> + +<p> +As to the alternative so frequently discussed, whether it is +preferable to make a large percentage of profit on the sale of +a small quantity of goods, or a small percentage on a large +quantity, we find that, in the lower stages of civilization, the +<pb n='322'/><anchor id='Pg322'/> +former is preferred, and the latter in the higher.<note place='foot'>We +might here speak of an aristocratic and democratic principle of the +determination of prices. The greater utility of the latter is advocated in the +Discourse of Trade, Coyn and Credit, London, 1697. <hi rend='italic'>Bacon</hi> has a good +word to say for the maxim: <q>Light gains make heavy purses; for light +gains come thick, whereas great come now and then.</q> Similarly, +<hi rend='italic'>Gurnay</hi> in <hi rend='italic'>Cliquot de Blervache</hi>, +Considérations sur le Commerce etc., 1758, 48, 54. As to how Morrison, the celebrated +merchant, became rich by adhering to the principles: <q>to sell cheap as well as to +buy cheap,</q> and <q>always tell the truth,</q> see <hi rend='italic'>Chadwick</hi>, +in the Statistical Journal, 1862, 503. Compare the related opinion of +<hi rend='italic'>Adam Smith's</hi> continuator in an ethical direction, +<hi rend='italic'>Garve</hi>, zu Cicero's Pflichten, III, 100. The contrary principle, +the cunning of the Judæans, according to <hi rend='italic'>Strabo</hi>, XVII, 800, +was followed by the Dutch East India Company, when it, in 1652, caused the greater +number of the vegetable roots on the Moluccas to be destroyed. +<hi rend='italic'>Saalfeld</hi>, Geschichte des holländischen Kolonialwesens, I, 272. +Also, when great quantities of roots were destroyed by burning in the East Indies. +(<hi rend='italic'>Huysers</hi> Beschryving der Oostindischen Etablissmenten, 1789, 22.) +For a clever argument against such practice, see <hi rend='italic'>de la Court</hi>, +Anwysing der heilsame Gronden, 1663. The principle +similar to that of the patent, mentioned in the text, works at the same +time democratically and aristocratically, both words understood in their best +sense.</note> And, indeed, +the latter is not only more humane, but, in the long run, it is +more profitable to the person who adopts it as his rule in business. +In the case of commodities, he now runs but little risk +from a change of fashion, because the fashions of the masses +change much less rapidly than those of the upper circles of +society. In the case of indispensable goods, on the other hand, +he may now calculate with more certainty on the increase of +population, and, therefore, on a future market for his wares. +Competition, which in former times, devoted all its efforts to +bringing about the exclusion, by law, of all rivals, is now engaged, +principally, in devising means of surpassing them by +superiority of workmanship, and in thus increasing the power +of the real sources of a nation's wealth. +</p> + +</div> + +<pb n='323'/><anchor id='Pg323'/> + +<div> +<index index='toc' level1='Section CIX. Effect Of A Decline Of Price Below Cost.'/> +<index index='pdf' level1='Section CIX.'/> +<head type='sub'>Section CIX.</head> +<head>Effect Of A Decline Of Price Below Cost.</head> + +<p> +If the market price sinks below the cost of production, the +producer naturally suffers a loss, and diminishes his stock as +soon as possible. That whole establishments engaged in industry +should forsake a branch of it which is suffering from +depression and enter a flourishing one, must ever remain a +rare exception.<note place='foot'>This is true, first of all, in +those industries which are intimately connected with one another, or +of those which are carried on with scarcely any fixed +capital; also in lower stages of civilization, where the lights and shades caused +by a highly developed division of labor are not very intense. On the numerous +difficulties overlooked by Ricardo in every other case, see +<hi rend='italic'>Sismondi</hi>, N. P., II, ch. 2. The workman thereby loses his +former skill, that is his principal capital, and can certainly not wait until he +has acquired other and different skill.</note> But the discouraged manufacturer may +delay renewing his stock on hand,<note place='foot'>When a lowering of prices is +expected, demand is less than consumption: <q>postponed demand;</q> whereas, an +expectation that the price will rise, produces <q>anticipated demand.</q> +<hi rend='italic'>Tooke</hi>, History of Prices, II, 155.</note> replacing his machinery +by new machinery; he may dismiss some of his workmen and +diminish the number of days during which the others shall +work. Moreover, most industries are operated by means of +borrowed capital, capital which must therefore, be returned to +the lender. Under certain circumstances, however, the industry +may be continued for some time, even at a real loss,<note place='foot'>Thus, +for instance, if the workmen were exposed to starvation, or were +likely to take their departure; if great stores of raw material were in danger +of spoiling; if fixed capital of great value were engaged in one industry and +could not be easily transferred to another. The first and third causes are frequently +met with in mining, and give rise to the mode of carrying on the +operation known as <foreign lang='de' rend='font-style: italic'>Zubusgruben</foreign>, +that is, a species of working mines upon shares. In England, after the spring of 1862, +cotton yarn was not so much dearer than raw cotton, that the loss caused by the decline +could be made up. (<hi rend='italic'>Ausland</hi>, 24 Sept., 1862.)</note> so +long as the loss of interest etc., which would follow the entire +suspension of the work, exceeds the loss produced by the lowering +<pb n='324'/><anchor id='Pg324'/> +of price, but hardly any longer. If the supply of the +commodity the price of which has fallen has been diminished, +the subsequent result depends on the causes which, in the first +place, brought about the fall in price. If the diminution in +price was caused solely by a too great supply, when this superabundant +supply is gotten rid of, the price will rise again.<note place='foot'>Besides, +in the time immediately following, the price lowered by too great +a supply, may produce a species of desperation among producers, which +would lead them, in the hope of covering their losses, to increase the supply +still more, until many of them were ruined. Generally, when a time of high +prices is followed by a time of low prices, we find an interval during which +sellers endeavor to defend themselves against the decline, and during which, +as a consequence, scarcely any business is transacted, while high prices are +nominally continued. And so <hi rend='italic'>vice versa</hi>. +<hi rend='italic'>Tooke</hi>, History of Prices, II, 62.</note> If +it were produced by a decrease in the value in use of the commodity, +the diminution of the supply can restore the former +state of things only in so far as at least a part of the purchasers +ascribe to the commodity the same value in use as before.<note place='foot'>Thus, +for instance, when the change of fashion brought about the disuse +of long periwigs in every-day life, their price did not cease to fall until they +had entirely disappeared. But, if a person wishes to have one made to-day +for a masquerade, for the stage, etc., he would pay as much for it as its former +price. On the other hand, the price of whalebone has never been again as +high as it was in the time when hooped petticoats were worn.</note> +Lastly, if the lowering of the price came from a decrease in the +number of buyers, or from a decrease in their ability to purchase, +the former price will be restored when production has +been adapted to a correspondingly smaller circle of consumers.<note place='foot'>The +great plague in the time of Edward III. caused during the first year, +on account of the decreased consumption, an extraordinary cheapness of +provisions. In the following year, however, they became alarmingly dear, +because there were few producers, especially among the humble classes. A +quarter of wheat cost in 1348, 4s. 2d.; in 1349, 5s. 5d.; in 1350, 8s. 3d.; in +1351, 10s. 2d.; while in 1346 and 1347, its average price was 6s. 8-7/8d. +<hi rend='italic'>Rogers</hi>, History of Agriculture and Prices, I, 232.</note> +This last is true especially when the price, without having +suffered any absolute change, has become relatively too +low, on account of an increase in the cost of production.<note place='foot'>As +for instance when new taxes or excises are imposed. Generally when +the cost of production has largely increased, purchasers do not wait until a +decrease of competition among sellers compels them to exact higher prices, +but meet them half way, especially when many greatly desire the commodity, +and the increase of the cost is only small. (<hi rend='italic'>Rau</hi>, Handbuch, +I, § 163.)</note> +</p> + +</div> + +<pb n='325'/><anchor id='Pg325'/> + +<div> +<index index='toc' level1='Chapter CX. Different Cost Of Production Of The Same Goods.'/> +<index index='pdf' level1='Chapter CX.'/> +<anchor id="Section_110"/> +<head type='sub'>Chapter CX.</head> +<head>Different Cost Of Production Of The Same Goods.</head> + +<p> +Most goods are produced at the same time, but under different +circumstances, at a very different cost. In order to +estimate the influence of this fact upon price, we must distinguish +between those commodities the cheapest manner of the +production of which may be extended at pleasure, and those in +the production of which it is necessary, in order to satisfy the +aggregate want of them, to call in the dearest mode of production +to aid the cheapest. +</p> + +<p> +In the former instance, the price of commodities is naturally +regulated by the least cost of production. The person who is +unable to sustain this competition permanently, would do a +great deal better to abandon the industry altogether; for it is +not in his power to raise the price by diminishing the supply; +more powerful rivals would then only need to correspondingly +increase theirs.<note place='foot'>Under this rule fall, according +to § <ref target="Section_33">33</ref>, most products of industry properly +so called. <q>If we lose a market for a year, we generally lose it for all +time,</q> said an experienced manufacturer before the parliamentary hand-loom +weavers' committee, 1840-42. Of course the cost of transportation as far as +the market must be estimated as part of the cost of production. In consequence +of this, as well as of the difference of taxation duties etc., the superiority +of one producer to another may be more than overcome. In the case +of colonial commodities, which go into the interior of a country from different +sea-ports, the territory supplied from each port is determined for the +most part by these data. Thus, in Switzerland, for instance, we find the districts +supplied by Havre, Genoa and Rotterdam; in Austria, the districts +supplied by Hamburg and Triest contiguous, but the boundary line subject +to many changes. (<hi rend='italic'>Rau</hi>, Lehrbuch, I, § 164.) It must be +understood that we do not here speak of abnormal expenses made by producers individually, +whether in consequence of want of skill or because of accident.</note> +</p> + +<p> +If the same law were applicable, in the latter case, producers +<pb n='326'/><anchor id='Pg326'/> +placed in a less favorable situation would be compelled to immediately +abandon the market. The market, in consequence, +would no longer be able to provide for the aggregate need; +and the price of the commodity would continue to rise until +the producers who had been driven from the market returned +to it again. Hence, here, price in the long run is determined +by the cost of the production of the commodity, produced +under the least advantageous conditions, while such production +is necessary in order to satisfy the aggregate need. The +person engaged in production under more advantageous conditions +receives in the same price of the goods, which are +cheaper to him, an excess of profit; one which is greater in +proportion as his situation, <hi rend='italic'>vis-a-vis</hi> of production, is superior +to that of his less favored competitors.<note place='foot'>This +is true especially of agricultural production, in which, as a rule, beside +the most fertile and most advantageously situated land, the worse must +be used. What <hi rend='italic'>Whately</hi> calls <q>surplus-profit</q> appears +here in the form of rent, whereas, in other cases, it takes the shape of unusually high +wages, or profit on capital. This is very beautifully and systematically developed by +<hi rend='italic'>Schäffle</hi>, N. Œk., II; Aufl., 192 ff. According to +<hi rend='italic'>Senior</hi>, Outlines, 15, the price-relation of two commodities to +each other depends not on the quantities of them which come to market, but on the +relative power of the difficulties which stand in the way of an increase in these +quantities. If the same producers can pursue the cheaper mode of production which does not +suffice to supply the market, as well as the dearer, we have, generally, a price +which is the mean between the two costs of production. The same is true in the case of +<q>smuggled</q> goods which ought to have paid duty. (<hi rend='italic'>Hermann</hi>, +loc. cit., 83, seq.)</note><note place='foot'>To this section belong the secrets of +production which may be taken advantage of either <foreign lang='la' +rend='font-style: italic'>ad libitum</foreign> or within certain limits. In agriculture, +advantages of production can seldom remain secret. Compare, however, the case +mentioned in <hi rend='italic'>Garnier's</hi> translation of <hi rend='italic'>Adam +Smith</hi>, V, 119, and that of the orchards which yielded £1,000 yearly for every 32 +acres, and which were a result of the recent introduction of the culture of the cherry +in Kent, in the reign of Henry VIII. (<hi rend='italic'>Anderson</hi>, Origin of +Commerce, a, 1540.) There is therefore, a certain odium attached by agricultural +producers to keeping secret a means of agricultural improvement.</note> +</p> + +</div> + +<pb n='327'/><anchor id='Pg327'/> + +<div> +<index index='toc' level1='Section CXI. Different Cost Of Production Of The Same Goods. +(Continued.)'/> +<index index='pdf' level1='Section CXI.'/> +<head type='sub'>Section CXI.</head> +<head>Different Cost Of Production Of The Same Goods. (Continued.)</head> + +<p> +Hence the price of a commodity and the ratio between its +supply and demand mutually condition each other. On the +height of the price depends, in great part, how many purchasers +shall resolve to make an effectual demand; but, at the +same time, to what amount of cost of production, sellers shall +extend their supply.<note place='foot'>Compare <hi rend='italic'>Boisguillebert</hi>, +Traité des Grains, II, ch. 2. <hi rend='italic'>John Stuart Mill</hi> +speaks of an equation: the price of a commodity in a given market is always +high enough to produce a demand corresponding to the present supply, or +to an expected supply. The price of such commodities only which may +not be increased to any desirable extent depends on supply and demand. In +the case of all others, on the other hand, demand and supply depend on the +price, and this on the cost of production. Supply and demand always tend +to an equilibrium which is never really attained where the price is high +enough to cover the cost of production (?). (Principles, III, ch. 2, § 4; ch. +3, § 2.) <hi rend='italic'>Schäffle's</hi> theory of prices is topped by the +proposition that all competing sellers and all competing buyers, after an economic +fashion, do not wish to sell below individual cost-value, nor to rise above individual +value in use, in purchasing. Hence, in a throng of competition of supply the costliest +productions step out of the field of competition in a descending cost-value +series; and in a throng of competition of demand, the most wearied +cravings in an ascending value-in-use series; until the quantities offered in +supply and asked for cover each other without loss, and have placed each +other in quantitative equilibrium. (N. Œk. Aufl., I, 188 ff.; compare 173, +185.) It is, however, to say the least, an instance of baseless solicitude, when +<hi rend='italic'>Wade</hi>, History of the middle and working Classes, 214, says that +one unemployed workman might depress the aggregate wages of labor, almost +<hi rend='italic'>ad infinitum</hi>.</note> We can speak of an equilibrium between +supply and demand only when the former corresponds with +the <emph>wish</emph> of those who are ready to make good the full cost +of production. (<hi rend='italic'>Malthus.</hi>) It has been asked, indeed, whether +it were more natural and better that demand should precede +supply or supply demand.<note place='foot'><hi rend='italic'>Hufeland</hi>, N. +Grundlegung, I, 78; <hi rend='italic'>Ricardo</hi>, Principles, ch. 31.</note> +But the inquiry is an illogical one, +when expressed in so general a manner, since supply and +<pb n='328'/><anchor id='Pg328'/> +demand are only two sides of the same transaction. But, we +may say that in the case of indispensable goods, the want of +them (demand) is always felt sooner than the excess of them +(supply), and that in the case of goods which may be dispensed +with, including, originally, money, the reverse is true. +Besides, a person engaging in the production of any kind of +goods, can, as a rule, only seldom directly investigate the relation +between supply and demand. Generally, he can do no +more than compare the market price of the commodity with +the cost at which he can produce it. Many mistakes are inevitable +here; but the making of them is the necessary sacrifice +which must be endured to purchase the more than counterbalancing +advantages of free competition.<note place='foot'><hi rend='italic'>Dunoyer</hi>, +Liberté du Travail, VIII, ch. 4; <hi rend='italic'>Rau</hi>, Lehrbuch, I, § 158.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXII. Exceptions.'/> +<index index='pdf' level1='Section CXII.'/> +<anchor id="Section_112"/> +<head type='sub'>Section CXII.</head> +<head>Exceptions.</head> + +<p> +The rule that goods which have the same cost of production +have also equal value in exchange, is applicable only to +the extent that it is possible to transfer the factors of production +at will from one branch of production to another. Where +this really free competition does not exist, the price depends +entirely on the quantity of the supply, compared with the +solvability or capacity to pay of the purchaser; and hence, it +may sometimes rise far above the cost of production (monopoly-price), +and sometimes sink far below it (forced price, or +under-price).<note place='foot'>For a good classification of monopolies, see +<hi rend='italic'>Senior</hi>, Outlines, 103 ff. <hi rend='italic'>Menger</hi>, +Grundsätze, I, 195, shows that no monopolist can arbitrarily determine +the extent of the market for his monopoly-product when the price +is fixed, nor when the extent of the market is known, the height of +the price. Moreover, the price may remain longer above than under the cost +of production, for the reason that it is easier to abandon a business than to +begin one, and that the fear of loss is more frequently an incentive to action +than the hope of gain. Hence the price of corn, when everything else is +very dear, is more apt to vary from the average price, than in times when +everything is very cheap. For instance, the Munich prices from 1750 to 1800 +show that its highest price was 147 per cent. above, and its lowest 47 per cent. +below the average of twenty years. (<hi rend='italic'>Rau</hi>, Lehrbuch, § 162, +182.)</note> Such hindrances to competition depend, in part, +<pb n='329'/><anchor id='Pg329'/> +upon natural causes. Thus, in the case of the works of art +of a deceased artist, which cannot be increased in number;<note place='foot'>Chance +plays a great part here. Thus, Murillo's Conception which Marshal +Soult had offered several times for 150,000 francs, but in vain, was sold +in May, 1852, for 586,000 francs. Paul Potter's young bull at the Hague, +which cost 625 florins in 1748, was valued before the middle of the nineteenth +century at 200,000 florins. (<hi rend='italic'>Dethmar.</hi>)</note> +or in that of living celebrities who cannot extend their mental +activity in the same degree that their reputation has grown. +So, also, in the case of precious stones, which are sometimes +found free, and therefore cost nothing, but which, at the +same time, have a high price.<note place='foot'>The purchaser resolves +to do so because it would, in all probability, cost +him more to go to India or Brazil in search of precious stones. Besides after +the working of the Brazilian mines in 1728, and again after the French Revolution, +the price of diamonds fell greatly; in the one case, from an increase +of the supply, in the other from a decrease of the demand. (<hi rend='italic'>Ritter</hi>, +VI, 355, 365.)</note> Many valuable agricultural +products are, together with their production, limited to a +definite and sometimes very small district.<note place='foot'>Thus, the +Champagne and Johannisberg grapes, when transplanted to the +Crimea, lost most of their native taste. On China's practical monopoly of +tea culture, and Ceylon's, especially in its southwestern part, of cinnamon, at least +so far as the peculiar aroma is concerned, compare <hi rend='italic'>Ritter</hi>, +Erdkunde, VI, 123 ff. The small deer of Angora no sooner leave the little district of +Asia Minor to which they belong, than they are in danger of degenerating. +(Revue des deux Mondes, May 15, 1850.) Indian birds-nests cost no more +than 11 per cent. to gather, dry etc., of the market price. +(<hi rend='italic'>Crawfurd</hi>, East India Archipelago, III, 432 ff.; +<hi rend='italic'>Hogendorp</hi>, Sur l'Ile de Java, 201.)</note> It is to be regarded +as a modification of such natural monopolies when substitutes +for a kind of goods which diminish, at least in part, +the demand for them, are found, at a cheaper price; for instance, +ordinary table-wines in the stead of fine wines. The +rule applies much more strictly to those goods which, on +account of their greater quantity, can replace inferior ones,<note place='foot'>Poor +material for fuel, poor day-laborer work—dwellings, medical attendance. +(<hi rend='italic'>Menger</hi>, Grundsätze, I, 116.)</note> +than it does to those where this is not possible. +</p> + +<pb n='330'/><anchor id='Pg330'/> + +<p> +The principal cause of forced or under-prices (<foreign lang='de' +rend='font-style: italic'>Schleuderpreise</foreign>) +is the facility with which the product deteriorates, and +must, therefore, find a quick sale, especially when its storage +or transportation is attended by further difficulties.<note place='foot'>Thus +sea fish, oysters etc. were formerly much cheaper during the summer +than during the winter, at Ostend and Scheveningen, because during +winter they could be sent to a distance. At Billingsgate market, in the +mackerel season, fish cost per hundred 48 to 50 shillings at 5 o'clock in the +morning, 36 shillings at 10 o'clock, and 24 shillings in the afternoon. +(<hi rend='italic'>H. Schulze</hi>, Nat-Œkonomische Bilder aus England, 1853, 241.) In +the Rhine country, the price of fruit does not vary so much as in Saxony, because it is +customary there to employ the surplus in the manufacture of cider, of preserves +etc., thus making it transportable and durable. Frequently, after a +very abundant crop of grapes or olives, under-prices prevail, sometimes on +account of a want of vessels, cellar-room etc.; they must, therefore, be sold +rapidly.</note> But, very +durable commodities are also subject to under-prices, and especially +those which last longest, because the supply of them +can be diminished only very slowly. Thus, for instance, +houses, in a declining city. Distress-prices are found most +usually in the case of such commodities as are produced without +any intention to produce them, as for instance, rags and +excrementitious substances. The more the mere forces of +nature preponderate in production, the less can the supply +be increased or decreased at pleasure, the more frequently, as +a consequence, do we find monopoly-prices and under-prices. +(Compare § <ref target="Section_131">131</ref> ff.) Thus the production of wheat is +invariably connected with the order of the seasons. Between seed-time +and harvest, there are a number of months which neither +capital nor skill can shorten to any extent. The cultivation of +land, to be very much greater and more lasting, supposes so +many conditions precedent, increase of live stock, buildings etc., +that it can be attained only after a series of years. Hence it +happens that wheat, much more than manufactured products, +is subject to oppressively high prices and oppressively low ones, +during a long period of time. No matter what the influence +of the forces operating in the opposite direction may be, the +<pb n='331'/><anchor id='Pg331'/> +price of wheat depends most largely on the result of the last +crop.<note place='foot'>Compare <hi rend='italic'>Adam Smith</hi>, Wealth of Nations, I, +ch. 7.; <hi rend='italic'>Tooke</hi>, History of +Prices, I, 97. Furs vary very much in price, sometimes 300 per cent. in a +year, because, in the case of this entirely natural product, every thing depends +on the stores of them, on the temperature etc. (<hi rend='italic'>McCulloch</hi>, +Commerc. Dict., s.v.) On the other hand, the price of coffee usually varies only after +periods of a number of years, because new plantations produce only after a lapse of +years. (<hi rend='italic'>Ibid.</hi>) Pigs vary much more than cattle in price, because +the former may be made ready for the slaughter house in one-third of the time +required for the latter. (<hi rend='italic'>Thaer</hi>, Rationelle Landwirthschaft, IV, +374.)</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXIII. Exceptions. (Continued.)'/> +<index index='pdf' level1='Section CXIII.'/> +<anchor id="Section_113"/> +<head type='sub'>Section CXIII.</head> +<head>Exceptions. (Continued.)</head> + +<p> +Other impediments in the way of freedom of competition +have their origin in social conditions. The rule governing +prices applies only where the vendor and purchaser are equally +ready to exchange. But in every case in which the producer +carries on his business, not for the sake of free gain, but +simply to obtain a means of livelihood, it may be subject to +many important exceptions.<note place='foot'>Thus the rent of farms, +where a numerous proletarian population will live +exclusively from agriculture, depends on scarcely anything but the number +of people and the extent of the land. (<hi rend='italic'>J. S. Mill</hi>, Principles, +III, ch. 2.) In retail trade, where personal want comes in question, prices are much more +subject to be modified by small circumstances, than in wholesale trade, where +both parties are only intent on <q>doing business.</q> (<hi rend='italic'>J. S. +Mill</hi>, III, ch. 1, § 5. <hi rend='italic'>Tooke</hi>, II, 72 f.)</note> +The richer a seller is, the longer +can he wait for a favorable opportunity to sell. Thus, for instance, +wheat is somewhat lower in price at times when payments +are universally made than at other seasons of the year, +because a great many country people are then compelled to +sell. Where the country population are universally needy, it +sinks after a harvest to an unusually low figure, and in spring +rises again very high. +</p> + +<p> +Sometimes price is affected by the agreements of the purchaser +or seller, but most readily by those of middlemen between +<pb n='332'/><anchor id='Pg332'/> +consumer and producer.<note place='foot'>Hucksters, butchers, dealers in corn, +inn-keepers etc. A remarkable case where Parisian dealers in +hare-skins attempted to ruin the new fashion in silk hats by +distributing a great number of them among the rabble, at mock-prices. +(<hi rend='italic'>Hermann</hi>, 1st ed., 91.) The author witnessed a similar but +unsuccessful attempt in Berlin in 1838-39, by the tailors against the so-called Macintosh +coat. On the conspiracy of the English dealers in second-hand goods +against auctions, see Athæneum, Dec. 5, 1863. It is one of +<hi rend='italic'>McCulloch's</hi> characteristic exaggerations, that he says that +conspiracies to raise the price of a commodity by artificial means, are broken just as +soon as they begin to obtain their object by the interest of the individual members to +profit by the advanced prices. (Edition of <hi rend='italic'>Adam Smith</hi>, Edinb., +1863, p. 59.)</note> Customs peculiar to whole +classes may exert the same influence, and such customs are +especially powerful in the lower stages of business and industrial +development. They, even at the present time, take +the place, frequently, of freedom of competition in retail business, +in the book business, and in the determination of lawyers' +and doctors' fees, as well as in the distribution of a nation's income among the three +great branches of its general economy,<note place='foot'><hi rend='italic'>J. S. +Mill</hi>, Principles, II, ch. 4.</note> +deciding, instead of competition, how much shall go to +each. Wherever there are guilds, communities, castes etc. +with legal privileges; wherever there are difficulties placed in +the way of exportation and importation; wherever preëmption +rights or monopolies,<note place='foot'>Monopolies universally prohibited: L. un. C. +De Monopol. (IV, 59.) Police-order of the Empire, 1548, tit. 18.</note> +in the strict sense of the word, exist, the +leveling ebb and flow of the elements of production may be +still more seriously interfered with. Legislation<note place='foot'>Privileges +which the purchaser voluntarily accords to the seller are wont +to be useful to both parties. (<hi rend='italic'>Hermann</hi>, loc. cit. 155, +158.)</note> of this sort +injures the non-privileged portion of the population more than it helps the privileged +portion. (See § <ref target="Section_97">97</ref>.)<note place='foot'>Besides, +guilds, castes, corporations etc. may, when the vent diminishes, +produce under-prices as readily as they may monopoly-prices when the vent +is very good. (See <hi rend='italic'>Adam Smith</hi>, Wealth of Nations, I, ch. 7.)</note> +</p> + +<p> +The word <hi rend='italic'>usury</hi>, so arbitrarily used in every-day language, +should be admitted in science only to designate a famine-price, +fraudulently and intentionally caused or intensified. +</p> + +</div> + +<pb n='333'/><anchor id='Pg333'/> + +<div> +<index index='toc' level1='Section CXIV. Prices Fixed By Government.'/> +<index index='pdf' level1='Section CXIV.'/> +<head type='sub'>Section CXIV.</head> +<head>Prices Fixed By Government.</head> + +<p> +No power can, of course, fix the price of a commodity in +the long run, which cannot at the same time fix the relation +of supply and demand. Hence, set prices fixed by governmental +authority can be made to play a part in practice only +in so far as they do not establish a price in opposition to the +real state of things, only to the extent that they give undoubted +expression to it in a manner in harmony with natural +conditions. With this restriction, set or fixed prices may, in +the absence of real competition, which can always best determine +prices, be useful to both parties; otherwise one party +would at one time, and the other at another, profit by an unjust +advantage; but it would not be long before both would +suffer from the perturbation caused thereby in all commercial +transactions. How pleasant it is for a traveler in Switzerland, +or even in Italy, to find set prices established there.<note place='foot'>Thus, +for instance, the traveler who wanted to cross a stream, would find +himself delivered over to the tender mercies of the ferry-man, without protection +of any kind against his demands. But repeated impositions in the +matter of prices would have for effect to bring a point into disrepute as a +place of crossing, and would induce the public to seek another. Similarly +in the case of hackney-coachmen and carriers in large cities, and in that of +innkeepers, at hotels and postal termini etc.</note> +Especially where competition is prevented by state privileges, +the establishment of set prices by the state for the protection +of the public may be necessary.<note place='foot'>Fixed prices +by governmental authority were soonest attempted after bad +harvests, but, indeed, with a strange ignorance of the natural grounds of the +increase in price of bread-stuffs. Thus in the time of Charlemagne. (Capitul. +a, 805; <hi rend='italic'>Baluz</hi>, I, 423.) Similarly in the case of other articles +of universal necessity, when oppressively but necessarily dear. (See § 175.) +During the last centuries of the middle ages, with their multitude of actual +monopolies, and at the beginning of the modern era, fixed prices became +more and more general. The earliest instance in the history of England of +a fixed price for bread was in 1202 (<hi rend='italic'>v. Raumer</hi>, Hohenstaufen, V, +372), and in 1266, 51 Henry III. The earliest in Prussia was in 1393. +(<hi rend='italic'>Voigt</hi>, Geschichte von Preussen, II, 659.) Many instances of fixed +prices in the Rhine provinces of Austria in 1530. In <hi rend='italic'>Mylius</hi>, +Corp. Const. March, V, 2, 587 ff., we find an ordinance of 1653 fixing prices in Berlin, +and including 72 industries. There is a very complicated system of fixed prices in the +police ordinance of the electorate of Saxony of 1612, and in the decree concerning +the coin of 1822. As to how, in Saxony in 1578, an attempt was made to +ascertain the cost of the production of shoes by shoemakers, see <hi rend='italic'>Joh. +Falke</hi>, Gesch. des Kurf. August in volkswirthschaft. Beziehung, 1868, 252. There +was an enormous extension of governmental fixing of prices under Philip +II.; one of the principal causes why Castile was so far behind Aragon economically. +(<hi rend='italic'>Townsend</hi>, Journey through Spain, II, 221.) Sometimes these +measures were adopted to prevent distress-prices; as in Hochheim, in favor +of the vintners. (<hi rend='italic'>Becher</hi>, Polit. Discurs, II, 1652.) The +predilection especially of German authorities for the fixing of prices by governmental +power, in the sixteenth and seventeenth centuries is very remarkable. Thus +<hi rend='italic'>Luther</hi>, vom Kaufhandel und Wucher, 1524; +<hi rend='italic'>Calvin</hi>, Leben Calvins, by <hi rend='italic'>Henry</hi>, II, +Beilage, 3, 23; <hi rend='italic'>Bornitz</hi>, De Rerum Sufficientia, 1625, 246; +<hi rend='italic'>Seckendorff</hi>, Teutscher Fürstenstaat, 5th ed., 1776, 210; +<hi rend='italic'>Becher</hi>, II, 1823 ff.; <hi rend='italic'>Horneck</hi>, Oesterrich +über Alles, wenn es will, 1684, 123; <hi rend='italic'>Leibniz ed. Dutens</hi>, VI, I, +250; <hi rend='italic'>Thomasius</hi>, Göttl. Rechtsgelahrtheit, 1709, 209; even +<hi rend='italic'>Frederick</hi> the Great, <hi rend='italic'>Mylius</hi>, N. Corp. +Const. March, I, 190. Similarly, <hi rend='italic'>Mariana</hi>, De Rege et +Regis Institutione, III, c. 9. Compare, however, III, c. 8, and +<hi rend='italic'>Bacon</hi>, Serm., 15; Historia Henrici, 1037, 1040. On the other +hand, <hi rend='italic'>Child</hi>, 1690, and <hi rend='italic'>North</hi>, +1691, reprove all such measures. <hi rend='italic'>Roscher</hi>, Zur Geschichte der +englischen Volkswirthschaftslehre, 65, 90 f. Earlier yet, +<hi rend='italic'>Salmasius</hi>, who would allow the free <foreign lang='la' +rend='font-style: italic'>fori ratio</foreign> to govern. (De Usuris, 1638, 583.) For +a very rigorous price-tariff in the old Indian laws, by which, <hi rend='italic'>inter +alia</hi>, the price of provisions was to be fixed anew every fourteen days, see +<hi rend='italic'>Menu</hi>, Laws, VIII, ch. 401 ff.</note> It is more difficult to fix a +<pb n='334'/><anchor id='Pg334'/> +set price for a commodity in proportion to its complexity and +to its variableness in quality; and where there are different +grades of quality of the same commodity, and the transition +from one grade to another is almost imperceptible, such price +is easily evaded.<note place='foot'>Where trade is free, the +<foreign lang='fr' rend='font-style: italic'>filet de boeuf</foreign>, +for instance, is worth four times as much as the +flesh of the ox's neck or throat; but prices fixed by a government +can scarcely take cognizance of the difference. How easily might not +a fixed price for beer, for instance, be evaded by diluting that beverage with +water, or fixed prices for inn-keepers by dealing out portions smaller in +quantity or of an inferior quality. Moreover, as early a writer as <hi rend='italic'>De la +Court</hi>, Polit. Discoursen, 1662, c. 4, remarks that the establishment of fixed +prices by governmental authority raises the average price of all commodities +rather than lowers it, for the reason that the few who are sellers by trade +can do more to influence the authorities than the many buyers, whose interests +are divided among numberless different commodities.</note> +In the case of every enterprise carried on +<pb n='335'/><anchor id='Pg335'/> +by many in common, where no competition is possible, it is +necessary to supply the defect by means similar to the establishment +of fixed prices; as in the case of government, by +fees for governmental services, and the coöperation of a chamber +of deputies in the imposition of taxes and the determination +of official salaries etc.<note place='foot'><hi rend='italic'>Schäffle</hi>, +Nat.-Œkonomie, II, 384 f.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXV. Influence Of Growing Civilization On Prices.'/> +<index index='pdf' level1='Section CXV.'/> +<anchor id="Section_115"/> +<head type='sub'>Section CXV.</head> +<head>Influence Of Growing Civilization On Prices.</head> + +<p> +On the whole, prices become more and more regular as +national-economic civilization advances. Progress in civilization +tends to bring the parties engaged in the struggle for prices +that is buyers and sellers, nearer to one another, in so far as it +uniformly decreases the cost of production, and increases the +purchaser's ability to pay.<note place='foot'><hi rend='italic'>Banfield</hi>, +Organization of Industry, 120. <q>Where the economic life of a +people is still undeveloped, and the production of one enterprise is not from +the first based on the estimated consumption of another, the circulation of +goods brings with it great profits and great losses; whereas, profits and losses +grow smaller, but at the same time more uniform and regular, in proportion +as the circulation of goods increases in rapidity and regularity.</q> +(<hi rend='italic'>Stein</hi>, Lehrbuch, 212.)</note> (See § +<ref target="Section_101">101</ref>.) The more universal division +of labor makes commercial intercourse more necessary +to every one, at the same time that it makes it more of a habit +to him; and hence exchange ceases more and more to be a +matter of caprice or chance. The better means of transportation +and communication render it easier, in every way, for +supply and demand to meet. With the advance of general enlightenment +and education, an acquaintance with commodities +also becomes more general, and every purchaser is on a better +way to be able to estimate the cost of production which the +seller has to bear. Hence, fraudulent prices and prices founded +<pb n='336'/><anchor id='Pg336'/> +in error become less frequent; and all this is helped forward +by the greater accuracy of weights and measures. The increase +of population makes competition more active in all +branches of trade, while at the same time, with the greater +freedom of circulation, a number of causes which previously +operated to produce very high prices in one place and very low +ones in another are removed.<note place='foot'>In Belgium, during +the last forty years, the price of wheat has become +more constant every year, while the price of rye has become more variable; +for the reason that rye has gradually ceased to be an article of popular consumption, +and therefore to be an important article in trade, and is consumed +almost entirely and directly by its producers. (<hi rend='italic'>Horn</hi>, Statist. +Gemälde von B., 1853, 185.) <hi rend='italic'>Rodbertus</hi> rightly conjectures that the +price of wheat was much more variable in ancient times than it is with us. +(<hi rend='italic'>Hildebrand's</hi> Jahrb., 1870, I, 36.) That it was so may be +inferred from the surprisingly large family supplies which were laid in, as appears from +Digest, XXXIII, De Penu legato.</note> But especially, the growth of a +distinct class of merchants leads to a uniformity in price. This +class are incited by their own interest to purchase at low prices +and sell at high prices. Thus, their competition in the former +case raises prices, and lowers them in the latter.<note place='foot'>In +Würtemberg even officials etc. buy their own wine almost always directly +from the vintner. This causes prices there to be exceedingly variable, frequently +from hour to hour. (<hi rend='italic'>v. Reden</hi>, Statist. Zeitschrift, Nov. 1847, +1008.) How greatly the mere presence of a regular market has contributed to make +prices more constant, may be seen in the suburbs of Hamburg, where fish +offered for sale on the street are sold in the evening for one-third of the price +asked for them in the morning. Besides, purchases made with a view to speculation +may increase the variations of price, if the speculation is unskillfully +conducted, especially when a low rate of interest, and of the profit of the +person engaged in it, has produced a blind race among the speculators. +Here the price of a commodity rises, not from any natural cause, but because +it once rose before, and <hi rend='italic'>vice versa</hi>. +(<hi rend='italic'>Senior</hi>, Outlines, 17 ff.; <hi rend='italic'>Hermann</hi>, 90 +ff.)</note> In all lower +stages of civilization, the custom of making offers and beating +down in price plays a great part, while where culture is +higher, the system of fixed prices (but not by government) +gains ground continually. Here Turgot's principle is applicable, +viz.: that the current price of an article is tacitly understood +when one asks a merchant the price of his wares.<note place='foot'>That fixed +prices suppose that men are engaged in the production of the +commodity in question, as their calling in life, see <hi rend='italic'>Garve</hi>, +Zu Cicero's Pflichten, III, 64 ff. Chess-like commerce of colporteurs, and in caravans +etc. Concerning the dreadful higgling of the Bedouins, see +<hi rend='italic'>Wellsted</hi>, Reise in Arabien, <hi rend='italic'>Rödiger's</hi> +translation, I, 147; and the still worse bantering in Cashmere, +where the merchant, in the first place, always denies that he possesses +the desired commodity, then begins to search for it, in order to discover what +value the purchaser puts upon it etc. (<hi rend='italic'>K. Ritter</hi>, Erdkunde, III, +475.) On the practices in Indian fairs, see <hi rend='italic'>Th. Skinner</hi>, +Excursion in India, 1832, I, ch. 6; on the bazaars in Asia, +<hi rend='italic'>Andree</hi>, Globus XII, 7, 211. <hi rend='italic'>Herberstein</hi> +says of the Russians in the sixteenth century: <foreign lang='la' +rend='font-style: italic'>mercantur fallacissime et dolosissime +nec paucis verbis ... mercatores nonnunquam non uno tantum aut altera +mense suspensos detinent, verum ad extremam desperationem perducere solent</foreign>. +Hence the great variations in prices and commodities. (Rerum Moscov. +Commentt., ed. Starczewski, 39 f.) Similarly also, in 1674, according to +<hi rend='italic'>Kilburger</hi>: Büsching's Magazin, III, 249. But, on the contrary, +it is said of the Plescovers, educated by intercourse with the Hanse; +<foreign lang='la' rend='font-style: italic'>tanta integritas ... in +contractibus, ut uno tantum verbo res ipsas indicarent omni verbositate +in fraudem emptoris omissa</foreign>. (<hi rend='italic'>Herberstein</hi>, 52.) In the +England of the present day, the custom of marking each piece of goods with its price is +very general. Concerning the rapidity and the paucity of words with which +prices are settled in that country, where business men do not even salute their +customers, nor customers the business man, see <hi rend='italic'>C. G. Simon</hi>, +Observations recueillies en Angleterre, 1835, I, 129 f. The Athenian laws (?), that fixed +prices should be asked, and that sellers should not sit down that that they +might sell more rapidly, points to something similar. (<hi rend='italic'>Athen.</hi>, +VI, 226 f. <hi rend='italic'>Plato</hi>, De Legg., XI, 916 f.) Athenian law prohibiting +mendacity in the markets. (See <hi rend='italic'>Demosth.</hi>, Lept., 459.)</note> +</p> + +<pb n='337'/><anchor id='Pg337'/> + +<p> +This proposition is true in the case of individuals, as well as of +classes and of whole nations.<note place='foot'>Thus the German +book-trade has fixed prices. Many merchants never +make an offer to their educated customers who are wont to do so with peasants +etc.; because they are aware that the latter purchase only after they +have compelled the seller to come down greatly from his first proposed price. +Among the Quakers it has been a rule from the beginning, never to ask more +for their wares than they were determined to accept. (<hi rend='italic'>Hume</hi>, +History of England, ch. 62.)</note> It is plain, that under a system +of fixed prices we can more certainly discover what the equitable +price is, than in the heat of higgling which besides consumes +a great deal of precious time. Lastly, one of the principal +requisites of a well developed scale of prices is national honor, +and this, doubtless, increases in the higher stages of civilization, +not only because of the greater moral culture which +<pb n='338'/><anchor id='Pg338'/> +then prevails, but also and especially because that which constitutes a people's real +and best interests is better understood.<note place='foot'><hi rend='italic'>Sir +William Temple</hi>, Observations upon the Netherlands, Works I, 134, +compares honor in trade to discipline in an army. Similarly, <hi rend='italic'>Law</hi>, +Trade and Money, 209 f. <hi rend='italic'>Ferguson</hi>, History of Civil Society, III, +4. Where the seller is not obliged to make known the existence of certain defects in his +wares to the purchaser before sale, there is always scope for fraud. Compare +Digest De Edict. aedilit., XXI, I. On the meaning of the German legal maxims: +<foreign lang='de' rend='font-style: italic'>Hand muss Hand wahren</foreign>, and +<foreign lang='de' rend='font-style: italic'>Ein Wort, ein Mann</foreign>, see +<hi rend='italic'>Eisenhart</hi>, Deutsches Recht in Sprüchwörtern, 311 f., 319 f. It +is a principle in matters of business, that the person who through malice or carelessness +recommends a man of whose probity there is already some doubt, should +bear the damage caused by his recommendation. (<hi rend='italic'>Martens</hi>, +Grundriss des Handelsrechtes, 24 ff.) Many attempts at dishonesty are prevented by laws +which in important contracts, especially in sales of land etc., require the +presence of witnesses, and this particularly in the lower stages of civilization. +(<hi rend='italic'>Meier</hi> and <hi rend='italic'>Schömann</hi>, Attischer Process, +522; Roman, Emancipatio; <hi rend='italic'>Grimm</hi>, Deutsche Rechtsalterthümer, 608 +f.), or even a public proclamation before the assembled community, at least written +documents invested with all legal formalities as practiced among civilized peoples. On +Greek laws of this nature, see especially, <hi rend='italic'>Theophrast.</hi>, in +<hi rend='italic'>Stobaeus</hi>, Sermon., XLIV, 22. Very remarkable in Sparta. +<hi rend='italic'>Schol. Aristophan.</hi>, Aves, 1284.</note> +Among declining nations, many of these developments take a +retrogressive road. The very great distinction between rich +and poor, between educated and uneducated, again produces +great fluctuations in price. A proletarian people who have +sunk so low as to live on potatoes will suffer much more from +variations in price and of the means of subsistence than a +people who live on wheat; for the reason that it is so difficult +to export or to preserve<note place='foot'>Compare <hi rend='italic'>Lotz</hi>, +Revision, I, 255 ff. In England the price of wheat scarcely +ever varied more than from 1 to 2. In Ireland the price of potatoes varied +from 1 to 6. (<hi rend='italic'>McCulloch</hi>, Comm. Dict., v. Potatoes.) Compare +<hi rend='italic'>Engel</hi>, Jahrbuch für Sachsen, I, 491 ff. The custom of asking +enormous prices with the expectation of being beaten down, is usual in Italy and carried +to a frightful extent, and related to the bad custom prevalent there of begging a +little after-payment to every little gratuity or drink-money which has been +received.</note> potatoes. Nor can it be doubted, that +the greatest possible constancy of prices is the most beneficial +condition that the general economy of a people can be in. +Where prices change while the cost of production remains the +<pb n='339'/><anchor id='Pg339'/> +same, one person can only gain what the other has lost. But +such unmerited gains and undeserved losses have an invariable +tendency to destroy the deepest roots of a people's economic +activity; and intentional speculation based upon such change usually assumes +an immoral character. (Stock-jobbing.)<note place='foot'><hi rend='italic'>Storch</hi>, +Handbuch, I, 311. <hi rend='italic'>J. B. Say</hi>, Traité I, ch. 16. As to how commerce, +when fully developed, is wont to be more moral than when only +half developed, see <hi rend='italic'>Garve</hi>, loc. cit., and Versuche IV, 149 ff. +How fortunate for the public economy of nations that the prices of corn especially have +been growing more steady all the time since the middle ages. See +<hi rend='italic'>Roscher</hi>, Ueber Kornhandel, 56, 61.</note> +Even if Macleod be right, that an increase or decrease +in prices is to be regarded as a warning of excess, the former +of excess of consumption, the latter of production, no one will +doubt that it is the interest of every organism to confine pain +within the smallest possible limits, even if its consequences +are so beneficial to the preservation of the whole body. +</p> + +</div> + +</div> + +<pb n='340'/><anchor id='Pg340'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter III. Money In General.'/> +<index index='pdf' level1='Chapter III.'/> +<head type='sub'>Chapter III.</head> +<head>Money In General.</head> + +<div> +<index index='toc' level1='Section CXVI. Instrument Of Exchange. Measure Of Value. +Barter.'/> +<index index='pdf' level1='Section CXVI.'/> +<anchor id="Section_116"/> +<head type='sub'>Section CXVI.</head> +<head>Instrument Of Exchange. Measure Of Value. Barter.</head> + +<p> +Wherever the division of labor is very highly developed, +the continuance of barter, or the direct exchange of one object +of consumption for another, presents difficulties well nigh +insurmountable. How difficult it would be always to find the +person who could supply us with precisely what we wanted, +and at the same time have need of what we had a surplus +of.<note place='foot'>Trade by barter was very general in several states of the American +Union about the close of the eighteenth century. In Vermont, for instance, it was +usual for a doctor to exchange his medicines against a horse, and for the +printer to buy corn, butter etc. with a newspaper. (<hi rend='italic'>Ebeling</hi>, +Geschichte und Erdbeschreibung, II, 537.) In Maryland, the Assembly fixed by law the +relative proportions at which tobacco, pork, corn and wheat should be exchanged +the one against the other. (<hi rend='italic'>Ebeling</hi>, V, 435 ff. +<hi rend='italic'>Douglas</hi>, Summary of the British Settlements in N. America, 1670, +V, 2, 359.) Even as late as 1815, children were wont to run the streets of Corrientes, +crying: <q>Salt for candles, tobacco for bread etc.</q> It was commerce with England that +first led to trade by money in the United States. (<hi rend='italic'>Robertson</hi>, +Letters on South America, 1843, I, 52.) Similarly in Rhokand until the end of the +eighteenth century, where the cities, as a consequence, presented the appearance of a +fair the whole year round. In the beginning of this century, the khan introduced +the use of copper money made from Persian cannons; and much +later yet, there were scarcely a million rubles in money to a million men. +(<hi rend='italic'>Ritter</hi>, Erdkunde, VII, 753.) <hi rend='italic'>Basil Hall</hi> +found the uncivilized inhabitants of the Loo-Choo Islands ignorant of the use of money. +(Voyage of Discovery, 1818.) Concerning trade by barter in the Homeric age, see the Iliad, +VII, 472 ff. A supposed law of Lycurgus prohibited the use of money in +purchases, and allowed barter only. (<hi rend='italic'>Justin.</hi>, III, 2.) According +to <hi rend='italic'>Pausan.</hi>, III, 12, only barter existed in India (?) in his +time.</note> But how much less frequently would it happen that one's +<pb n='341'/><anchor id='Pg341'/> +want and another's surplus would correspond exactly the one +to the other in quantity; that, for instance, the manufacturer +of nails, desirous of exchanging his nails for a cow, should +meet a cattle-dealer who should want exactly as many nails +as a cow is worth! Here there is one chief difficulty in the +way, viz.: that there are so many commodities which cannot +be divided without causing a diminution or even a destruction +of their value; and that others cannot be stored away in any +quantity without becoming a very heavy burthen to their +owner. How useful it would therefore be, if there was one +commodity which should be acceptable to every person, at all +times, especially if in addition to this, it possessed the qualities +of durability, capacity for transportation and for being stored +up and preserved. Any person who possessed a proper supply +of this one commodity would then be certain of being able to +obtain all other exchangeable commodities through its instrumentality; +and every seller would be satisfied to exchange +what he had to dispose of against this <q>universal commodity.</q> +If two values are equal to a third, they are equal to each +other. It is, therefore, a simple matter to use this most current +of all commodities, with which all others are most frequently +compared, as a measure of the relative values of all +other exchangeable commodities. There is need of such a +measure, and it is analogous to the want experienced by the +mathematician who has a column of fractions to sum up, and +who does it by first reducing them all to a common denominator. +(<hi rend='italic'>Storch.</hi>)<note place='foot'>The person who has been used to +paying for four pounds of meat with twenty pounds of bread, and is asked to give twenty +pounds of bread in exchange for some other article, must of course have some unit of +measure in his mind to serve as a means of comparison between the value of that article +and that of four pounds of meat. In Denmark, during the rule of the aristocracy, +there were fixed prices sanctioned by the tradition of long usage, in +accordance with which the prices of all commodities were estimated in relation +to a ton of barley or rye—a natural consequence, apparently, of the +want of a common measure to govern in the greater number of transactions. +<hi rend='italic'>Bergsoe</hi>, Archiv der Polit. Œk., IV, 314; +<hi rend='italic'>Graugan's</hi> Icelandic Code contains a remarkable fixed price of this +nature in the supplement to the <hi rend='italic'>Kaupa-Balkr</hi> +or Commercial Code, I, p. 500. Similarly among the ancient Persians. +<hi rend='italic'>Reynier</hi>, Economie publique des Perses, 308.</note> +A person entrusted with the duty of assessing +<pb n='342'/><anchor id='Pg342'/> +the values of two hundred different articles would be +obliged, if he had no such measure to use, to burthen his +memory with at least 19,900<note place='foot'>That is, (200x(200-1))/2. Compare +<hi rend='italic'>Rau</hi> in <hi rend='italic'>Storch</hi>, Handbuch, III, 253. The +<q>at least</q> has reference to the fact, that in barter, the many different kinds +of most commodities has to be borne in mind. (<hi rend='italic'>Knies</hi>, Geld und +Credit, I, 218.)</note> different ratios. With it, he +need carry only 199 in his head. +</p> + +<p> +Such a commodity, universally in favor, and which, on that +account, is employed as an intermediary in the effecting of +exchanges of the most varied nature, in the measuring of all exchange-values and as a +value-carrier (<foreign lang='de' rend='font-style: italic'>Werthträger</foreign>) in +time<note place='foot'>This transportation of values supposes an equality of values of +the money in two places, while the transportation of goods supposes different values of +the same kind of goods in both places. (<hi rend='italic'>Knies</hi>, Geld und Credit, +I, 218.)</note><note place='foot'>While the words <hi rend='italic'>pecunia</hi>, +<hi rend='italic'>danaro</hi>, <hi rend='italic'>dinero</hi>, and +<hi rend='italic'>argent</hi>, are all derived from unessential qualities, the German +word for money, <foreign lang='de' rend='font-style: italic'>Geld</foreign>, corresponds +with the essential quality of money, since it denotes that which is of value everywhere +(<hi rend='italic'>gilt</hi>). On the other hand, <hi rend='italic'>nummus</hi> and +νόμισμα from νόμος, (<hi rend='italic'>Bœckh.</hi> Metrolog. Unters., 310.), +<hi rend='italic'>moneta</hi> (the English, money), are from the temple of Juno Moneta, +in which the Roman coins were for a long time stamped. In old German, the word for money, +<foreign lang='de' rend='font-style: italic'>Geld</foreign>, means everything that +is paid by any one. (<hi rend='italic'>Grimm</hi>, D. Rechtsalterth., 382.) The present +meaning of the word is to be met with in a very old document of 1327. +(<hi rend='italic'>Arnold</hi>, z. Geschichte des Eigenthums in den deutschen Städten, +89.)</note> and space, we call money. (<hi rend='italic'>Merce universale: Berri; produit +préféré: Ganilh; marchandise intermédiare; Bastiat.</hi>)<note place='foot'><p>The +wrong definitions of money may be divided into two classes: those +which convey the idea that it is more than a commodity, and those which +imply that it is less. +</p> +<p> +This was a point which was contested even among the Greeks. There +were many who claimed that wealth consisted exclusively in the possession +of much money; as we find, for instance, in the pseudo-Platonic dialogue +Eryxias; while others insisted that money was something purely imaginary +(λῆρος), and the creation, exclusively, of human laws. (<hi rend='italic'>Aristot.</hi>, +Polit., I, 3, 16, Schn.) Νόμισμα σύμβολον τῆς ἀλλαγῆς ἔνεκα. +(<hi rend='italic'>Plato</hi>, De Rep., II, 371.) <hi rend='italic'>Anacharsis</hi> +compares money to counters. (<hi rend='italic'>Plutarch</hi>, De Profectt +in Virtute.) <hi rend='italic'>Aristotle</hi>, himself, subscribed to the second +opinion, although he saw clearly, that only useful and current things (χρείαν +εὐμεταχείριστον πρὸς τὸ ζῆν) could be used as money. (Polit., I, 3, 14 ff. Eth. Nicom., +V, 5, 6, Rhet., II, 16.) <hi rend='italic'>Xenophon</hi> ascribed properties to money +which no other commodity possessed; especially when he said that it could never be +too plentiful, and that its price could never fall. (De Vectt. Ath., 4.) The +finest ancient explanation of the nature of money is that of the jurisconsult +<hi rend='italic'>Paullus</hi>, L. I.; Digest, XVIII, 1; and it well deserves the long +commentary devoted to it by <hi rend='italic'>P. Neri</hi>, Osservazioni etc., in +<hi rend='italic'>Custodi</hi>, P.A., VI, 324, ff. +</p> +<p> +Among the moderns, <hi rend='italic'>Melancthon.</hi>, Corp. Ref., XVI, 498, and +<hi rend='italic'>Seb. Frank</hi>, Chronik., 760, consider money as a mere symbol. On +the other hand, the over-estimation in which the precious metals were held by the +adherents of the Mercantile System was owing, without doubt, to their very superior +utility as money; for we very frequently find that the adherents of that school +insist that the precious metals must circulate. (See § <ref target="Section_9">9</ref> +and § 210.) <hi rend='italic'>v. Schröder</hi>, Fürstl. Schatz- und Rentkammer, III f., +considers new copper coins as an increase of the national wealth, but not other copper +which is merely a commercial commodity. He frequently calls money, the +<hi rend='italic'>pendulum commercii</hi>, and expresses ideas concerning it as +enthusiastic as they are obscure (p. 86.) <hi rend='italic'>Horneck</hi>, in his +Oesterreich über Alles wenn es will, 1864, calls gold and silver <q>our best blood, the +very marrow of our strength,</q> and <q>the two most indispensable universal instruments +of human activity and existence.</q> (p. 188.) <hi rend='italic'>Th. Mun</hi>, England's +Treasure by forraign Trade, 1664, (ch. 2) considers cash-money and resources as +synonymous in every way. Only, he says (ch. 4) that it is sometimes advisable to allow +one's money to remain in foreign countries, and to use bills of exchange, banks etc., at +home, as a substitute. <hi rend='italic'>F. Gee</hi>, Trade and Commerce of Gr. Britain, +edition of 1738, laments the <q>stiff-necked folly of those who think money a commodity +like any other.</q> It is one of the most common demands of the adherents of the +Mercantile System that the home mines of gold and silver should be worked +at no matter what sacrifice, since the money employed in working them continues +to remain in the country and the newly coined precious metal is clear +gain. Compare <hi rend='italic'>Schröder</hi>, loc. cit. 109 ff., 181. +<hi rend='italic'>Horneck</hi>, loc. cit. 173. <hi rend='italic'>Broggia</hi>, +Della Monete, 1743, cap. 33; <hi rend='italic'>v. Fusti</hi>, Staatswirthschaft, 1755, +I, 246: <hi rend='italic'>Forbonnais</hi>, Finances de France, 1758, I, 148. +<hi rend='italic'>Ulloa</hi>, Noticias Americanas, 1772, ch. 12. We seldom meet with the +correct view on this subject in the seventeenth century. <hi rend='italic'>Sully</hi>, +of whom Henry IV. said that he never found anything to be possessed of beauty which cost +double its real value, had it at times. (Economies royales, LXXIII.) So had +<hi rend='italic'>v. Seckendorff</hi>, Teutscher Fürstenstaat, 1655, 5th edition. +</p> +<p> +It is in accordance with the usual course of human development that the +exaggerations of the Mercantile System led to a reaction characterized by an +exaggeration in the opposite direction. Even <hi rend='italic'>Davanzati</hi>, Sulle +Monete, 1588, traces the value of money back to human convention and refuses to find it +in nature. A natural calf, he thinks, is <foreign lang='it' rend='font-style: italic'>più +nobile</foreign> than a golden one; although he elsewhere expresses his admiration of +the precious metals, calls them <foreign lang='it' rend='font-style: italic'>cagioni +seconde della vita beata</foreign>, and lauds them because they procure us +<foreign lang='it' rend='font-style: italic'>tutt'essi beni</foreign> (20, 21, Cust.) +<hi rend='italic'>Montanari</hi> (ob., 1687) demonstrates from the +use of leather money etc., that the authority of the state is the only power +which gives money its character as money. (Della Moneta, 35.) +<hi rend='italic'>Davenant</hi> (ob., 1714) carries his inclination to call money <q>the +servant of trade, measure of trade,</q> so far as to compare it to a ticket or counter. +(Works, I, 355, 444.) Strongly as <hi rend='italic'>Law</hi>, himself, opposes the +convention theory (Trade and Money, ch. I; Sur l' Usage des Monnaies, 1720, p. 1.), his +disciple <hi rend='italic'>Dutot</hi>, in his Réflexions polit. sur le Commerce et les +Finances, 1738, 905, éd. Daire, contrasts not only paper money but also gold and silver +as representative wealth, with real wealth. <hi rend='italic'>Berkeley</hi>, Querist, +1735, teaches that the real notion of money is not that of a <q>commodity, standard, +measure, pledge, but [No. 23] ticket or counter, entitling to power and fitted to record +and transfer such power.</q> (441, 475.) Even if the names, <hi rend='italic'>livre</hi>, +shilling etc., remain, and the metal is dropped, every article may still as well as +before be counted and sold, industry promoted and the course of commerce preserved. +(p. 440.) According to <hi rend='italic'>Montesquieu</hi>, Esprit des Lois, XXI, 22, +gold and silver are a <foreign lang='fr' rend='font-style: italic'>richesse de fiction +ou de signe</foreign>. Compare Lettres persanes, II, 18. <hi rend='italic'>Benjamin +Franklin</hi> also maintains that the value of gold, for instance, is +principally a credit-value. Remarks relative to the American Paper-Money, +1765, Works, II, Sparks' edition. <hi rend='italic'>Forbonnais</hi>, Finances de France, +I, 86 f., calls money, simply a means to put commodities, which alone have value +originally, in circulation. Hence it is, in itself, a matter of indifference +whether, for a given quantity of coin, a person gives one thaler, or ten. In +the Elements de Commerce, I, 11, II, 67 ff., he draws a distinction between +<foreign lang='fr' rend='font-style: italic'>richesses naturelles</foreign> (raw +material), <foreign lang='fr' rend='font-style: italic'>artificielles</foreign> +(manufactured products), and <foreign lang='fr' +rend='font-style: italic'>richesses</foreign> de convention (money.) +<hi rend='italic'>von Schlözer</hi>, Aufangsgründe, 1805, 100, +138, calls money something imagined; and <hi rend='italic'>Th. Smith</hi>, Essay on the +Theory of Money and Exchange, 1807, asserts, that true money is only an ideal +measure of value, of which coins in turn are only the representatives. +Compare, however, Edinb. Review, Oct., 1808. <hi rend='italic'>Oppenheim</hi>, Die Natur +des Geldes, 1855, grants that in the beginnings of trade, money possessed the +character of a commodity; but says that as soon as the services of circulation of the +money-commodity prevailed over its services in consumption, it +lost all its importance for the latter purpose, and that all relations dependent +thereon ceased. At present, he claims money is only the representative of +commodities, but no commodity itself. See, on the other hand, +<hi rend='italic'>Roscher's</hi> critical analysis in the Literarisches Centralblatt, +1855, December. +</p> +<p> +The true doctrine was advocated in a classic form by <hi rend='italic'>Nicolaus +Oresmius</hi> (ob. 1382). See his Tractatus de Origine et Jure nec non et Mutationibus +Monetarum, newly edited by <hi rend='italic'>Wolowski</hi>: Paris, 1864. See +<hi rend='italic'>Roscher's</hi> essay in the Comptes rendus of the Académie des +Sciences morales et politiques, vol. 62, 435 ff. Based on the latter we have +<hi rend='italic'>Gabr. Biel</hi> (ob. 1495), De Monetarum Potestate simul et Utilitate, +1542, and <hi rend='italic'>G. Agricola</hi>, De Re metallica, 1556, I, +4 ff. This true doctrine was acclimated earliest in England and Holland, and +before the mercantile system invaded them. Compare <hi rend='italic'>Hobbes</hi>, +Leviathan, 24, in which the <foreign lang='la' rend='font-style: italic'>concoctio +bonorum</foreign> is described by means of money, and the full and clear chapter 12 of +<hi rend='italic'>Salmasius</hi>, De Usuris (1638), who, among other +things, shows how Midas, who turned everything into bread, died of thirst. +<hi rend='italic'>Petty</hi> shows very clearly that national wealth does not consist +exclusively nor mainly in money. Every country, he says, needs a certain quantity of +money to carry on trade. It would be a waste to increase the former, the +latter remaining the same. But the precious metals, by reason of their durability +and universally recognized value, possess the character of wealth in +a higher degree than other commodities. +</p> +<p> +On the whole, the use of money in a nation is like the use of fat in the +individual. (Quantulumcunque concerning Money, 1682.) Compare +<hi rend='italic'>Roscher</hi>, z. Geschichte der eng. Volkswirthschaftslehre, 80 f. +<hi rend='italic'>Davanzati</hi> and <hi rend='italic'>Hobbes</hi> had compared it to +the blood, as has recently <hi rend='italic'>Schmitthenner</hi>, Staatswissenschaften, +1839, I, 459. <hi rend='italic'>North</hi> calls money a commodity of which there may +be an excess as well as a want. (Discourse on Trade, preface and postscript.) +Compare <hi rend='italic'>Locke</hi>, Considerations on the Lowering of Interest, 1691, +Works II, 13 ff., 19. <hi rend='italic'>Galiani</hi>, 1750, Della Moneta, IV, holds a +very happy middle place between the alchymists and the philosophic contemners of gold. +See, further, <hi rend='italic'>Quesnay, éd. Daire</hi>, 64, 75 ff. +<hi rend='italic'>Turgot</hi>, Sur la Formation des Richesses, § 30 ff, had many clear +views on this subject. <hi rend='italic'>Verri</hi>, Meditazioni, 1771, II, +1, calls money the universally current commodity. The expressions, measure +of value, pledge, representative of all commodities might be true also +of all other wares. It cannot, however, be denied that most modern political +economists have not borne sufficiently in mind the peculiarities which distinguish +money from all other commodities, as is apparent from the doctrine +of the balance of trade prevalent in Hume's and Adam Smith's time. To +this extent, therefore, the semi-mercantilistic reaction instituted by +<hi rend='italic'>Ganilh</hi>, Théorie de l'Economie politique, 2822, II, 380 ff., 426; +<hi rend='italic'>St. Chamans</hi>, N. Essai sur la Richesse des Nations, 1824, ch. 3; +and <hi rend='italic'>Colton</hi>, Public Economy for the United States, 1849, 203 ff., +who bring into relief the difference between <q>money as the subject</q> and <q>money +as the instrument of trade,</q> was not wholly unfounded. <hi rend='italic'>Ad. +Müller</hi> exaggerates a correct thought, and causes it to degenerate into a species +of mystic pleasantry, when he calls every individual in the state and every commodity +that possesses value, in exchange or a social character, money. +</p> +<p> +The highest object of the state is to develop this money-character more +and more. (Elemente der Staatskunst, II, 194, 199.) The statesman, he +says, should be money. (III, 206.) A very valuable monograph on this +subject is <hi rend='italic'>M. Chevalier's</hi> De la Monnaie, 1850, constituting the +third volume of his Cours d'Economie polititique. <hi rend='italic'>Knies</hi>, Geld +und Credit, I, 1873, is here most thorough and acute, especially in keeping separate, by +well defined lines of demarcation, the five different functions of money: measure of +value (by proper division into parts: price-measure), instrument of exchange, means of +transportation of values, and means of storing up and preserving values. +</p> +</note> +</p> + +<pb n='343'/><anchor id='Pg343'/> + +<p> +The more enlightened portions of every business community +gradually come to require payment in the commodity +<pb n='344'/><anchor id='Pg344'/> +which has for the time being the greatest circulating capacity. +If to this be added the sanction of the government, and if the +<pb n='345'/><anchor id='Pg345'/> +government itself recognizes this same <q>universal commodity</q> +as the means of payment of all debts, or as <q>legal tender</q> +<pb n='346'/><anchor id='Pg346'/> +(<foreign lang='fr' rend='font-style: italic'>puissance libératoire</foreign>), +where no other is expressly agreed upon, the <q>universal commodity</q> +in question then becomes money in the fullest sense of the idea conveyed by the +word.<note place='foot'><p><hi rend='italic'>Knies</hi> shows how the making of money +legal tender by the state, although of only secondary importance, is by no means an +irrelevant matter, since persons must then have it, even if they do not want it for +purposes of use or exchange, to discharge their liabilities thereby etc., etc. (Tübinger, +Zetschrift, 1858, 272.) +</p> +<p> +In all these cases, barter-economy (<foreign lang='de' +rend='font-style: italic'>Naturalwirthschaft</foreign>) meets with greater +and greater difficulties as civilization advances. How, for instance, could 50 +days annually of socage-service or labor be redeemed by the achievement at +one time of 1,000 days of socage-service or labor? The rich man requires +money principally as a means of payment, the poor man as a medium of exchange. +The requirement or need of a people of media of payment is much +more susceptible of extension or contraction, than that of media of exchange, +made especially so by the intervention of claim-rights instead of money. +<hi rend='italic'>(Knies</hi>, loc. cit, 200 ff.) <hi rend='italic'>Ravit</hi>, Beitr. +z. Lehre vom Gelde, emphasizes this feature of money altogether too much after the +manner of a jurist. But he is entirely right in adopting the exclusion of the +<foreign lang='la' rend='font-style: italic'>rei vindicatio</foreign> against the +honest possessor as necessary to the completion of the idea of money. +</p> +</note> +</p> + +</div> + +<pb n='347'/><anchor id='Pg347'/> + +<div> +<index index='toc' level1='Section CXVII. Effect Of The Introduction Of Money.'/> +<index index='pdf' level1='Section CXVII.'/> +<head type='sub'>Section CXVII.</head> +<head>Effect Of The Introduction Of Money.</head> + +<p> +By the introduction of money, most exchanges are divided +into two halves: purchase and sale.<note place='foot'><hi rend='italic'>Sismondi</hi>, +N.P., I, 131, very rightly remarks that this has made practice +as much easier as it has theory more difficult.</note> We may also say with +Schlözer, that by its means, exchange, for the first time, becomes +a sale, and obscure value in exchange, clear and definite +price. (<hi rend='italic'>Permatio vicina emtioni</hi>). Were there no money, +the party to an exchange, occupying the most advantageous +economic position, would possess a much greater superiority +over the other than he does now. Many a bread-buyer, especially, +would be half starved before he could agree with the +seller on the quantity of bread to be received in exchange for +the commodity he had to dispose of. The producer of the +means of subsistence would here possess an extreme advantage, +since the urgent necessity of the exchange for the one +party, and the power of the other to postpone it, would make the determination +of the price an entirely arbitrary matter.<note place='foot'><hi rend='italic'>Law</hi>, +Trade and Money, 19. Hence, before the invention of money, +scarcely anything but the things most indispensable to existence were produced. +Were there no money, there would be very few scholars, artists etc.; +for the classes who produce most of the things indispensable to existence +make but few demands for them. <hi rend='italic'>Büsch</hi>, Geldumlauf, I, 11 ff., 36, +II, 54.</note> +Hence, the development of money as the instrument of trade, +keeps pace with the development of individual liberty. Payment +of wages in money makes the workman more responsible +for his husbandry etc., but at the same time, freer, than payment +in produce. Now, also, a higher division of labor becomes possible; +for the easier it is to obtain everything else for money, +the easier it is for each person to devote himself exclusively to +one branch of business.<note place='foot'><hi rend='italic'>Turgot</hi>, Formation et +Distribution, § 48 ff. Commodities which perish rapidly could be produced by persons +devoting themselves to their production as a business only after the invention of small +coin. (<hi rend='italic'>Lueder</hi>, N. Œk., 1820, 283.)</note> +Without money, too, only ready +<pb n='348'/><anchor id='Pg348'/> +commodities could be exchanged one against another. Only +when money has become the instrument of trade, is it possible +to separate the net from the gross returns, and, therefore, to +manage income properly. (<hi rend='italic'>Schäffle</hi>). Now, also, it becomes +for the first time really remunerative to produce more than +one needs for his own use, and to save. Without money, the +owner of any one kind of capital, who could not employ it +himself, would be obliged, if he desired to loan it, to find not +only a person who was in need of capital, but one who needed +the very kind of capital he had. For instance, the person who +had one horse too many, would be obliged to look for another +who was in need of one etc. And how difficult a task it would be +to determine the amount of interest, if it had to be paid in produce +or kind, and even to make a return in produce or kind of +capital which had been presumably used. (<hi rend='italic'>Storch</hi>). Moveable +property or resources can attain importance only after the introduction +of good money, since, previous to such introduction, +it was by reason of its great variety,<note place='foot'>Compare +<hi rend='italic'>Knies</hi>, Geld und Credit, I, 219.</note> +and of its perishable nature, +immensely inferior to landed property. Hence it is, that +money, in a nation's economy, is what the blood is in the life +of the animal. It is, so to speak, the common reservoir in +which all food is first dissolved, and by which, at a later stage, +the elements of nutrition and preservation are distributed to +the several organs.<note place='foot'>Compare <hi rend='italic'>Schmitthenner</hi>, +loc. cit., I, 457. One of the principal advantages +of money consists in this, that every producer can discover what there is an +over-supply or under-supply of in the nation, by means of the relation of +the price in money of his products to the cost of producing them, estimated +in money, (<hi rend='italic'>v. Thünen</hi>, Isolirte Staat, II, 2, 235.)</note> +There is, indeed, no machine which has +<pb n='349'/><anchor id='Pg349'/> +saved as much labor as money. (<hi rend='italic'>Lauderdale</hi>). It is true that +the shadows which wealth is wont to cast, extravagance, avarice +and inequality of every kind, may readily grow longer +and darker in consequence of the introduction of money.<note place='foot'>Hence +it is that so many socialists attack money. <hi rend='italic'>Th. More</hi> assures us +that with the simple abolition of money, vice and misery would, for the most +part, disappear of themselves. Hence in his Utopia, criminals are bound in +golden chains and the chamber-pots are made of gold and silver in order to +make these metals contemptible. (Ed. 1555, ff., 197 ff.) Similar views among +the over-cultured Romans. (Compare §§ <ref target="Section_79">79</ref>, 204.) +<foreign lang='la' rend='font-style: italic'>Auri sacra fames</foreign>. +<hi rend='italic'>Virgil</hi>, Æneid, III, 56. <hi rend='italic'>Pliny</hi>, too, would +recall the days of trade by barter. (H. N., XXXIII, 3.) Even in +<hi rend='italic'>Boisguillebert</hi>, Factum de la France, ch. 4, we find, +together with many correct views on the nature of money, passionate declamation against +it because of its darker side. <foreign lang='fr' rend='font-style: italic'>Argent +criminel</foreign>. (Détail de la France, 7. Dissertation sur la Nature des Richesses +etc.) More recently this darker side has been dwelt upon by <hi rend='italic'>F. +Möser</hi>, Patriot. Phant., I, 28; <hi rend='italic'>Ortes</hi>, +Economia nazionale, II, 17, and the would-be restorer of the middle ages, +<hi rend='italic'>Ad. Müller</hi>. While the latter writer lauds the feudal system as a +<q>sublime fusion of person and thing</q> (Elemente I, 221), the present system of wages, +because it is a system of compensation, he blames, and prefers the feudal for +the opposite reason (?). <q>The only <emph>merit</emph> which the state recognizes in our +day is one <emph>of service</emph>.</q> (III, 259.) <hi rend='italic'>Kosegarten</hi>, +Geschichtliche systematische, Uebersicht der N. Oek., 1856, 146 ff., is no friend to +the economic system to which money gives a distinctive character. <hi rend='italic'>Per +contra</hi>, compare <hi rend='italic'>Bastiat</hi>, Maudit Argent, 1849.</note> But +may not the knife which, in the hands of the surgeon, does so +much for life, become an instrument of danger in the hands of +a child? The invention of money has been rightly compared to the +invention of writing with letters.<note place='foot'><hi rend='italic'>Mirabeau</hi>, +Philosophie rurale, 1763, ch. 2, adds as the third great invention +the <foreign lang='fr' rend='font-style: italic'>tableau économique</foreign> of the +Physiocrates. For a comparison of money and language, see <hi rend='italic'>Hamann</hi>, +Werke, II, 135 ff., 509. <hi rend='italic'>Hehn</hi>, Kulturpflanzen +und Hausthiere, finds it characteristic of the race, that wine, writing with +letters, and money, all owe their origin to the monotheistic stem of the Semitic +people.</note> We may, however, +call the introduction of money as the universal medium of exchange +(money-economy),<note place='foot'>Where every man becomes a merchant, and the society +itself a commercial society. <hi rend='italic'>Ad. Smith</hi>, Wealth of Nations, I, +ch. 4.</note> in which goods intended for use are +exchanged against money<note place='foot'>Just as descriptive is the German word +<foreign lang='de' rend='font-style: italic'>billig</foreign> +(<hi rend='italic'>equitable</hi>) for cheap. Here it is plain that language takes +sides with the possessor of money!</note>—instead of barter (barter economy), +which is a system of public economy (<hi rend='italic'>Schäffle</hi>), in an, +as yet, very little developed form, man being there less sociable +<pb n='350'/><anchor id='Pg350'/> +with his fellow men—one of the greatest and most beneficent +advances ever made by the race.<note place='foot'><p>The contrast between +barter-economy and money-economy is of great and fundamental importance. It repeats +itself with so much regularity in the history of every highly developed nation, that +political economists gifted with perception for the historical, could not possibly +overlook it. Thus, <hi rend='italic'>Aristotle</hi>, for instance, establishes with the +utmost care and accuracy the difference between οἰκονομικὴ and χρηματιστικὴ, that is, +between natural economy and artificial economy, corresponding to the difference between +value in use and value in exchange. (Polit., I, 3, Schn.) Similarly <hi rend='italic'>D. +Hume</hi>, who allows a period of luxury, culture, industry, of trade and manufactures, +of freedom and circulation of money, to be preceded by one in which the feeling of wants +is not awakened, in which coarseness and idleness prevail, one in which +agriculture is alone pursued, and monetary economy and freedom decline, +and trade by barter obtains. (Discourses, passim, especially On Interest +and on Money.) A similar contrast we find frequently, and as one of his +fundamental thoughts, in <hi rend='italic'>J. Steuart</hi>. +</p> +<p> +As to how the transition from barter-economy to monetary-economy is +generally effected, see <hi rend='italic'>F. G. Hoffmann</hi>, Lehre vom Gelde, 1838, +176 ff. In the Tyrol, as late as 1820, the greater portion of purely mechanical work, +such as that of the smith, the carpenter, and the washerwoman, were purely +feudal duties. On the other hand, payment in money was the rule, in the +beginning of the fourteenth century. (<hi rend='italic'>F. Beidermann</hi>, Technische +Bildung in Oesterreich, 3.) Yet, for a long time after, the functions of a measure of +value were performed by pieces of land, and those of an instrument of exchange +by cattle and natural products. (<hi rend='italic'>Arnold, Gesch. des Eigenth</hi>., 207.) +In France, money-economy, i.e., trade by money, had grown to importance +earlier. (<hi rend='italic'>Nitsch</hi>., Ministerialität und Bürgerthum, im 11. und 12. +Jahr., 143.) Even in the time of Mary Stuart, the Scotch estimated the rent of land in +<q>cauldrons of victuals.</q> (<hi rend='italic'>Moryson</hi>, Itinerary, 1617, III, +155.) In ancient Italy, during the first three centuries of Rome, there was, with the +exception of the Greek colonies, only trade by barter. <hi rend='italic'>Mommsen</hi>, +Römische Gesch., I, 293, shows that the oldest ases were not money in the higher sense +of the word, but belonged rather to the stage of barter-economy. On the other +hand, we find in the time of the classic jurists, much as slavery had limited +the sphere of action of money, the principle: <foreign lang='la' +rend='font-style: italic'>pecuniæ nomine non solum numerata +pecunia, sed omnes res, tam soli quam mobiles, et tam corpora quam jura +continentur</foreign>. (L. 222, Digest L. 16; compare 4, 5, 178.) Similarly in +<hi rend='italic'>Cicero</hi>, Top. 6. De Invent, II, 21. De Legg, II, 19, 21; III, 3. +Compare <hi rend='italic'>Dionys. Hal.</hi>, N.R. IV, 15. +</p> +</note> +</p> + +</div> + +<pb n='351'/><anchor id='Pg351'/> + +<div> +<index index='toc' level1='Section CXVIII. The Different Kinds Of Money.'/> +<index index='pdf' level1='Section CXVIII.'/> +<anchor id="Section_118"/> +<head type='sub'>Section CXVIII.</head> +<head>The Different Kinds Of Money.</head> + +<p> +Very different kinds of commodities have, according to circumstances, +been used as money; but uniformly only such as +possess a universally recognized economic value.<note place='foot'>Were +money nothing but a measure of values in exchange, it should +on that account, if on no other, have value in exchange itself, as a measure +of length must necessarily have length itself. (We measure time on a +clock by means of the revolution of the hands on the dial.) Again, value +in exchange supposes value in use. The so-called <q>money of account,</q> +such as the East Indian <hi rend='italic'>lac de roupies</hi>, the Portuguese reis, +and the earlier English <hi rend='italic'>pound</hi> sterling are no imaginary +magnitudes, which would disappear with the figures of our system of counting +(see <hi rend='italic'>Hufeland</hi>, N. Grundlegung, II, 33, in reply to +<hi rend='italic'>Struensee</hi>, Abh., III, 501); but real coin-values which +can not be represented by only single pieces of coin, units of value for the +most part no longer recognized by the state, but which the people still retain. +See <hi rend='italic'>M. Park's</hi> (Travels, 27) refutation of the fable circulated +by <hi rend='italic'>Montesquieu</hi>, Esprit des Lois, XXII, 8, that the regular +standard money of the Mandingo negroes was a mere imaginary standard. +<hi rend='italic'>Hobbes</hi>, Leviathan, 24, exhibits a very good knowledge of this +subject.</note> On the +whole, people in a low stage of civilization are wont to employ, +mainly, only ordinary commodities, such as are calculated to +satisfy a vulgar and urgent want, as an instrument of exchange. +As they advance in civilization, they, at each step, +choose a more and more costly object, for this purpose,<note place='foot'>Compare +<hi rend='italic'>P. Neri</hi>, Osservazioni, 1751, VI, 1. <hi rend='italic'>Lord +Liverpool</hi>, Treatise on the Coins of the Realm, 1805. The person who takes money as +such must always harbor the hope of being able to dispose of it again as money. +Hence, such an acceptance always supposes the existence of a certain amount +of commercial confidence. The savage Goahiros, between Rio de la Hacha +and Maracaibo, are too <q>distrustful</q> to take anything in trade but commodities +fit for the most immediate use. (<hi rend='italic'>Depons</hi>, Voyage dans la Terrefirme, +I, 314.) Similarly in the twelfth century, the heathen Laplanders. +(<hi rend='italic'>Arndt</hi>, Liefl. Chronik, II, 3.) Commodities which barbarians can +consume immediately are objects of the first necessity, whereas more civilized people, who +are in a condition to undergo greater expense, look more to the technic qualities +of money, such as divisibility, capacity for transportation and durability. +<hi rend='italic'>v. Scheel</hi> shows in a very happy manner how, as commerce increases, +money comes to be, as it were, subjected to a process resembling that of distillation: +first mere increase of stores for use, next preponderating values in +exchange, lastly mere orders for the same possessing no independent value. +<hi rend='italic'>Hildebrand's</hi> Jahrbb., 1866, I, 16.</note> and +one which ministers to the more elevated wants. +</p> + +<pb n='352'/><anchor id='Pg352'/> + +<p> +A. Races of hunters, at least in non-tropical countries, +usually use skins as money; that is the almost exclusive product +of their labor, one which can be preserved for a long +period of time, which constitutes their principal article of +clothing and their principal export in the more highly developed +regions.<note place='foot'>The last circumstance continues to be one of great importance +for a long period of time in the frigid zones. Thus, the beaver-skin continues still to +be the unit of measure of trade in much of the territory of the Hudson Bay +Company. Three martens are estimated to be equal in value to one beaver, +one white fox to two beavers, one black fox or a bear to four beavers, a rifle +to fifteen beavers. (Ausland, 1846, No. 21.) The Esthonian word, +<hi rend='italic'>raha</hi>, money, means in the related language of the Laplanders, +fur. (<hi rend='italic'>Krug</hi>, Zur Münzkunde Russlands, 1805.) Concerning +skin-money in the middle age of Russia, see <hi rend='italic'>Nestor</hi>, +<hi rend='italic'>Schlözer's</hi> translation, III, 90. The old word +<hi rend='italic'>kung</hi>, money, means marten. By degrees it came to pass that +instead of whole skins, only two <q>snouts</q> were given or other pieces of leather +about a square inch in size, which were probably stamped by the government and redeemed +in whole skins at the government magazines. Hence, there is here supposed +a species of assignats, and of disturbances of credit. The Mongolian conquerors +would not recognize them, and they therefore became suddenly valueless. +In Novgorod and Pskow, the system continued some time longer, +for the reason that these places had little trade with the Mongols. In the +rest of the kingdom it now became necessary to introduce silver money, and +in the north to return to real squirrel and beaver skins. +<hi rend='italic'>Karamsin</hi>, Russ. Gesch., I, 203, 385; I, 96, 191 f. Voyage de +Rubruquis, in <hi rend='italic'>Bergeron</hi>, Voyages I, 91. +<hi rend='italic'>Herberstein</hi>, Rer. moscov. Commentt, 58 ff. Even in 1610, a +Russian military chest was captured by the enemy, and in it were found 5450 +silver rubles, and 7000 fur rubles. (<hi rend='italic'>Karamsin</hi>, XI, 183.)</note> +</p> + +<p> +B. Nomadic races and the lower agricultural races,<note place='foot'>When +the Danes progressed so far as to practice agriculture, they used +grain instead of cattle, in quantities corresponding to the value of one cow or +one sheep, for money, to the end that their idea of a unit of measure might +not become obscured. (<hi rend='italic'>Ravit</hi>, Beiträge, 3.)</note> pass, +by a natural gradation, to the use of cattle as money; which +supposes rich pasturages at the disposal of all. If it were +otherwise, there would be a great many to whom payments +<pb n='353'/><anchor id='Pg353'/> +of this kind had been made, who would not know what to do +with the cattle given them, on account of the charges for their +maintenance.<note place='foot'>Homeric determination of prices in oxen. Iliad, II, +449; VI, 236; XXI, 79; XXIII, 703 ff; Odyss., I, 431. Compare, however, II, VII, 473 +ff. In Draco's time, money-fines were imposed in cattle (<hi rend='italic'>Pollux</hi>, +IX, 60 ff.), and in Athens, before Solon's time, even the metal coins were, for the +most part, stamped with the figure of an ox. <hi rend='italic'>Plutarch</hi>, Theseus, +25. <hi rend='italic'>Böckh</hi>., Metr. Uuntersuch., 121 ff. Among the most ancient +Romans (<hi rend='italic'>Cicero</hi>, de Rep., II, 35) the imposition of fines in +property, the coins first stamped by Servius, <foreign lang='la' +rend='font-style: italic'>boum oviumque effigie</foreign> (<hi rend='italic'>Plin.</hi>, +H. N., XVIII, 3, <hi rend='italic'>Cassiodor.</hi>, Var., VII, 32), and +the words <foreign lang='la' rend='font-style: italic'>pecunia</foreign>, +<foreign lang='la' rend='font-style: italic'>peculium</foreign>, +<foreign lang='la' rend='font-style: italic'>peculatus</foreign>, derived from +<foreign lang='la' rend='font-style: italic'>pecus</foreign>, point to something +analogous. (<hi rend='italic'>Varro</hi>, De L. L., V, 19; De Re rust., II, 1; +<hi rend='italic'>Cicero</hi>, De Rep., II, 9; <hi rend='italic'>Ovid</hi>, Fast., V, +281; <hi rend='italic'>Plutarch</hi>, Publicola, 11.) Old German fines +in cattle, in <hi rend='italic'>Tacitus</hi>, Germ., 12, 21; Lex Ripuar, 36, 11; Lex +Saxonum, 19. <hi rend='italic'>Ulfilas</hi> translates αργύριον δοῦναι +(<hi rend='italic'>Mark</hi>, 14, 11), <hi rend='italic'>faihu giban</hi>. Very old +German documents, of the seventh and eighth centuries, name horses as +purchase-price. (<hi rend='italic'>Grimm</hi>, Deutsche Rechtsalterth., 586 f.) Otho +the Great imposed cattle-fines. (<hi rend='italic'>Widuk</hi> Corb., II, 6.) +Similarly, in King Stephen's laws of Hungary (<hi rend='italic'>Wachsmuth</hi>, +Europäische Sitturgesch., II), in the old Irish Brehon laws +(<hi rend='italic'>Leland</hi>; History of Ireland, 36 ff.), as well as in the +Scotch collection of laws, <hi rend='italic'>Regiam Majestatem</hi>, of 1330. +(<hi rend='italic'>Honard</hi>, II, 263 f, 537.) <foreign lang='la' +rend='font-style: italic'>Viva pecunia</foreign> of the Anglo-Saxons in the laws of +William I. In ancient Sweden, all property was estimated in +<hi rend='italic'>fä</hi>=cattle (<hi rend='italic'>Geijer</hi>, Schw. Gesch., +I, 100), just as now, in Icelandic, <hi rend='italic'>fe</hi>=property. In Berne, the +German <hi rend='italic'>vieh</hi>, cattle, is used to express commodities. Among +really nomadic races this is, of course, still more the case. Thus the Kirghises use +horses and sheep as money, and wolf-skins and lamb-skins for small change. +(<hi rend='italic'>Pallas</hi>, Reise durch Russland, 1771, I, 390.) Among some of the +Tartar tribes, everything is stipulated for in cows. (<hi rend='italic'>v. +Haxthausen</hi>, Studien, II, 371.) Among the Persian nomads, sheep are used as money; +or when they are held in subjection in the cities, corn, straw and wool. +(<hi rend='italic'>Ritter</hi>, Erdkunde, VIII, 386.) Oxen in use as money among the +Tscherkessens. (<hi rend='italic'>Klemm</hi>, Kulturgeschichte, IX, 16.) +<hi rend='italic'>W. B. Hermann</hi> doubts, however, whether cattle were ever used as a +medium of exchange. He thinks rather they were employed only as a measure +of price. (Münchener Gel. Anz., 580.)</note> +</p> + +</div> + +<pb n='354'/><anchor id='Pg354'/> + +<div> +<index index='toc' level1='Section CXIX. The Metals As Money.'/> +<index index='pdf' level1='Section CXIX.'/> +<head type='sub'>Section CXIX.</head> +<head>The Metals As Money.</head> + +<p> +C. That metals were used for the purpose of money much +later than the commodities above mentioned, and the precious +metals in turn later than the non-precious metals, cannot by +any means be shown to be universally true. Rather is gold +in some countries to be obtained by the exercise of so little +skill, and both gold and silver satisfy a want<note place='foot'>That +of vanity which presents itself among some people sooner than that +of clothing.</note> so live and general, +and one so early felt, that they are to be met with as an +instrument of exchange in very early times.<note place='foot'>In Genesis, +1, 24, gold appears only as a valuable ornament. Abraham +paid for his purchases in silver.</note> In the case of +isolated races, much depends on the nature of the metals with +which the geologic constitution of the country has furnished +them.<note place='foot'>For this reason, zinc-money is just as natural with the Malays +and Chinese as iron-money with the Senegambians. (<hi rend='italic'>Mungo Park</hi>, +Travels, 27.) And so <hi rend='italic'>Plutarch</hi>, Lysand., 17, may be right when +he calls iron the earliest universal means of payment. In Sparta, too, where industrious +efforts were made to maintain the lower stage of culture, this medium of payment was +longest maintained. Compare, however, <hi rend='italic'>St. John</hi>, The Hellenes, +III, 260 ff. The first copper coins were stamped a short time before Philip, father of +Alexander the Great. (<hi rend='italic'>Eckhel</hi>, Doctr. Numm, I, XXX ff.) On the +other hand, Italy, partly because it had mines of its own, and partly because of its +intercourse with Carthage (Cyprus), had become, at a very distant period, +so rich in copper that the circulation of copper, or to speak more accurately, +of bronze, was naturally introduced. Compare <hi rend='italic'>Niebuhr</hi>, Röm. +Gesch., I, 475 ff. (<foreign lang='la' rend='font-style: italic'>Aes alienum, obæratus, +ærarium, æstimare.</foreign>) Copper was all the more adapted to this end the more +frequently it was found unmixed. It was generally used in preference to iron because +of the greater facility of working it. (<hi rend='italic'>Hesiod.</hi>, Opp., 150 f.; +<hi rend='italic'>Lucret.</hi>, V, 1285 f.) In modern nations copper money +seems to have been employed only after silver money. Thus, it was not +stamped in England before the time of James I. (<hi rend='italic'>Adam Smith</hi>, I, +ch. 5), nor in Sweden before 1625. (<hi rend='italic'>Geijer</hi>, Schwed., Gesch., +III, 56.) Money was struck from the metal of molten bells during the French +Revolution!</note> In general, however, the above law is found to prevail +here. The higher the development of a people becomes, +<pb n='355'/><anchor id='Pg355'/> +the more frequent is the occurrence of large payments; +and to effect these, the more costly a metal is, the better, of +course, it is adapted to effect such payments. Besides, only +rich nations are able to possess the costly metals in a quantity +absolutely great.<note place='foot'>In Russia, between 1763 and 1788, there were 76 +million rubles of gold and silver coins struck, against 54 million of copper rubles. +(<hi rend='italic'>Hermann</hi>). On the other hand, in France, between 1727 and +1796, there were struck only 40 million francs of copper, 10 million of +<hi rend='italic'>billon</hi> or base coin, and 3967 million of gold and +silver.</note> Among the Jews, gold as money, dates only +from the time of David.<note place='foot'><hi rend='italic'>Michaelis</hi>, De +Pretiis Rerum apud veteres Hebræos, 183.</note> King Pheidon, of Argos, it is said, +introduced silver money into Greece, about the middle of the +eighth century before Christ. Gold came into use at a much +later period.<note place='foot'><hi rend='italic'>Strabo</hi>, VIII, 358. Hiero, tyrant +of Syracuse, found it exceedingly difficult to obtain gold. When the Spartans wished +to make an offering of gold at Delphi they were obliged to have recourse to Crœsus. +(<hi rend='italic'>Herodot.</hi>, I, 69; <hi rend='italic'>Theopomp.</hi>, in +<hi rend='italic'>Athen</hi>, VI, 231 ff.) <hi rend='italic'>Aristoph.</hi>, Ranae, +720, calls gold <q>new</q> in contradistinction to the <q>old money,</q> that is, +silver.</note> The Romans struck silver money, for the first time, in 209 before Christ, +and, in 207, the first gold coins.<note place='foot'><hi rend='italic'>Plin.</hi>, +H. N., XXXIII, 13. Compare, however, <hi rend='italic'>Dureau de la Malle</hi>, +Economie polit. des Romans, I, 69, after <hi rend='italic'>Varro</hi>, apud Charisium, +I, 81. (<hi rend='italic'>Putsch.</hi>) It is certain, however, that when Italy was +conquered, the Romans had introduced a circulating medium of silver, and that it was the +prevailing medium; but in the time of Cæsar and Augustus, a gold circulation +was the prevalent one. Yet the state treasure was deposited in gold +during the period of silver circulation, because gold was, without question, +better adapted to storing up and transportation.</note> +Among modern nations, Venice (1285) and Florence seem to have been the first +to have coined gold in any quantity.<note place='foot'><hi rend='italic'>Muratori</hi>, +Antiquitt., IV, Diss., 28.</note> +Henry III. of England (ob. 1272), was the first to coin gold, +but with so little success, that for a long time after, Edward +III. (ob. 1377) was regarded as the first English monarch who +had coined gold.<note place='foot'>Henry was obliged to +issue an order to the mayor and sheriffs of London, +to get his gold into circulation; but he soon saw himself compelled to desist +from executing his design. Edward III. was able only after a voluntary circulation +of them had continued for a long time, to prohibit any one's refusing +the rose-nobles. (<hi rend='italic'>L. Liverpool</hi>, loc. cit.)</note> +How little a barbarous people are in a +condition to make use of very costly material as money, is +<pb n='356'/><anchor id='Pg356'/> +proved by the account which Tacitus gives of the ancient +Germans, who preferred silver to gold in trade.<note place='foot'>German., 5. Still +more striking is the example cited by <hi rend='italic'>Herbelot</hi>, Bibliothéque +Orientale (1697), 485. <hi rend='italic'>Rubruquis</hi>, Voyage, ch. 13. In the time of +Nadir-shah, the Kurds gave, without the slightest hesitation, a pound of gold for a pound +of silver or copper. (<hi rend='italic'>Ritter</hi>, Erdkunde, VIII, 395.)</note> England +presents us with an instance of the other extreme. Since +1816, silver, in that country, has been used only as a species +of change, and the circulation of gold governs in almost all +commercial transactions.<note place='foot'>Recommended even by +<hi rend='italic'>Adam Smith</hi>, ch. 5, and for Germany by <hi rend='italic'>F. G. +Hoffmann</hi>, Drei Aufsätze über das Münzwesen, 1832. In Egypt, also, for a +long time the wealthiest country of the middle ages, the circulation of gold +prevailed until the twelfth century. (<hi rend='italic'>Macrisi</hi>, Historia Monetae +Arab., cap. 3 ed., <hi rend='italic'>Tychsen</hi>.) Harun Alraschid's income was +estimated at about 7,500 cwt. of gold. (<hi rend='italic'>Ritter</hi>, Erdkunde, X, +235.) Something similar related of the Carnatic, <q>the land of ancient emporiums.</q> +<hi rend='italic'>Ritter</hi>, Erdkunde, V, 564, after +<hi rend='italic'>Ferishta</hi>.</note> +</p> + +<p> +D. The local usage of some countries has raised many +other commodities to the dignity of instruments of exchange, +especially where the population are poor and the metals which +might be used as money have not existed in sufficient quantities +or in the requisite proportion. But people have always +limited themselves in the material of their money to such +commodities as are universally acceptable, as uniform as may +be, and current as articles of export or import.<note place='foot'><p>The use of the +<hi rend='italic'>cauris</hi> (<hi rend='italic'>Cypræa moneta</hi>) in India this +side and beyond the Ganges, in upper Asia, and in southern Africa depends on their +employment for purposes of ornament, on their greater uniformity, and on the rarity of +copper which would otherwise be better suited to purposes of change. In +Calcutta, 1280 <hi rend='italic'>cauris</hi> are equivalent to about half a shilling. +(<hi rend='italic'>McCulloch.</hi>) Compare <hi rend='italic'>K. Ritter</hi>, Africa, +149, 324, 422, 1038; Asien, I,964; II, 120; III, 233, 739; IV, 53, 420; +<hi rend='italic'>Salin</hi>, III, 62; <hi rend='italic'>Botz</hi>, in the Tübinger +Ztschr. Similarly among the fishing population of Northwestern America. +(<hi rend='italic'>Stein-Wappäus</hi>, Handbuch I, 352.) Salt as money on the +Chinese-Birman boundary (<hi rend='italic'>Marco Polo</hi>, 38), but especially in the +interior of Africa, where nature does not at all produce it, but into which it is +brought by caravans from the deserts, where salt is found in great quantities. +<hi rend='italic'>M. Polo</hi>, Travels, 305, found the +current price of a salt-tablet, two and a half feet long, one foot, two inches +broad, and two inches thick, to be equal to the value of two pounds sterling +among the Mandingos. In Abyssinia, the salt-bars are generally six inches +long, three inches broad, one and a half inches thick, and they are bound +with an iron ring to protect them against fracture. Sixty of them are worth +one thaler. (Ausland, 1846, No. 35.) Slaves used as money: <hi rend='italic'>Barth</hi>, +Reise, III, 338, 344. Tea-blocks in upper Asia and Siberia; and they are given by +the Chinese to the Mongols as pay for troops. (<hi rend='italic'>Ritter</hi>, Asien, +III, 252,) In Keachta, a tea-block is equal in price to one paper ruble. (Ausland, 1846, +No. 20. <hi rend='italic'>Timkowski</hi>, Reise nach China, 143.) Date-money in the +Sivah oasis. (<hi rend='italic'>Hornemann</hi>, Reise, 21.) Also in the Persian +date-country, where, formerly, the lowest silver piece of money was coined in the form +of a date (<hi rend='italic'>Ritter</hi>, Asien, VIII, 752, 819.) +</p> +<p> +The ancient Mexicans used as money cocoa-nuts, in bags of 24,000 pieces, +cotton-stuffs, small pieces of copper, and gold dust in quills. +(<hi rend='italic'>Humboldt</hi>, N. Espagne, IV, 11.) Cocoa-beans are still used as +small change there. (Ibidem, IV, 10.) On the Amazon, wax-cakes weighing one pound are +used. (<hi rend='italic'>Smyth</hi>, Journey from Lima to Para, 1836.) Among the ancient +inhabitants of Rügen, linen (<hi rend='italic'>Helmold</hi>, I, 39); and still among the +Icelanders, the so-called <hi rend='italic'>Vadhmâl</hi>. During the middle ages, 120 +ells of <hi rend='italic'>Vadhmâl</hi> were equal in value to one milch cow or six milch +sheep, or two and a half ounces of silver. (<hi rend='italic'>Leo</hi> in +<hi rend='italic'>Raumer's</hi> histor. Taschenbuch, 1835, 515.) That the ancient +northern mode of valuation, by the <hi rend='italic'>Vadhmâl</hi> and in cows is older +than by the <hi rend='italic'>mark</hi> is shown by <hi rend='italic'>Wilda</hi>, Gesch. +des deutschen Strafrechts, I, 331. The cod-fish money used by the Icelanders was, on +account of its great commercial importance as an article of export, an advance upon the +use of the <hi rend='italic'>Vadhmâl</hi>. Among the Caffirs, besides +<hi rend='italic'>cauris</hi>, mats, javelins, glass corals, but +particularly brass rings, are used as money. From three to four hundred of +these rings are strung together, and two such strings are equal in value to +one cow. (<hi rend='italic'>Klemm</hi>, Kulturgeschichte, III, 308, 320 f.) Ivory used +as money in the neighborhood of the Portuguese colonies in Africa. +(<hi rend='italic'>Martius</hi>, Reise, II, 670.) In Logone, +<hi rend='italic'>Denham</hi> (1822) ff., had met with pieces of iron as a +medium of circulation; but on the other hand, <hi rend='italic'>Barth</hi> (1849), with +small strips of cotton from 2 to 3 inches in breadth, and shirts for larger sums. +(A. R., III, 274, 297, 538.) In colonies, money of this nature is continued +for a long time. Thus cod-fish used in Newfoundland, sugar in the English +West Indies (<hi rend='italic'>Adam Smith</hi>, I, ch. 4), tobacco in Maryland and +Virginia. (<hi rend='italic'>Douglas</hi>, V, 2, 389; <hi rend='italic'>Ebeling</hi>, +V, 435 ff.) The last was related to the inspection +and storage of the tobacco intended for exportation. Payment was +made in orders on the stored and inspected tobacco, even as late as the end +of the eighteenth century. In 1618, the forced circulation of tobacco was +decreed in Virginia, and under severe penalties. (<hi rend='italic'>Gouge</hi>, History +of Paper-Money and Banking in the United States, ch. 1.) +</p> +</note> +</p> + +</div> + +<pb n='357'/><anchor id='Pg357'/> + +<div> +<index index='toc' level1='Section CXX. Money—The Precious Metals.'/> +<index index='pdf' level1='Section CXX.'/> +<anchor id="Section_120"/> +<head type='sub'>Section CXX.</head> +<head>Money—The Precious Metals.</head> + +<p> +That the precious metals are uniformly preferred in highly +<pb n='358'/><anchor id='Pg358'/> +cultivated nations<note place='foot'>When the caravans no longer +touched at the oasis Agades, gold and silver money fell into disuse, +and grain, stuffs etc. did service as instruments of circulation. +(<hi rend='italic'>Barth</hi>, Reisen und Endeckungen, I, 144.)</note> +as the instrument of exchange, depends on +the greatness and uniformity of their value in exchange, but +especially on their durability and pliancy as to form. +</p> + +<p> +This value in exchange is great, because their beauty, which consists +in their luster and their sonorous ring,<note place='foot'><hi rend='italic'>Ad. +Müller</hi> says very pertinently, but in a very mystical vein, that the +precious metals combine in a very high degree and yet in a very simple manner, +the principal qualities in which man's greatness finds expression: rarity, +flexibility, uniformity, mobility, durability and beauty. (Elemente, II, 266.) +In another place, he says, the highest ideal good is God, the highest material +good, gold! (III, 65.) The mysticism of gold was most highly developed +among the alchymists of the sixteenth and seventeenth centuries.</note> gives them +great value in use; and because, at the same time, their rarity +in nature makes the supply of them relatively small,<note place='foot'>Iron +beds are worked only when they contain at least 18 per cent. of metal. +Generally it is estimated that the furnace should yield 30 per cent. In the +copper mines of Mansfield, Norway, Agordo and Venice, it goes as low as +from one to three per cent. On the other hand, silver mines which yield 0.17 +per cent. of metal are considered worth working. Lastly, gold is so rare that +generally it can be extracted only from time to time by the ordinary mining +processes. As a rule, men are content to gather it where nature has charged +itself with its refining. The extreme limit of the working of gold appears, +according to <hi rend='italic'>Plattner</hi> and <hi rend='italic'>Haussmann</hi>, +at Goslar, to be reached when in 5,200,000 parts of mineral earth +there is one of gold. Spite of this, however, by reason +of their great ductility, the precious metals have been able to penetrate +even into the meanest huts in one form or another. It has been estimated +that a silver leaf may be attenuated by beating to a thickness of only +0.00001 of an inch, and a gold leaf to 0.0000035 of an inch. An ounce of gold +spread on a silver thread may attain a length of 13,000 English miles. +(<hi rend='italic'>McCulloch.</hi>)</note> and not +susceptible of increase at pleasure.<note place='foot'>How easily, for instance, +could leather-money, such as was used by the ancient Galls +(<hi rend='italic'>Cassiodor.</hi>, Varia, II, 32,) be increased to any desired quantity, +and thus its price brought down.</note> As they contain so large +<pb n='359'/><anchor id='Pg359'/> +a value in so small a volume, they are adapted to transportation from one place to +another, with but little difficulty—a matter of the greatest importance in an +instrument of exchange.<note place='foot'><p><hi rend='italic'>Engel</hi>, at the usual +tariff for land and railroad freight (10 and 5 <hi rend='italic'>pfennigs</hi> +per mile and hundredths of a mile) estimates the enhancement of the price +of the following commodities, for one mile of transportation of a custom-hundred-weight +(<hi rend='italic'>Zollcentner</hi>) at the following percentage of their average +value: +</p> +<p> +Gold, value 47610 German <hi rend='italic'>Reichsthaler</hi> per cwt., 0.000007 by +land, 0.0000035 by railroad.<lb/> +Silver, value 3000, 0.00111 by land, 0.00055 by railroad.<lb/> +Cotton, value 45, 0.074 by land, 0.037 by railroad.<lb/> +Tin, value 24, 0.1389 by land, 0.0694 by railroad.<lb/> +Lead, value 8, 0.416 by land, 0.208 by railroad.<lb/> +Iron, value 2.5, 1.333 by land, 0.666 by railroad.<lb/> +Rye, value 2, 1.666 by land, 0.833 by railroad.<lb/> +Potatoes, value 0.6, 5.555 by land, 2.777 by railroad.<lb/> +Coal, value 0.12, 27.777 by land, 13.888 by railroad. +</p> +<p> +Their great specific gravity, also, makes the precious metals easy of transportation. +Thus <hi rend='italic'>Cazeau</hi> calculates that a given value of gold is 17,222 times +as easy to transport as the same value in wheat. But as, where the weight +is the same, the labor of transportation is inversely as the volume, this number +must be multiplied by 26, and we therefore have 447,772 times. In the +case of silver, the relation to wheat is as 1:15,554. Concerning copper, see +<hi rend='italic'>Storch</hi>, Handbuch 1, 488. <hi rend='italic'>Chevalier</hi>, +Cours, III, 17 ff.</p></note> +Hence, it is much easier to keep the demand for +them and the supply of them at a level all over the world, +than it is the demand and supply of most other commodities. +And this all the more as there are not different kinds of gold +and silver, but only different qualities of their fineness.<note place='foot'>This, +at bottom, is also true, of the various kinds of copper; only, here, +complete refining is impracticable on account of the relation between the cost +of production and the product-price.</note> It +also contributes to the uniformity of their value in exchange, +that they minister mainly only to wants of luxury. The most +indispensable commodities are subject to the greatest variations +<pb n='360'/><anchor id='Pg360'/> +in price (see § <ref target="Section_103">103</ref>), whereas, in the case of the +precious metals, the diversity of uses to which they may be turned +contributes greatly to render their value, as instruments of exchange, +more equable. If the supply of them be small, gold +and silver vessels are less in demand; a part of the old ones +are melted down, and <hi rend='italic'>vice versa</hi>. +</p> + +<p> +In durability, the precious metals surpass almost all other +commodities. They are not at all affected by air or water, +and they can be corroded only by very few fluids. Fire may, +indeed, change their form, but scarcely in any degree the +value of the material of gold, and that of silver very little, and +then only when it is subjected to a very powerful blast or +draught of air.<note place='foot'>On the other hand, copper, +and still more zinc, tin and lead lose much of their value in +the fire. Pearls may lose their entire value by fire, and diamonds +more than half of it.</note><note place='foot'><hi rend='italic'>Aqua-regia</hi>, +a mixture of nitric and muriatic acid, dissolves gold. Chlorine +and bromine attack it. It has been noticed to vaporize at a very high +temperature. A gold thread vaporizes when a strong electric current is +passed through it. A small ball of gold gives off a great deal of vapor if +placed between two carbon points and subjected to the action of a powerful +galvanic pile. (<hi rend='italic'>K. F. Naumann.</hi>)</note> +Hence, while by laying them by, they +suffer virtually nothing at all (a most valuable article is an +article to deposit savings in), their wear and tear from use may +be very much decreased by an admixture with other metals +in the proper proportion.<note place='foot'>Compare <hi rend='italic'>Hatchett</hi>, +Experiments and Observations of the various Alloys, +On the specific Gravity and comparative Weight of Gold, 1863. The French +five-franc pieces wear away, on an average, in a year, 0.00016; the English +crown, 0.00018; the half crown, about 0.00173; and the shilling, about 0.00456. +(<hi rend='italic'>L. Liverpool</hi>, Treatise on the Coins. 204; +<hi rend='italic'>M. Chevalier</hi>, Cours, III, 128 ff.) The wear from use of +the south German gulden is 0.292 per 1,000. (<hi rend='italic'>Rau</hi>, +in the Archiv. N.F.X, 256.) According to <hi rend='italic'>Jacob</hi>, the +average wear of coin is 2.38 per 1,000. (Historical Inquiry into the Production +and Consumption of the Precious Metals, ch. 23.)</note> +This durability contributes largely +to keep the price of the precious metals more uniform. By +the time that the wheat crop is rightly harvested, the great +bulk of the previously stored wheat is, as a rule, consumed; +and, therefore, the supply of wheat depends almost entirely on +<pb n='361'/><anchor id='Pg361'/> +the yield of the last crop. On the other hand, it is probable +that there is many a piece of money, the raw material of which +was dug from Thracian gold mines in the time of King Philip +or from the silver mines of Spain during the reign of Hannibal, +in circulation to-day. Compared with the immeasurable stores +of gold and silver which have gone on accumulating for thousands +of years, the new yield of them, in any one year, is lost +like a drop in a bucket. Hence, only when the yield of the mines +has continued for a very long time, or when it is exceedingly +great or remarkably small, can the price of their products +change to any great extent.<note place='foot'><hi rend='italic'>Adam Smith</hi>, +Wealth of Nations, I, ch. II, Digr.</note> Even during the revolution in +prices, between 1492 and 1560, the yearly decline in their +prices was only one-half of one per cent. per annum. +</p> + +<p> +Their great pliability of form has, too, very important advantages +for our purpose: first, that they can be divided very +accurately into very small parts, and that the volume of every part corresponds exactly +to the value of the part;<note place='foot'><hi rend='italic'>Solera</hi>, Sur +les Valueurs, 1785, 271 ff.; <hi rend='italic'>Custodi</hi>. Half an ox, for instance, +is worth half the value of a whole one only for a few well defined purposes. +As to how much the value of the diamond varies with the size etc., see +<hi rend='italic'>Dufrênoy</hi>, Traité de Minéralogie, II, 77 f. On the other hand, +the separated parts of a piece of metal are very readily reduced to a whole.</note> +and secondly, that they take an impression at very little cost, an impression +which is an authoritative and trustworthy expression +of their weight and quality, thus saving the commercial public +the perilous trouble of weighing and testing them every time +they are used.<note place='foot'>In the case of the ox, it is impossible +to imagine a mark which might not be eluded by its losing +flesh.</note><note place='foot'>The cost of coinage since 1849 has +been ¾ of 1 per cent. in the case of silver, and in that of gold not quite +2 per 1,000. (<hi rend='italic'>M. Chevalier</hi>, Cours, III, +110.)</note><note place='foot'>Platinum possesses many of the properties necessary to an +instrument of exchange in as high a degree as gold and silver,—great value in +exchange, great specific gravity and great durability. On the other hand, its pliability +as to form is very small, and therefore the cost of coining it would be high. +The conversion of platinum coins into utensils, and of utensils into coin, +which would contribute to the supply of money when needed, and to a +diminution of that supply when the demand decreased, would be much more +difficult on this account; and also because of the small degree of beauty +possessed by that metal, which renders it little adapted to purposes of luxury. +Under these circumstances, the rarity in nature of the metal is a great drawback; +for the discovery of a new mine would create a great perturbation in +prices. For this reason, the Russian platinum coins have been generally +very much undervalued since 1828 in the commercial world, and the whole +experiment was given up in 1845-46. Compare <hi rend='italic'>J. Schòn</hi>, National +Œkonomie, 128 ff. Aluminum, discovered by Wöhler, and which can be prepared +from argillaceous earth, is capable of manipulation in a very high degree +(<foreign lang='fr' rend='font-style: italic'>malléable et ductile à peu près sans +limite, excessivement fusible</foreign>), almost as indestructible +as the precious metals, but easily distinguished from silver by a +fine bluish color, which has been compared to that of tin; by its small specific +gravity, from 2.5 to 2.67, and its ring like that of iron. Hence it is very +doubtful whether aluminum can be made to play the part of a substitute +for silver, and still more so whether it can be used for coining.</note> +This duty the state, as a rule, assumes. +<pb n='362'/><anchor id='Pg362'/> +(Coinage.) When its authority, however, is not recognized, +as is generally the case in international trade, gold and silver +bars are even now used, and have, therefore, to be weighed +and tested.<note place='foot'><hi rend='italic'>Lingot, bullion</hi>. In India, +beyond the Ganges, and in China, bars are very much used. +(<hi rend='italic'>Sycee.</hi>) In the latter country, besides these bars, there +is no coinage except that of a mixture of copper and lead, for small change. +(<hi rend='italic'>Th. Smith</hi>, An attempt to define some of the first +Principles of Political Economy, 31. <hi rend='italic'>Timkowski</hi>, Reise +nach China, III, 366.) Concerning Brazilian trade by bars, see +<hi rend='italic'>Spix und Martius</hi>, Reise, I, 346 f. They are stamped +with the national coat of arms, the sign of the mint, the number by which +registered, that of the year and of the degree of fineness. Concerning the +Persian bars, the <hi rend='italic'>laries</hi>, see <hi rend='italic'>Noback</hi>, +Handbuch der Munzverrh., III, Taf. 29.</note><note place='foot'>Concerning +the utility of the precious metals for purposes of money, see +<hi rend='italic'>Pliny</hi>, A.N. XXXIII, 3; <hi rend='italic'>Oresmius</hi>, +De Mutatione Monetarum, ch. 2; <hi rend='italic'>Law</hi>, +Sur l' Usage des Monnaies, 683 f. <hi rend='italic'>Daire</hi>, where we read +that before the invention of money, silver had served all kinds of useful purposes, +but that now it served its most important purpose, namely the making of the best +material for money on many accounts. Yet <hi rend='italic'>Law's</hi> book, Money and +Trade considered (1705) is based mainly on the idea that pieces of land are +much better adapted for purposes of money than the precious metals (185)! +<hi rend='italic'>Galliani</hi>, Della Moneta, 1750, I, 3, 4, and +<hi rend='italic'>P. Neri</hi>, Osservazioni, 1751 ff, +Cust., have very correct ideas on this subject.</note> +</p> + +</div> + +<pb n='363'/><anchor id='Pg363'/> + +<div> +<index index='toc' level1='Section CXXI. Value In Use And Value In Exchange Of Money.'/> +<index index='pdf' level1='Section CXXI.'/> +<head type='sub'>Section CXXI.</head> +<head>Value In Use And Value In Exchange Of Money.</head> + +<p> +The original value in use of the precious metals, to satisfy +certain wants of luxury in the most aesthetic and the most substantial +manner, continues still; but with the advance of civilization, +the employment of gold and silver for this purpose +has fallen farther and farther behind the more recent employment +of these metals as the best material for money. And +since now the services rendered by money may be divided into +two classes: storing up or preservation, and the transmission +(division, concentration) of values,<note place='foot'><hi rend='italic'>North</hi>, +Discourses upon Trade, 16. The capacity of money to act as a +storer of wealth has been as much over-estimated by the so called Mercantile +System, as its capacity to transfer wealth has been by the so called +currency-school.</note> the former always plays a +greater part in the earlier states of the development of trade +by money; and the latter plays the larger part in the later +stages of the same development. We may best compare money to +the other machines or instruments of commerce.<note place='foot'><hi rend='italic'>Adam +Smith</hi> compares money to a large wheel, by means of which a due +share of the means of subsistence and of enjoyment is distributed to each +member of society. Elsewhere he compares its utility to streets and roads. +(Wealth of Nations, II, ch. 2.) <hi rend='italic'>Hume</hi>, On Money, Pr., +prefers to compare it to the oil with which the wheels of circulation are greased. +<hi rend='italic'>Sismondi</hi> compares money to porters. (N. Principes, II, +ch. 2.) <q>Money is to commerce what railways are to locomotion, a contrivance to +diminish friction.</q> (<hi rend='italic'>J. S. Mill.</hi>) According to +<hi rend='italic'>Schmitthenner</hi>, 455, it bears the same relation to other +commodities that the written language of a people's literature does to their +dialects.</note> +</p> + +<p> +The person who, in times when there is a dearth of goods, +and especially of capital, complains of a want of money, commits +the same error as if he ascribed a scarcity or absence of +grain, when it exists, to a too small number of wagons to carry +it, or to the narrowness of country highways. The inference +may, indeed, be sometimes well-founded, but certainly only by +way of exception; and yet it is generally the first which politico-economical +<pb n='364'/><anchor id='Pg364'/> +quacks think of in practice.<note place='foot'><hi rend='italic'>Law's</hi> +views on money are, in part, excellent. Thus, for instance, he +says that the debasement of the coin from financial necessity is as great a +folly as it would be to try to enlarge a piece of goods too small for the purpose +for which it was intended, by diminishing the length of the yard-stick. +(Sur l'Usage des Monnaies, 697.) A country entirely isolated from all others +could get along as well with one hundred pounds sterling as with a million. +(Money and Trade, p. 88.) Elsewhere, he confounds money and capital to +such a degree that he considers every increase of the amount of money in a +country as an enrichment of the people, a means to give employment to the +poor, to carry on manufactures etc. (Money and Trade, 23, 26 ff., 168.) A +given quantity of money is capable of giving employment at most only to +a certain number of men. (21.) A nation's power and wealth depend on +the population and its stores of goods, these on commerce, and commerce in +turn on the amount of money. (Pp. 110, 220.) The advice given, in 1848, +to the National Assembly of France, but which it had the good sense to +reject, to overflow all France with the so-called <foreign lang='fr' +rend='font-style: italic'>bons hypothécaires</foreign>, is akin to +Law's practical propositions. <hi rend='italic'>M. Chevalier</hi>, Cours, +III, 8, rightly ridicules the literal construction of the words: +<foreign lang='fr' rend='font-style: italic'>l'argent est abondant</foreign>, +when merchants find it easy to obtain credit, and considers it as well grounded as it +would be to infer from the maxim: <foreign lang='fr' rend='font-style: italic'>l'argent +est le nerf de la guerre</foreign>, that rifles and +bullets were made of silver.</note> Like all tools or +instruments, money constitutes a part of an individual's or a +nation's, or of the world's capital. Considered from the point +of view of private business or economy, money is circulating +capital, but from the point of view of the world's economy, it +is fixed capital.<note place='foot'><hi rend='italic'>Adam Smith</hi> +was not entirely clear, in his own mind, on this point. Thus +inconsistently enough, he calls money unproductive—<q>dead stock,</q> for the +reason that it leaves no material traces behind it of the goods which it has +transferred from one hand to another. (II, ch. 2.) Is not the same true of +trade itself? And yet Adam Smith calls trade productive. His error is +doubtless a remnant of the Physiocratic doctrine, to which Smith still held. +Compare <hi rend='italic'>Quesnay</hi>, 94, éd. Daire. Even +<hi rend='italic'>Twiss</hi> says that money employed as +money is unproductive, but that, when employed as a commodity, it is productive. +(View of the Progress of Political Economy, since the sixteenth +Century, 1847.) Besides it is not a peculiarity of money alone, that, after it +has served the purposes of production, it comes out of the product unaltered. +The same is true of quicksilver employed in amalgamation. +(<hi rend='italic'>Hermann</hi>, 2nd edition, 302.)</note> +</p> + +</div> + +<pb n='365'/><anchor id='Pg365'/> + +<div> +<index index='toc' level1='Section CXXII. Value In Exchange Of Money.'/> +<index index='pdf' level1='Section CXXII.'/> +<head type='sub'>Section CXXII.</head> +<head>Value In Exchange Of Money.</head> + +<p> +The value in exchange of money is said to be high when +all other commodities estimated in money are cheap; and low +in the opposite case. We have here to do with the application +of the most general of all laws of price; therefore, with +the demand and supply of money. The demand for it depends +on the wants and the means of payment of its purchasers. +Therefore, if a country has little trade, it will, on this account, +need only few instruments of trade, that is, of little money +to effect exchanges. If it be poor in other goods, it will get +little money in exchange. In the former respect, there is a +beneficent principle of equalization or compensation which decreases +the price-variations of money, no matter of what kind, +in the necessity, when the number of business transactions remains +the same and money becomes cheaper, to use more of it, +and less when it becomes dearer.<note place='foot'><hi rend='italic'>Senior</hi>, +Three Lectures on the Value of Money, 1840, is, in so far, not +wrong when he says that the value in exchange of the precious metals is +still ultimately determined by the want of such commodities as are luxuries. +This last determines to what extent the production shall be extended by the +working of the poorest mines, whereas the wants of circulation can be met +as well by small as large quantities of the metals.</note> The supply of money is, in +the long run, dependent chiefly on the cost of production. +But since the cost of production in different mines is very different, +the value in exchange of the precious metals is determined +by the cost of producing them from the poorest mines +which must be worked in order to supply the aggregate +want of them. (See § <ref target="Section_110">110</ref>.)<note place='foot'>The +good or bad result of this production depends on many different elements +which may compensate on another. In California and Australia gold +is to be found in large quantities, and is easily mined; but the workmen +make large demands which the nature of the country renders it difficult to +meet. In the Harz mines, where the cost is scarcely covered, +(<hi rend='italic'>Lehzen</hi>, Hannover's +Staatshaushalt, 1853, I, 139), the shafts are sometimes 175-½ fathoms +deep, but this is made up for in a measure by the moderate demands of the +workmen and their skill in mining. Among the Mandingos, the auriferous +material is so rich that ⅓ per 1,000 of the weight of the sand is washed out into +pure gold in ten minutes (<hi rend='italic'>M. Park</hi>, Journal, 53 ff., +addenda, XIX), while in Europe, where the proportion is only 1/100 per 1,000, mines are +still considered worth working. But then, what workmen there are there! In Peru, the +burdensome height of the mines above the level of the sea and the want of +combustible material more than counterbalance many favorable advantages, +while in Norway the cheapness of wood compensates for a great many disadvantages. +Another thing which contributes towards the uniformity of +the price of the precious metals is the circumstance that the great amount +of fixed capital required in the greater number of mining enterprises, postpones +for a long time the working of good mines as well as the abandonment +of poor ones.</note> The more unfavorable the conditions +<pb n='366'/><anchor id='Pg366'/> +of their production are, the greater is the quantity of +commodities which must be given for a pound of gold, silver +etc.; that producers may not be deterred from the prosecution +of their work. The extremes of the value in exchange +of money are dependent on the use for which it is intended. +That value cannot rise higher than to the point at +which single pieces of money become inconvenient on account +of their smallness, nor sink lower than the point at which a +similar inconvenience is produced by their too great size. In +both instances, it would become necessary to have recourse +to other instruments of exchange. +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXIII. The Quantity Of Money A Nation Needs.'/> +<index index='pdf' level1='Section CXXIII.'/> +<anchor id="Section_123"/> +<head type='sub'>Section CXXIII.</head> +<head>The Quantity Of Money A Nation Needs.</head> + +<p> +How great the amount of money needed in the entire +economy of any state is, cannot be always rightly determined, +either by the amount of the national resources, or by the +number of the population.<note place='foot'>Older writers have +estimated the amount of money necessary in a country +at 1/5, 1/10 (<hi rend='italic'>Petty</hi>), 1/15, and even 1/30 of +the yearly income of a people (<hi rend='italic'>Adam Smith</hi>, II, +ch. 2.) According to <hi rend='italic'>Cantillon</hi>, Sur la Nature du Commerce, +p. 73, it is from 1/6 to 1/10 of the annual gross production of a nation.</note> +It is a very easy thing to refute +the opinion, that the aggregate amount of cash money in a +<pb n='367'/><anchor id='Pg367'/> +country constitutes an equivalent of the aggregate amount of +all other commodities to be found there at any time, in such a +way that the two pans of this great scales (<hi rend='italic'>Locke</hi>) hang always +in a state of equilibrium, and that an increase of the +amount of money, the amount of all other commodities remaining +the same, must be productive of an exactly corresponding decrease in the value +of each piece of money.<note place='foot'><p><hi rend='italic'>Davanzati</hi>, +Lezione sulle Moneta, 1588, 32 ff., Cust., thinks that all terrestrial +things which serve to satisfy the wants of men are, by virtue of agreement, +equal in value to all the gold, silver and copper; and that the parts +comport themselves as the whole. The price of a commodity is based on +this, that men find in it as much of their <hi rend='italic'>beatitudine</hi> as +is afforded them by a given quantum of gold etc. Similarly, +<hi rend='italic'>Montanari</hi>, who adds as a limitation the quantity of money +<hi rend='italic'>spendibile in commercio</hi>. (Della Moneta, 45, 64, Cust.) +The same opinion leads <hi rend='italic'>Locke</hi> to the singular conclusion, +that, as there is now in the world, ten times as much silver as there was previous +to the discovery of America, each single piece of silver, separately considered, and +taken in relation to such commodities as have not varied, is worth only one-tenth +of what it was then. <hi rend='italic'>Locke</hi>, here, starts out with the gross +assumption, shared even by <hi rend='italic'>Ganilh</hi>, Théorie, II, 386 ff., that +in the case of money the demand is always, relatively speaking, equally strong and +just as great as the supply, or as the amount in the market. (Works, II, 23 ff.) +Further, <hi rend='italic'>Montesquieu</hi>, Esprit des Lois, XXII, 7, 8. Per contra, +however, see <hi rend='italic'>Montesquieu</hi>, ibid. XXII, 5, 6, and +<hi rend='italic'>Hume</hi>, On Money and on the Balance of Commerce, +Essays II, 1752. +</p> +<p> +Hume knew perfectly well, that only circulating money and circulating +commodities operated on price, but failed to take the rapidity of circulation +into account. Similarly, <hi rend='italic'>Forbonnais</hi>, Eléments du Commerce, II, 212; +even <hi rend='italic'>Canard</hi>, Principes, ch. 6; <hi rend='italic'>Fichte</hi>, +Geschloss. Handelstaat, 93 ff., and <hi rend='italic'>Stein</hi>, Lehrbuch, 58. +Contested by <hi rend='italic'>Law</hi>, Trade and Money considered, 140, a +work directed especially against the Mercantilistic essay, Britannia languens; +1680, by <hi rend='italic'>Mélon</hi>, Essai politique sur le Commerce, ch. 22; +<hi rend='italic'>Genovesi</hi>, Economia civile, 1764, II, 1, 15; +<hi rend='italic'>Steuart</hi>, Principles, II, ch. 28; <hi rend='italic'>Verri</hi>, +Meditazioni, XVII, 3 ff.; <hi rend='italic'>Büsch</hi>, Gedlumlauf, II, 40. The +simple taking of an inventory of most private resources which possess so much greater +value in other commodities than in money is enough to demonstrate the error of +<hi rend='italic'>Davanzati's</hi> doctrine. Thus, in France, in Necker's time, the cash +money in the kingdom was estimated at 2,200,000,000 livres, and the average value of the +wheat crop alone at 1,000,000,000. <hi rend='italic'>Necker</hi>, Législation et +Commerce des Grains, 1776, I, 215. Recently, <hi rend='italic'>Michel Chevalier</hi>, +estimated the amount of money in France at from 3-½ to 4 milliards, while the official +estimate of its immovable property alone was over 83 milliards.</p></note> Think +<pb n='368'/><anchor id='Pg368'/> +only of the great many commodities which are obtained and +consumed without any exchange whatever! Rather does the +amount of money necessary to keep the value in exchange of +the money employed in a people's public economy unaltered,<note place='foot'>When +money becomes dearer, less of it is of course needed; and when +cheaper, more, for the same purpose.</note> +depend on the cooperation of the following conditions: +</p> + +<p> +A. <hi rend='italic'>The number and extent of such commercial transactions +as are effected by means of money</hi>;<note place='foot'>In contradistinction to +presents, acts of spoliation, but especially to barter.</note> a relation which, +evidently, increases (see § <ref target="Section_56">56</ref>, ff.) with every advance +in the division of labor. Hence the transition from serfdom and socage service +to free labor, from domestic-servant labor to day-labor and piece-work, from feudal +military service to that of paid and standing armies, from land-privileges and +allowances in produce, such as fire-bote etc., to the payment of officials in +money, from dues in produce to taxes in money, and regular lease-hold interests, from +requisitions to loans of money; in a word, from the barter-economy +(<foreign lang='de' rend='font-style: italic'>Naturalwirthschaft</foreign>) of the +middle ages to the trade by means of money in the higher +stages of civilization, that is, from the <q>feudal</q> to the <q>commercial</q> +system must, of itself, increase the money-need (<foreign lang='de' +rend='font-style: italic'>Geldbedarf</foreign>) of a people. +</p> + +<p> +B. <hi rend='italic'>The rapidity of the circulation of money</hi>; because, in +most commercial transactions, one dollar which circulates ten +times a year really performs the same service as ten dollars +which go from hand to hand once in a year; just as the +economic use of a ship employed in the transportation of +commodities does not depend on its commodiousness alone +but on its rapidity also.<note place='foot'>The discoverer of this truth +is supposed by many to be <hi rend='italic'>Bandini</hi>, Discorso +economico, 1737, 141 f., Cust. <hi rend='italic'>Berkely</hi>, however, in the Querist, +1735, 477 f, writes: <q>A sixpence twice paid is as good as a shilling once paid.</q> +Much earlier yet, in 1797, <hi rend='italic'>Boisguillebert</hi>, Détail de la France, +II, 19, had the germ of this doctrine, but he confounds circulation with consumption. +And <hi rend='italic'>Locke</hi>, Considerations, II, 13 ff., presented it in 1691 with +great clearness, although he did not always remain true to his theory. Compare +<hi rend='italic'>Quesnay</hi>, éd. Daire, 64; <hi rend='italic'>Cantillon</hi>, 159 +ff., 382.</note> The economic use of money does +<pb n='369'/><anchor id='Pg369'/> +not depend on its amount simply. Says <hi rend='italic'>Sismondi</hi>: <q>The +amount of the medium of circulation in a state must be equal +to the sum of the payments made in it in a given time, divided +by the sum of the times the former has, on an average, +changed owners within that time.</q><note place='foot'>If the number +of annual exchanges effected by 1 dollar = u; the total +number of dollars in the store of money = m; the rapidity of circulation, +that is the number of exchanges effected on an average by each dollar in a +year, = s: then is u = m s, s = u/m, m = u/s.</note> Under given economic +circumstances, the rapidity of the medium of circulation is, +taken all in all, not by any means an arbitrary matter. It +will happen very seldom that one man will purchase or consume +a commodity in order that another may not want +money.<note place='foot'>Since good money is so easily stored away and preserved, no one +is in haste to get rid of it. <hi rend='italic'>St. Chamans</hi>, N. Essai sur la +Richesse des Nations, 122 ff.</note> Were the greater number of money-earners (and in +nations with a healthy economic life this number is always +made up of men noted for the good management of their +own affairs) inclined to pay out the money which they had +taken in, rapidly, a very active production would prevail +everywhere; and this, in turn, supposes general commercial +freedom and great legal security. The less these conditions +are developed, the more difficult it becomes, not only to lay +out the money received to-day productively to-morrow, but +the more imperatively does a proper foresight demand, that a +reserve-fund should be maintained for times of necessity. +(See § <ref target="Section_43">43</ref>.)<note place='foot'>Among the Kurds, all the +money in their camps is used for head-ornaments for their women. (<hi rend='italic'>K. +Ritter</hi>, Erdkunde, X, 887.)</note> Even in the same age and among the same +people, money moves most slowly under the influences of +troublesome and critical epochs; for the dangers of war +and sedition, of impending burdensome taxation, commercial +gluts and numerous cases of bankruptcy uniformly operate +to make the possessors of money hold anxiously to their +present supply.<note place='foot'>Thus, <hi rend='italic'>Sir +David North</hi>, Discourse on Trade, 1691, Postscr.</note> +</p> + +<p> +In less civilized countries, the same condition of things leads +<pb n='370'/><anchor id='Pg370'/> +the people even to bury their money-treasures. In large +cities, the circulation of money is generally more rapid than +in the country districts; in a thickly populated than in a thinly populated country; +and in trade than in agriculture.<note place='foot'><hi rend='italic'>Lotz</hi>, +Handbuch, 377, is of opinion that even in England £100,000 employed +in trade in land can scarcely effect exchanges to the amount of £1,000,000 +in a year. The same sum employed for the same purpose in London, +in stocks and in the trade in commodities, will effect exchanges to the amount +of £160,000,000.</note> Every +improvement in the means of intercommunication tends to facilitate +it. The rich man possesses, as a rule, less money, relatively +speaking, than the poorer man. Hence, a more equable +division of a nation's resources among the people would increase +the amount of money needed.<note place='foot'><hi rend='italic'>Cernuschi</hi>, +Mécanique de l'Échange, 1865, 132 ff.</note> While the concentration, +as to time, of circulation into few great terms of payment +is calculated of itself to cause a large sum of money to remain +idle in the interval,<note place='foot'>Thus <hi rend='italic'>Petty</hi> +(ob. 1687) is of opinion that England needed as much +money as ½ of all its ground-rents amounted to, as the ¼ of all house-rents, +and 1/52 of all the wages of labor for a year; for the reason that ground-rents +are paid semi-annually, house-rents quarterly, and wages weekly. (Several +Essays, 179; Political Anatomy of Ireland, 116.) <hi rend='italic'>Locke</hi>, on the +other hand, assumes 1/50 of the wages of labor, ¼ of all the revenue of land owners, and +1/20 of the amount cash money taken in in a year by merchants. Of these +amounts, there should be always, at least, one-half in ready money on hand, +if commerce would not be brought to a stand-still. If leases were to be paid +for on short terms, a great saving of money would be possible. (Works, II, +13 ff.) <hi rend='italic'>Pinto</hi>, Traité du Crédit et de la Circulation, 34, +calls special attention to the case of Tournay, in which the commandant, during the +siege of 1745, made 7,000 florins serve him for seven weeks to pay the garrison; by +borrowing that sum anew every week from the inn-keepers etc.; which they, +again, had received from the soldiers.</note> its concentration in space in large +commercial cities must dispense with the necessity of a great number +of instruments of exchange. In England, it is customary +for every man in comfortable circumstances, as soon as he receives +any money, to deposit with a banker, and to make all +his payments by means of checks upon the latter. Cash +money is now employed by Londoners only in payment of +<pb n='371'/><anchor id='Pg371'/> +wages, and in trade between retail dealers and consumers. +The banker is there the common cashier of a great number of +private individuals, and is in a condition to make their payments +for them with a much smaller amount of money, especially +when they are to be made by one of his depositors to +another.<note place='foot'>If all were to commit their payments to the care of the same +banker, it would be possible to do with almost no money. But even now, if 100 separate +merchants were obliged to keep each 3,000 dollars in their money-chests +for unforseen contingencies, a banker might accomplish the same for them +with 50,000 dollars, because it is not probable that the unforseen contingencies +in question would occur to all at the same time.</note> This <q>union of money-chests</q> +(<foreign lang='de' rend='font-style: italic'>Kassenvereinigung</foreign>) +has been effected also on a larger scale; inasmuch as bankers, +in greater or smaller numbers, are wont to have one bank as +a center; and the country banks, in turn, to be in constant relation +with the great moneyed institutions of London, subject to +a species of general superintendence by the Bank of England. +These great monetary institutions have, so to speak, a common +rendezvous at the Clearing-House, where the greater part of +their payments are made by a mere off-setting of debits and +credits;<note place='foot'>In the London Clearing-House, in 1839, £954,401,600 were paid +by means of the use of £66,275,600 as a circulating medium, for the most part notes +of the Bank of England. (<hi rend='italic'>Tooke</hi>, Inquiry into the Currency +Principle, 27.) From May, 1868, until May, 1869, £7,068,078,000. (Statist. Journal, 1869, +229.) The New York Clearing House, in 1867, effected payments to the +amount of £5,735,031,900 (Ibid., 1867, 577), and in 1868, $30,880,000,000. +(<hi rend='italic'>Hildebrand's</hi> Jahrb., 1869, II, 168.)</note> +and this bank is, as it were, the cashier-in-chief of +the nation, and in possession of almost the entire cash stores +of the English people.<note place='foot'>This system began in the middle of the +seventeenth century. (A Discourse of Trade Coyn and Paper Credit, +64.) As early a writer as <hi rend='italic'>Sir J. Child</hi>, N. Discourse on Trade, +46, says, that for some time, every man who had from £50 to £100 in money, sent it to +his banker, and that since that time, all the money flowed towards London and the +country was deprived of it. (127 ff.) As a rule, the goldsmiths were also bankers. One +such smith had at the time of the Great Fire of 1666, emitted £1,200,000 in +notes. (A Discourse etc., 67.) The Bank of England, as a money center, +dates from 1694. The London banks developed into intermediaries principally before the +time of the French Revolution. (<hi rend='italic'>Thornton</hi>, Paper-Credit of +Great Britain, 1802.) This remarkable institution had grown to vast dimensions +even in Thornton's time, although it has been much enlarged since +1825. (<hi rend='italic'>Tooke</hi>, History of Prices, 152 f.) Similar conditions among +almost all highly civilized peoples. Thus in Greece, compare +<hi rend='italic'>Becker</hi>, Charicles, I, 294. Concerning a person who had 14 +talents' worth of resources, 26 minæ, and therefore three per cent. in cash, see Lysias, +adv. Diog., 6. In Rome, compare <hi rend='italic'>Polyb.</hi>, XXXII, 13. +<hi rend='italic'>Cicero</hi>, pro Font., I, 1. For Italian analogous +cases, part of which may be traced back as far as the twelfth century, see +<hi rend='italic'>Lobero</hi>, Memorie storiche della Banca de S. Georgio, 1832; or the +Dutch <q>cassiere</q> Richesse de Hollande, I, 376, ff. In France an ever increasing +centralization of the money-trade is to be noticed in Paris (<hi rend='italic'>M. +Chevalier</hi>, Cours., III, 418); and now of the money-trade of Germany in Berlin.</note> +</p> + +<pb n='372'/><anchor id='Pg372'/> + +<p> +C. <hi rend='italic'>The quantity and rapidity of circulation of the representatives +of money.</hi> These, in so far as they are worthy of the +name here given them, depend on the credit of those who issue +them; that is, on the certainty that they shall, at the time fixed, +be redeemed in money. To this category belong the paper +money of the state which bears no interest, and the treasury-notes +of the state which do bear interest, bank notes, bills of +exchange, promissory notes, book-credits of private persons, +sometimes even certificates of the storage of goods in public +stores. It is estimated, that, at the present time, nine-tenths +of all the payments made in Great Britain are effected without +the aid of money, or even of bank-notes.<note place='foot'>Compare +<hi rend='italic'>Fullarton</hi>, On the Regulation of Currencies, 1845. Among +the Dutch, the custom of using all commercial commodities as much as possible, +as a basis of the circulating medium, was much earlier developed. +(<hi rend='italic'>Child</hi>, Discourse on Trade, 65, 264 f.) In Great Britain, +the aggregate amount of bills of exchange put in circulation was, in 1839, £528,000,000, +which sum has been increased annually at the rate of about £24,000,000. +(<hi rend='italic'>Tooke</hi>, Inquiry into the Currency Principle, 26.) Between 1828 +and 1847, there circulated at the same moment, on an average, £79,127,000 in bills of +exchange in England, and in Scotland, £17,380,000 (Athenæum, 1850, No. 175), +and in Great Britain and Ireland, from £180,000,000 to £200,000,000. +(<hi rend='italic'>Tooke</hi>, History of Prices, VI, 588,) According to +<hi rend='italic'>Macleod</hi>, the bills of exchange +and promissory notes together amounted to £500,000,000; bills of exchange, +bank-notes and bank-credits, to over £600,000,000. (Elements, 12, 325.) +<hi rend='italic'>Macleod</hi> calls the currency the sum total of all debts due by +every individual in the country. (Elements, 43.)</note> The capacity +of a person to make purchases does not depend simply on the +<pb n='373'/><anchor id='Pg373'/> +amount of money he possesses, but on his credit likewise. +The person who buys on credit, contributes as much to raise +the price of commodities as the person who buys for cash; +with this exception, however, that when the former eventually +fails to redeem his promise to pay, the price raised by him +quickly falls again.<note place='foot'>A case in England, in +1857, in which a house with £10,000 capital failed +with liabilities amounting to £900,000. (Report of the select Committee on +the Bank Act, 1858, XV.) Or where a speculator with £1,200 made purchases +on credit to the amount of £80,000, and then failed with a deficit of +£16,000. (<hi rend='italic'>Fawcett</hi>, Manual, 442 f.)</note> And, indeed, all the +various forms of credit, mentioned above, agree essentially in this, however +they may differ from one another in costliness and rapidity of +circulation. +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXIV. The Quantity Of Money A Nation Needs. +(Continued.)'/> +<index index='pdf' level1='Section CXXIV.'/> +<head type='sub'>Section CXXIV.</head> +<head>The Quantity Of Money A Nation Needs. (Continued.)</head> + +<p> +Of the three conditions above mentioned, it is evident that +the first operates on the amount of money needed, in a direction +opposite to that of the other two. The usual course of +development is this: among an advancing people, the number +of money transactions increases at first; later, when education +has become general, and the people have grown habituated +to the giving and receiving of credit, the circulation of money +is accelerated, and an increase of the substitutes for money +effected. Hence, it is perfectly natural that the money-need +of a people whose public economy is only half developed, +should, in proportion to the number of inhabitants, be greater, +not only than that of a people whose economy is wholly undeveloped, +but also, than that of a people whose public economy +has been carried to the highest point of perfection.<note place='foot'>Remarked +by as early a writer as <hi rend='italic'>Davenant</hi>, Works, IV, 106 ff. Compare, +however, II, 238. <hi rend='italic'>Quesnay</hi>, éd. Daire, 75 ff. +<hi rend='italic'>Lord King</hi>, Thoughts on +the Effects of the Bank Restriction, 1804, 17 ff. Exhaustively treated by +<hi rend='italic'>Chevalier</hi>, Cours., III, 397 ff. He very much laments the fact +that the customs of France cause it to need from 3½ to 4 milliards of cash money, while +England does a much larger trade with 1,200 millions. (I, 207 ff.) In +France, it is said that the amount of money, in 1812, was 1,500,000,000 +francs(?). (<hi rend='italic'>Peuchet</hi>, Statistique élémentaire, 473.) In Prussia, +in 1805, it was 90,000,000 thalers. (<hi rend='italic'>Krug</hi>, +Betracht. über den Nationalwohlstand des +preuss. St., I, 244.) The annual amount of production in the former country +was, 7,036,000,000 francs; in the latter it was estimated at 261,000,000 +thalers, so that in Prussia the relation of money to national income was, as +1:2.9; in France, as 1:4.69.</note><note place='foot'><p>It +is scarcely possible to determine exactly the amount of money in a +country; for the reason that, outside of the suppositions of bankers etc., +there is no authority which can be safely relied on, unless it be the reports +concerning the coinage, and of the emission of paper money. The information, +no less necessary, to be derived from the statistics of the importation +and exportation of money, the melting down of coin by gold smelters etc., +can never be exactly obtained. In England, at the end of the sixteenth century, +the circulating medium was estimated at £4,000,000 (<hi rend='italic'>Hume</hi>, +History of England, ch. 44, App.); under Charles II., at £6,000,000, when the population +was 6,000,000. (<hi rend='italic'>Petty</hi>, Several Essays, 179.) About 1711, +<hi rend='italic'>Davenant</hi>, New Dialogues, 11 ff., mentions £12,000,000 as the +amount; and <hi rend='italic'>Anderson</hi>, Origin of Commerce, a., 1659, £16,000,000 +in 1762. The circulation of gold, shortly before 1797, was estimated by +<hi rend='italic'>Rose</hi> at, at least, £40,000,000; by Lord +<hi rend='italic'>Liverpool</hi>, at £30,000,000; by <hi rend='italic'>Tooke</hi>, at +only £22,500,000. (History of Prices, V, 130 ff.) <hi rend='italic'>Moreau de +Jonnés</hi>, 1837, assumed £43,500,000 (Statistique, I, 329), and +<hi rend='italic'>Helferich</hi> (Schwankungen der edlen Met., 1843, 147), £45,000,000. +<hi rend='italic'>Sir Robert Peel</hi>, estimated the amount in 1845 at £59,000,000, to +which was to be added an average of £28,000,000 in bank notes, after deduction made of +the metallic reserve. According to <hi rend='italic'>Jevons</hi>, the amount of British +money is now £80,000,000 in gold, £14,000,000 in silver, £1,000,000 in copper; the sum +total, including bullion and bank notes, after the deduction of their metallic +representatives, £134,000,000. (Economist, December, 1868, July, 1869.) In +France, <hi rend='italic'>Vauban</hi>, Dîme royale, 104 (Daire), estimated the cash +money at about 500,000,000 livres, over 750,000,000 francs, with which +<hi rend='italic'>Voltaire</hi>, Siècle de Louis, XIV, ch. 30, agrees so far as the +year 1683 is concerned. In 1730, <hi rend='italic'>Voltaire</hi>, assumes the amount to +be 1,200,000,000 of the coins of that time. <hi rend='italic'>Necker</hi>, +Administration des Finances, III, 66, estimated it, in 1784, at 2,200,000,000 livres; +<hi rend='italic'>Mollien</hi>, about 1806, at 2,300,000,000. The valuations in +Louis Philippe's time varied from 2,400,000,000 to 2,500,000,000 (Chamber +of Deputies, April, 13, 1847), and 4,000,000,000. (<hi rend='italic'>Blanqui.</hi>) +The valuations of 1870 were, according to <hi rend='italic'>Wolowski</hi>, 4 milliards; +and to <hi rend='italic'>Bonnet</hi>, from 5 to 6 milliards. Compare +<hi rend='italic'>Wolowski</hi>, L'Or et l'Argent, 383 ff., Euquête, 42. The +German Zollverein is said to have had, at the beginning of 1870 +(<hi rend='italic'>Soetbeer</hi>) 480,000,000 or 520,000,000 thalers +(<hi rend='italic'>Weibezahn</hi>) cash money. +</p> +<p> +In Wirtemberg, <hi rend='italic'>Memminger</hi>, 1840, estimated the resources of the +country at 1,600,000,000 guldens, of which 36,000,000 were cash; and the yearly gross +income at 179,000,000 guldens; so that the money was 20 per cent. of the +latter and 2¼ per cent. of the former. The annual sales = 226,000,000. +Therefore the coin currency must have circulated on an average between six +and seven times in a year. In the electorate of Hesse, there were <hi rend='italic'>per +capita</hi> 4 thalers, 18 sgrs., 9 hellers, metallic money, and 3 thalers, 9 sgrs., 4 +hellers, paper-money. (<hi rend='italic'>B. Hildebrand</hi>, Statist. Mitth., 1853, +185.) The amount of money in Naples, in 1840, was estimated at 42,000,000 ducats. +(<hi rend='italic'>Scialoja.</hi>) It has been estimated that, in 1830, Spain +possessed 1,725,000,000 francs. (<hi rend='italic'>Barrego +von Rottenkamp</hi>, 330.)</p></note> +</p> + +</div> + +<pb n='374'/><anchor id='Pg374'/> + +<div> +<index index='toc' level1='Section CXXV. Uniformity Of The Value In Exchange Of The +Precious Metals.'/> +<index index='pdf' level1='Section CXXV.'/> +<head type='sub'>Section CXXV.</head> +<head>Uniformity Of The Value In Exchange Of The +Precious Metals.</head> + +<p> +The peculiar properties of the precious metals described +above (§ <ref target="Section_120">120</ref>), explains satisfactorily enough, why, at +the same +<pb n='375'/><anchor id='Pg375'/> +time, but in different countries, they have more nearly the +same value in exchange than any other commodity whatever. +Like a fluid in tubes which communicate with one another, +the precious metals seek the one same level of value the whole +world over.<note place='foot'><hi rend='italic'>Montanari</hi>, Della +Moneta, 52 ff.</note> Only, it must not be supposed that every absolute +or relative increase of the amount of money in a country +must produce immediately a corresponding diminution of the +value of money; and in addition to this cause an exportation +of money.<note place='foot'><hi rend='italic'>David Hume's</hi> +very influential essay on the balance of trade does not give +expression to this error, but he certainly was the occasion of making a great +many of his disciples advocate it. It is related to the error mentioned in +§ <ref target="Section_123">123</ref>. <hi rend='italic'>Quesnay</hi>, 101 +(Daire) saw this point in a much clearer light. So did +<hi rend='italic'>Graumann</hi>, Gesammelte Briefe vom Gelde (1762), 12 ff.; 73 +ff.</note> If the number of trade-transactions increases in +the same proportion as the amount of money, the value of +money remains entirely unaffected.<note place='foot'>This is +seen, for instance, when paper money is issued, in times when +trade is thriving, and is withdrawn when this conjuncture ceases.</note> +The same thing occurs +when the increased influx of money, instead of overflowing +the channels of circulation, only swells the volume in the +<pb n='376'/><anchor id='Pg376'/> +ready-money reservoirs. By means of these stores of ready +money, very large payments may be made by one nation to +another, without changing the circulation, or, therefore, the +value of money, in the slightest degree, on either side.<note place='foot'>Very +well elaborated by <hi rend='italic'>Fullarton</hi>, On the Regulation of Currencies, 71 +ff., 139 ff. Compare, however, <hi rend='italic'>Becaria</hi>, Economica publica, IV, 4, +27. When England on the occasion of the removal of the bank restriction in 1821 and +1822, caused £9,520,759 and £5,356,788 to be stamped, this powerful demand +scarcely affected the gold-agio in Paris. (<hi rend='italic'>M. Chevalier</hi>, Cours, +III, 157.) And, on the other hand, the system of assignats, developed during the first +French Revolution, on so large a scale, had no influence on the price of silver +in the rest of Europe. (<hi rend='italic'>Lord King</hi>, Thoughts on the Bank +Restriction, 1804.) And so, <hi rend='italic'>Tooke</hi>, History of Prices, I, 205, +describes a very large increase of the medium of circulation, after which the prices of +commodities remained unchanged, corn fell, colonial products rose in price, both as they +had done before, and from causes inherent in the commodities themselves. +During the first years of the bank restriction, 1799-1801, grain rose very rapidly +in price, while all trans-Atlantic products sank. (<hi rend='italic'>Tooke</hi>, I, +232 ff.) The unusually large importation of wheat from January 1, 1846, to January 14, +1847, was paid in France by a decrease of the bank metallic reserve +(<foreign lang='fr' rend='font-style: italic'>encaisse</foreign>) +to the extent of 172,000,000 francs. (<hi rend='italic'>M. Chevalier</hi>, Cours, III, +470.) An experienced practitioner in England is of opinion that an increase of bank notes +to the amount of about £5,000,000 would not raise prices nor increase the +tendency to speculation, but only enlarge the deposits of the bankers. But, +if on the other hand, £5,000,000, by any sudden contingency, were to be put +into the hands of the working classes, this money would, for the most part, +enter immediately into circulation; the price of commodities would, therefore, +rise and continue to rise until that amount had come into closer fists, as +it would after some time. (<hi rend='italic'>Tooke</hi>, III, 156 ff., II, 323.)</note> +If, indeed, such payments should continue for a long time to flow +in the same direction, they would certainly influence the circulation, +and then produce a current in the opposite direction. +</p> + +<p> +However, it may happen, that the value of money in different +countries may be permanently different, when there are +lasting difficulties in the way of the leveling influence of the +incoming or outgoing current of money. Thus, the precious +metals maintain a high value in those countries especially which +can obtain them only by giving commodities difficult of transportation +for them. If, for instance, an Englishman, anxious +to take advantage of the high value of money in Poland, +<pb n='377'/><anchor id='Pg377'/> +should cause Polish articles, such as wheat, wood, wool etc., +to be imported into England, they would reach their destination +very much increased in price, because of the great cost +of transportation. Whether Poland or England would have +to bear this cost depends on the relations of supply and demand. +Certain it is, however, that the migration of money +is hereby rendered exceedingly difficult, forbidden even within +the limits of certain value-differences, especially where the +means of communication are universally bad. And so, the +smaller the number of countries which minister to the want of +commodities of precious-metal districts, the more must other +nations obtain the money they need only at second and third +hand; by means of which, naturally, money itself is made +dearer each time. Now, it is, as a rule, nations in a low stage +of civilization, that engage in the exportation of raw material, +and they are the worst adapted to engaging directly in the +carrying on of trade. When, therefore, they do not possess +gold or silver mines themselves, money-value is, as a rule, +highest with them; especially as the absence of legal security +and protection, which generally obtains there, makes the value +in use of the precious metals one of great urgency to them.<note place='foot'><p>This +explains the high price of gold in Farther Asia, which was formerly +separated from America, the principal source of supply of the precious +metals, by a journey around the earth, the then usual course of the world's +trade. +</p> +<p> +The precious metals are generally higher in country places than in large +cities, and in the interior than on the sea-coast. Since the public highways +etc. in Germany have been so much improved, the difference in the value of +money in upper and lower Germany has almost disappeared. (<hi rend='italic'>Rau</hi>, +in the Archiv der polit. Oek., III, 338.)</p></note><note place='foot'>Happy +beginning of this doctrine in <hi rend='italic'>Hume</hi>, On the Balance of Trade. +Further, <hi rend='italic'>Thornton</hi>, The Paper Credit of Great Britain, ch. 11. +<hi rend='italic'>Adam Smith</hi>, on the other hand, claims that gold and silver, +because they are costly superfluities are uniformly paid most dearly for, in the +richest countries. (Wealth of Nations, I, ch. 11, 3: Digr.)</note> +</p> + +<p> +Direct legislative or governmental provisions may operate +in the same direction; as, for instance, the Japanese embargo +laws which, not long since, limited all foreign trade to two +<pb n='378'/><anchor id='Pg378'/> +foreign nations.<note place='foot'>Similarly in China, and even +in Upper Egypt, the China, so to speak, of antiquity! Compare +<hi rend='italic'>Herodot.</hi>, II, 112 ff; <hi rend='italic'>Homer</hi>, Od., IV, +354 ff. The religion of the Egyptians prescribed to them a mode of life which was scarcely +practicable in foreign parts. They were systematically inspired with a horror +for everything foreign. They had a strong antipathy for salt, fish and pilots. +In Egyptian mythology, Osiris represents the Nile, Typhon the desert and +the sea! (<hi rend='italic'>Plutarch</hi>, De Iside, 32.)</note> +I intend to treat of the influence of taxation +on the value of money, in a future work to be written by me, +on the Political Economy of the State. +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXVI. Uniformity Of The Value In Exchange Of The +Precious Metals. (Continued.)'/> +<index index='pdf' level1='Section CXXVI.'/> +<head type='sub'>Section CXXVI.</head> +<head>Uniformity Of The Value In Exchange Of The +Precious Metals. (Continued.)</head> + +<p> +Most nations can satisfy their want of the precious metals, +only through the medium of foreign trade. Hence they very +naturally look upon the cost of production of the articles of +export by the exchange of which they obtain the precious +metals either directly or indirectly, as the cost of production of +these metals themselves. But, the rule that all commodities of +equal cost of production have equal value in exchange is applicable +only within the limits of the same economic territory +(§ <ref target="Section_107">107</ref>), for it is +frequently physically impossible, and still more +frequently rendered difficult, by laws, customs and states of +mind to transfer factors of production from one country to +another simply on account of the more advantageous market +they would there find. Thus, for instance, when England +exchanges its cotton and woolen goods, and steel instruments +for Mexican silver, the cost of production of the two equivalents +may be very different, and the one party in this trade +may permanently make a larger profit than the other.<note place='foot'>The +other party, of course, makes a profit also. He is in a better condition +than if he wished to produce the desired commodity in his own country.</note> According +to § <ref target="Section_101">101</ref>, that party will be most favored in whom the +desire of holding to his own commodities is farthest from being +<pb n='379'/><anchor id='Pg379'/> +out-weighed by his desire to obtain the other. But, at +bottom, silver is no very indispensable article. Especially in +highly civilized commercial communities, it is easiest to obtain +substitutes for it, while the principal articles of English +export are, for the most part, objects with which to satisfy +wants rather urgent in their nature, very general, and of rapid +growth; and which, besides, are not, to any extent, difficult +of transportation. It is not a matter of surprise, therefore, +that English commodities, in silver countries, are generally +sold above the mean price between the English cost of production +and the Mexican, for instance, or the cost of procuring +them elsewhere; and that silver, on the other hand, is sold +in England, under the same. But this lowers the price of the +precious metals of the latter country in general. Hence a +change in the channels of international trade, which in most +countries is the only source of gold and silver, may make the +price of the precious metals dearer in one place and cheaper in +another, even when the conditions of the production of mines +remain entirely unaltered.<note place='foot'><p>The +first clear germ of this doctrine, which is one of the most important +theoretical principles of international-trade politics, is to be found in +<hi rend='italic'>David Hume</hi>, On Interest; <hi rend='italic'>Cantillon</hi>, +Nature du Commerce, 226, 369 ff. <hi rend='italic'>Ricardo</hi>, Principles, +ch. 7. <q>Gold and silver having been chosen for the general medium +of circulation, they are, by the competition of commerce, distributed in such +proportions amongst the different countries of the world, as to accommodate +themselves to the natural traffic which would take place if no such metals +existed, and the trade between countries were purely a trade of barter.</q> +<hi rend='italic'>Rebenius</hi>, Oeff. Credit, I, 29 ff. Still further developed, +especially by <hi rend='italic'>John Stuart Mill</hi>, Elements, 1821, III, 4, 13 f.; +<hi rend='italic'>Torrens</hi>, The Budget, 1844. <hi rend='italic'>John +Stuart Mill</hi>, Essays on some unsettled Principles of Political Economy, 1844, +No. 1, and Principles, III, ch. 19, § 3, 5th ed.: <q>The opening of a new branch +of export trade from England; an increase in the foreign demand for English +products, either by the natural course of events or by the abrogation of duties; +a check to the demand in England for foreign commodities, by the laying +on of import duties in England, or of export duties elsewhere; these and +all other events of similar tendency, should make the imports of England, +bullion and other things taken together, no longer an equivalent for the exports; +and the countries which take her exports would be obliged to offer +their commodities, and bullion among the rest, on cheaper terms, in order to +re-establish the equation of demand; and thus England would obtain money +cheaper, and would acquire a generally higher range of prices.</q> +</p> +<p> +Obscurely surmised by <hi rend='italic'>Beccaria</hi>, E.P., 3, 18, and even by +<hi rend='italic'>Galiani</hi>, Della Moneta, II, 2. <hi rend='italic'>Senior's</hi> +admirable work, Three Lectures on the Cost of Obtaining +Money, 1830, follows up the thought that every country obtains indigenous +and foreign products at a cost which grows smaller in the same +proportion as the productiveness of its people's labor is large. This would, +certainly, explain why it is that perhaps one hundred English days' work in +cotton manufactures will exchange against as much silver as is produced by +two hundred days' work in Mexican mines and foundries. This would not, +by any means, produce a lowering of the price of the precious metals relatively +to other English commodities, but the influence would be felt equally +by all the products of English national industry.</p></note> In an isolated country, any +<pb n='380'/><anchor id='Pg380'/> +amount of gold and silver whatever would, finally, as soon as +the people had grown accustomed to it, suffice for all the +wants of circulation. But, in commerce with the rest of the +world, the greater quantity and greater cheapness of the +precious metals, that is of those commodities which are most +current and are possessed of the greatest amount of economic +energy, must, without fail, be of the greatest advantage to a +country; and this irrespective of the fact that they are under +certain circumstances the symptom of an especially highly +developed public economy. If we suppose two nations, A and +B, equal in every other point, but that A has twice as much +money as B, and that prices are twice as high there as in B; +yet, with the same effort or sacrifice, A could levy twice as +many taxes as B. In case of a war between them, A might +pay in ready money for the necessities of an army which had +invaded B, with one-fourth the sacrifice which B would have +to make to support its army in A, if we reverse the case, and +suppose that B had invaded A.<note place='foot'>To be found in germ in +<hi rend='italic'>Cantillon</hi>, Nature du Commerce, 1755, 249 ff. +307. <hi rend='italic'>Büsch</hi>, Geldumlauf, 14. <hi rend='italic'>Kaufmann</hi>, +Untersuchungen, I, 75 ff. Many of the doctrines of the so-called Mercantile System, of +which I shall treat in my projected work on the Political Economy of Commerce, have +given expression to this truth in an inexact and exaggerated way; but they were not +entirely erroneous, as is supposed by the adherents of Hume and Smith. +However, <hi rend='italic'>J. S. Mill</hi>, Principles II, ch. 19, § 2, does not fully +admit the degree of the cheapness of money in England usually assumed. According +to him it is wants of luxury (luxury-wants) become such through habit, +that produce <q>the dearness of living in England.</q></note> +</p> + +</div> + +</div> + +<pb n='381'/><anchor id='Pg381'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Chapter IV. History Of Prices.'/> +<index index='pdf' level1='Chapter IV.'/> +<head type='sub'>Chapter IV.</head> +<head>History Of Prices.</head> + +<div> +<index index='toc' level1='Section CXXVII. Measure Of Prices,—Constant Measure.'/> +<index index='pdf' level1='Section CXXVII.'/> +<head type='sub'>Section CXXVII.</head> +<head>Measure Of Prices,—Constant Measure.</head> + +<p> +If we had a measure of prices with the same universality of +application and the same unchangeableness as the measure of +length, which is determined by astronomical calculation, we +should be able, not only to clearly understand all the data relating +to value, that is to say, a not unimportant portion of historical +science, but we should, moreover, have a practical means to +condition and fix even perpetual annuities, in such a way, that +they would always afford the same economic and purchasing +power to the person receiving them. No wonder, therefore, +that political economists since Petty's time have zealously labored to find a +<emph>constant</emph> measure of prices.<note place='foot'><hi rend='italic'>Petty</hi> +considers the search for a measure which could be applied both to +land and labor as one of the principal problems of Political Economy. (Political +Anatomy of Ireland, 62 ff.) <hi rend='italic'>Sir J. Steuart</hi>, Principles, III, ch. +I, took the matter very easy by considering the so-called <q>coin of account,</q> for +instance, <q>bank-money,</q> as an invariable value-magnitude. Compare +<hi rend='italic'>Jacob</hi>, Grundsätze der National Œkonomie, II, 441 ff. +<hi rend='italic'>Cazaux</hi>, Economie politique et privée, 1825, 16 ff., has a not +uninteresting study on this subject; but he goes, throughout his argument, on the +assumption that the rate of interest is the price of money! If the rate of interest in +two countries = I and i, the prices of the same commodity = P and p, the true +thing-values, V and v; then we have v: V:: i p: I P!</note> If by this we +understand a species of goods such that it should always maintain +equal exchange-power, as compared with all other commodities, +<pb n='382'/><anchor id='Pg382'/> +the idea of a <q>constant</q> measure of prices is unthinkable. +We would have to suppose here, that not a single +kind of goods varied in its price; since, otherwise, at least as +compared with those that varied in price, the measure of +prices would itself be variable.<note place='foot'><hi rend='italic'>Law</hi>, +Trade and Money, 181. Before him, and quite correctly, <hi rend='italic'>Montanari</hi>, +Della Moneta, I, p. 84 ff., compares the means employed of measuring +one commodity by another, to the means used to estimate time in terms of +space, as when it is measured by the revolutions of the hands of a clock, and +again, space in terms of time.</note> But we may, indeed, search +for a kind of goods such that its inherent elements and the elements +peculiar to it, so far as it is itself concerned, and which +go to determine price, should exert the same uniform influence +at all times. If there be such a kind of goods, and its value +in exchange as compared with other kinds of goods were to +vary, we should be certain, at least, that the cause of the +change was not in it, but in them; that <emph>it</emph> had not grown +dearer or cheaper, but that they had grown cheaper or +dearer. Such a kind of goods would have these two characteristics: +A. A given amount of it would, under all circumstances, +have the same value in use for the same number +of persons. B. It would require, under all circumstances, +the same cost to produce it, and therefore the supply might +always keep pace exactly with the number of those who demanded +it.<note place='foot'>The solvability or capacity to pay of buyers cannot be taken into +consideration here, because it is synonymous with the amount of counter-values which +are to be measured.</note> In this way the supply and demand of this kind +of goods, abstraction made of the quantity of counter-values, +would preserve forever the same invariable relation. +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXVIII. Value In Exchange Estimated In Labor.'/> +<index index='pdf' level1='Section CXXVIII.'/> +<head type='sub'>Section CXXVIII.</head> +<head>Value In Exchange Estimated In Labor.</head> + +<p> +Adam Smith is of opinion that different kinds of goods, no +matter how far removed from one another they may be in +<pb n='383'/><anchor id='Pg383'/> +time or space, have equal value in exchange, when an equal +quantum of human labor may be purchased by their means. +He adopts, because of the great differences in work, the average +work of the common manual laborer. One work-day, and +the sacrifice of <q>rest, freedom and happiness</q> therewith connected, +are, under all circumstances, attended with the same +inconvenience (value). If at one time this day's labor will exchange +for more, and at another for less, of any kind of goods, it is only because the price +of the latter has fallen or risen.<note place='foot'><hi rend='italic'>Adam Smith</hi>, +Wealth of Nations, I, ch. 5. Similarly <hi rend='italic'>Luther</hi>, vom Kaufhandel: +Werke, ed. <hi rend='italic'>Walch</hi>, X, 1098 f. <hi rend='italic'>B. Franklin</hi> +considered the labor employed in the production of wheat as the best measure of prices. +(Letter to Ld. Kames: Works, ed. <hi rend='italic'>Sparks</hi>, VII.) As Adam Smith, so +also <hi rend='italic'>Sismondi</hi>, Richesse commerciale, I, 371 f.; +<hi rend='italic'>Kraus</hi>, Staatswirthschaft, I, 84,; v. +<hi rend='italic'>Schlözer</hi>, Anfangsgründe, I, 41. Also +<hi rend='italic'>Malthus</hi>, in the second and succeeding editions +of his Principles, ch. I, 6, and Definitions, ch. 8, 9. The Measure of +Value, 1823. <hi rend='italic'>Zachariä</hi>, Vierzig Bücher, VII, 53 f., maintains +that, at least within the limits of every separate nation, the average labor-power of one +man is invariable. Assuming this principle, therefore, to be true, the means +of subsistence necessary to support a laborer for one work-day constitutes, indirectly, +a measure of prices. <hi rend='italic'>Tooke</hi>, History of Prices, I, 56, says that +the amount of a day's wages is always a better measure of the price of the precious +metals than the price of wheat. Even in 1750, <hi rend='italic'>Galiani</hi>, Della +Moneta, II, 2, had denied the impossibility of an entirely invariable measure of price +in this world of change, but he considered man himself the least variable of +measures, and in a country where slavery prevailed, slaves. He thought +that the <hi rend='italic'>macuta</hi> of the negroes were a part of the average price +of slaves. Practically, Adam Smith's proposed measure was used in the French constitution +of 1791, in as much as it provided that participation in primary assemblies should depend +on the participant's paying an annual tax equal to the wages of three days' work, and +eligibility as an <foreign lang='fr' rend='font-style: italic'>èlecteur</foreign>, on +the possession of an income equal in value to the wages paid for two hundred days' +day-labor. <hi rend='italic'>Owen</hi> endeavored to base the value of the paper money +in circulation in his Utopian commonwealth, not on any metal of a certain weight or +stamp, but on hours of labor as the unit. (<hi rend='italic'>Reybaud</hi>, +Réformateurs Contemporains, I, 255.)</note> +</p> + +<p> +But we may ask whether the same sacrifice of liberty is as +great a hardship to a Russian as to a Bedouin; or whether +the sacrifice of an equal amount of rest is as hard for the New +Englander as it is for a Turk, or as difficult to endure on a +hot day in July as in the cold of winter. Besides, we have +<pb n='384'/><anchor id='Pg384'/> +here to do primarily only with value in exchange; and that +value in the case of day-laborers' work is subject to very +great fluctuations. +</p> + +<p> +The elements on which the demand and supply of labor +depend are not, in themselves, invariable, nor do their variations +usually compensate for one another. In progressive nations, +the value in use of day-laborers' work increases as well +as the capacity of their employers to pay them; but, at the +same time, as a rule, and at least relatively speaking, the supply +of labor diminishes on account of the increase in the cost +of production of workmen. Precisely the reverse of this happens +in nations in their decline, and in over-populated nations. +The workman is subjected to the necessity of accepting distress-prices +for his work, and especially of accepting them for a +long space of time.<note place='foot'>The wretched condition, +until within a short time since, of the Irish working +class, is well known; how they dwelt in mud cabins without windows, +board-floors or chimneys etc., in the same apartment with their pigs; how they lived +almost exclusively on potatoes, and went about in rags. These same Irish, +<foreign lang='la' rend='font-style: italic'>coelum, non animum mutantes</foreign>, +received in North America for the coarsest kind of labor, 50 to 75 cents wages, besides +wheat bread and meat three times a day, coffee and sugar twice a day, butter once, and +seven or eight glasses of whisky or brandy. (<hi rend='italic'>M. Chevalier</hi>, +Lettres sur l'Amérique du Nord, I, 159.)</note> How often it happens that, if only +transitorily, when wages are declining, work improves, and <hi rend='italic'>vice +versa</hi>.<note place='foot'>Thus in Mauritius, the immigration of the coolies has +produced a decrease of negro wages, but an increase of negro industry. In the Barbadoes, +the negroes are more industrious and their wages lower than in Jamaica. The +wages of good workmen, as for instance during the commercial crisis in Manchester, +often sink, while the wages of bad workmen rise; as, for example, +in a village through which a railroad is made to pass. Compare +<hi rend='italic'>Lauderdale</hi> Inquiry, ch. 1; <hi rend='italic'>Sartorius</hi>, +Abhandlungen, 1806, I, 16 ff.; <hi rend='italic'>Lotz</hi>, Revision, I, +99 ff.; <hi rend='italic'>M. Chevalier</hi>, Cours, III, 88 f.</note> +</p> + +<p> +Ricardo's school employs, as the measure of the price of +various kinds of goods, the quantity of work by which the +goods themselves are produced.<note place='foot'>Besides the passages cited in § +<ref target="Section_107">107</ref>, compare also <hi rend='italic'>Harris</hi>, On +Money and Coins, II, 1757 f.; <hi rend='italic'>Jacob</hi> also preceded +<hi rend='italic'>Ricardo</hi>. See the German translation +of <hi rend='italic'>Say</hi>, II, 435, 507.</note> It is evident that the same +<pb n='385'/><anchor id='Pg385'/> +amount of common labor produces very different results, according +as it is well or badly conducted. Hence Ricardo +must have used the word labor in the sense of labor ideally +adapted to its end. But in this way it would be impossible to +reduce all the different kinds of labor to a common denominator.<note place='foot'>The +introduction of the words <q>the socially necessary time of labor</q> +into the formulæ does not make the measure any more practical for political +economists or for socialists.</note> +Nor could the peculiar effects of capitalization, or the +influence of the natural or artificial limitations of competition +be estimated in terms of such a measure. (See §§ <ref target="Section_47">47</ref>, +<ref target="Section_107">107</ref>, 189.)<note place='foot'><hi +rend='italic'>Cantillon</hi>, who reduces all the cost of production to land and labor, +considers the <q>at par</q> between these two to be this: that the labor of the meanest +slave corresponds to the quantity of land which the owner is obliged to +employ for his support, and the support of the slave and of the children +who are to take his place. (Nature du Commerce, 42.) The Physiocrates +thought that the internal (<hi rend='italic'>innere</hi>) value of two commodities stood +in the same relation to each other as the area of land directly or indirectly necessary +to their production. <hi rend='italic'>Schlettwein</hi>, Grundfeste der Staaten, 1792, +230.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXIX. The Precious Metals The Best Measure Of +Prices.'/> +<index index='pdf' level1='Section CXXIX.'/> +<anchor id="Section_129"/> +<head type='sub'>Section CXXIX.</head> +<head>The Precious Metals The Best Measure Of Prices.</head> + +<p> +It is no more possible to find a constant measure of prices +than it is to square the circle. (<hi rend='italic'>J. B. Say.</hi>) If the two magnitudes +to be compared are separated from each other in +space but not in time, the precious metals constitute not only +the best measure of their prices, but also a very good one. +But the precious metals are subject to very sensible and accidental +variations in price in long periods of time. If, therefore, +we would compare sums of money belonging to different +times with one another, we must first construct a price-current +list of all the more important articles of commerce for the +time in question, and in the quantities they are needed in every +<pb n='386'/><anchor id='Pg386'/> +day life. We would next have to calculate the average of +these mean prices, and thus to determine the relative value of +the amounts to be estimated.<note place='foot'>The so-called <foreign lang='de' +rend='font-style: italic'>Sachwerth</foreign> (thing-value, real-value) of +<hi rend='italic'>Hermann</hi>, St. Untersuchungen, +101 ff. Thus <hi rend='italic'>Poulett Scrope</hi> recommended a <q>tabular standard,</q> +to be officially established and renewed from time to time, to serve as an +anchor to those persons who wished permanently to fix their money in such a +manner as to make it exchangeable for an equal value in <emph>things</emph>. (Principles +of Political Economy, 1833, 406.) Something of this kind was tried for 50 +commodities, between 1833 and 1837, by <hi rend='italic'>Porter</hi>, Progress of the +Nation, 1st ed., II, 236 ff., then for 40 commodities by <hi rend='italic'>Jevons</hi> +in the Statistical Journal, 1865. Of course, all commodities of a given price are not +equally important in this respect. Thus, for instance, a fluctuation in the price of +diamonds would have no effect on the thing-value or real-value of a day's wages, but +it certainly would on the thing-value of a princely income. There are some +excellent remarks on this very important subject in <hi rend='italic'>Lowe's</hi> work, +On the Actual Condition of England, chs. 8 and 9. The controversy carried on +between <hi rend='italic'>Jevons</hi>, A serious Fall in the Value of Gold, and its +social Effects, 1863; Statist. Journal, 1865; and <hi rend='italic'>Laspeyres</hi>, +<hi rend='italic'>Hildebrand's</hi> Jahrb., 1864, 81 ff.; +1871, I, 296 ff; in which the former recommends the geometric mean of the +relative prices of separate commodities at different points of time, in order +to calculate the average relative price: and the latter, as usual, the arithmetical +mean, is very thoroughly reviewed and criticised by <hi rend='italic'>Drobisch</hi>, who +shows that neither of these methods is sufficient, but that the quantity of every +separate commodity must also be taken into account, for which he furnishes +practical formulæ. (Math. phys. Berichte der <hi rend='italic'>K.</hi> Sächs. +Gesellsch., 1871, I, 143 ff, 416 ff.) It is certain that a fixed income in money could +maintain its real value or thing-value (<foreign lang='de' +rend='font-style: italic'>Sachwerth</foreign>) just as little if the cwt. of bread +rose by as many dollars as the cwt. of pepper had fallen; as if the increasing +price of bread depended on a decreasing price of pepper.</note> The person who should +limit his comparison to a few species of commodities, says von +Mangoldt, would lose in exactness what he gained in comprehensibility. +</p> + +<p> +In every such list, the wages of a day would occupy a very +important place. The desire of exerting an influence over the +lives and actions of other men, and the desire of relatively +greater social distinction as compared with the social distinction +of others, is very general; and there is scarcely any better +evidence that it has been attained than the possession of the +power of controlling a large number of days' work. The man +who can keep one thousand day laborers is certainly, in a politico-economical +<pb n='387'/><anchor id='Pg387'/> +sense, an important personage. Besides, the +height of day-wages has the most direct influence on the price +of many other commodities.<note place='foot'><hi rend='italic'>Senior</hi>, +Outlines, 187. In addition to this, we may draw from the thing-value +of a day's wages a right conclusion as to the economic condition of the +majority of the people; and assuming the customary division of the national +wealth, also as to the degree, to which the people have subjected the forces +of nature to their service.</note> +</p> + +<p> +No less important is the price of wheat, or rather of the +principal article of food of the people, for the time being, with +which the price of inland raw material—in so far as it can be produced from the +same soil alternately with wheat—and, in the long run, also the wages of labor, +are so essentially connected.<note place='foot'><hi rend='italic'>Ricardo</hi>, ch. +22, refuted, indeed, only the view that an increase in the +wages of labor produced by the higher prices of corn, would necessarily +make all goods or products of labor, correspondingly dearer.</note> +The same indispensable necessity of wheat which +causes its price to fluctuate so largely from year to year, and +from month to month, promotes the uniformity of its average +price,<note place='foot'>Compare § <ref target="Section_103">103</ref>. In Paris, in +1817, the <foreign lang='fr' rend='font-style: italic'>setier</foreign> of wheat cost +March 5, 55½ francs; April 2, 57 fr.; April 23, 60 fr.; May 14, 63 fr.; May 21, 66 fr.; +May 28, 75 fr.; June 4, 82 fr.; June 11, 92 fr. (<hi rend='italic'>Tooke</hi>, History +of Prices, II, 17.)</note> when many years are taken into the +account.<note place='foot'><hi rend='italic'>Locke</hi>, 98. When +<hi rend='italic'>Condillac</hi> asserts that wheat is the best measure of +prices, he adds, when free trade in wheat obtains. (Commerce et Gouvernement, +1, 23.) <hi rend='italic'>Fichte</hi>, on the other hand, while advocating the despotic +guidance of all trade by the state, would employ wheat as the fundamental measure +of prices. (Geschl. Handelstaat, 47 ff.) That grain does not afford a +good measure of prices in very highly cultivated nations nor in barbaric +ones, see <hi rend='italic'>Hermann</hi>, II, Aufl., 451.</note><note place='foot'>The +average price must be based on the prices of a great many years, +since crops vary not only from year to year in price, but from decade to +decade. See <hi rend='italic'>Roscher</hi>, Nationalökonomik des Ackerbaues, § 152, and +<hi rend='italic'>Roscher</hi>, Kornhandel und Theuerungspolitik, 47 ff. Great wars are +wont to disturb agriculture in such a manner that the price of corn is very much increased +by them. Hence, it is not unfrequently possible to use the prices of +grain as a species of barometer to determine the real pressure of a war upon +the economic life of a people. Judging by this standard, England suffered +much less from the War of the Roses in the fifteenth century, than from the +civil wars in the seventeenth; and less than France from the religious wars +of the sixteenth. The war year 1631-2, in which Gustavus Adolphus and the +emperors had to spare the country, must have been far less oppressive for +Saxony than the later Swedish campaigns. <hi rend='italic'>Roscher</hi>, in the Tübinger +Zeitschrift, 1857, 471.</note> +<pb n='388'/><anchor id='Pg388'/> +(<hi rend='italic'>Malthus.</hi>) If, by reason of great progress made in the art of +agriculture, the cost of the production of wheat should fall to +one-half of what it was, a large increase of population would +certainly not be delayed long. And so, on the other hand, +there would be a decrease of population if, by the destruction +of artificial means of irrigation, or other steps in the direction +of a retrogressive civilization, the cost of the production of +wheat were to be permanently increased. +</p> + +<p> +But even the average price of wheat, during a long series +of years, is not entirely invariable. The increasing consumption +compels the nation, as a whole, to provide for its requirement +of wheat from less fertile sources, which increases its +price generally. It is true that the progress of the science of +agriculture and of the corn-trade counteract this tendency, +retard the advance of the price of wheat, and may, for a time, +produce an opposite tendency. It is true, also, that the people +are induced by their most general and vital interests to take +advantage of this possibility. But spite of the frequency of +exceptions to it, the rule remains.<note place='foot'><p>Most countries go through these +successive periods in their corn trade: in the first, exportation preponderates; in the +second, there is an equilibrium; in the third, importation preponderates. +(<hi rend='italic'>M. Chevalier</hi>, III, 74 ff.) Compare <hi rend='italic'>Tacit.</hi>, +Ann., XII, 43. Omitting the two dearest and the two cheapest years, +the Prussian provinces were circumstanced as follows: +</p> +<p> +In The Whole Kingdom, the price of Rye, 1816 to 1837, was 40. silver groschens. +The population per square mile, 2,776<lb/> +In Prussia, 32.2 silver groschens, and 1,827<lb/> +In Posen, 34.3 silver groschens, and 2,180<lb/> +In Brandeburg, Pomerania, 38.4 silver groschens, and 2,093<lb/> +In Saxony, 40.3 silver groschens, and 2,366<lb/> +In Silesia, 38.0 silver groschens, and 3,612<lb/> +In Westphalia, 47.7 silver groschens, and 3,600<lb/> +In Rhine Province, 49.4 silver groschens, and 5,078 +</p> +<p> +<hi rend='italic'>Rau</hi>, Lehrbuch, I, § 183. As to when it may be assumed that the +price of corn has remained unchanged, see <hi rend='italic'>Hermann</hi>, loc. cit., +125 ff. +</p></note> If, therefore, we wished +to so fix a perpetual annuity that it should always be worth +<pb n='389'/><anchor id='Pg389'/> +as much money as a certain quantity of wheat had cost, on +an average, during the three preceding decades, the thing-value +of this annuity would, on the whole, rise with an advance +in civilization.<note place='foot'><hi rend='italic'>Petty</hi> recommended the average +daily food necessarily required by one +man as the measure of price, estimated on the basis of the cheapest means +of subsistence. (Polit. Anatomy of Ireland, 62 ff.) <hi rend='italic'>Thaer</hi> used as +such a measure the smallest day's wages; as he supposed, expressed in rye, that is, +1/9 of the Prussian <hi rend='italic'>scheffel</hi>. Similarly, +<hi rend='italic'>Malthus</hi>, in his first edition, and <hi rend='italic'>Buquoy</hi>, +Theorie der Nationalwirthschaft, 240. But this is simply to substitute +for wheat an arbitrarily determined quantity and quality of the same as +a measure of prices. For practical experiments of this kind, made by the +depreciation of paper money during the French Revolution, see <hi rend='italic'>M. +Chevalier</hi>, Cours, III, 98; and Constitution de 1795, V, 68, VI, 173. +<hi rend='italic'>Count Soden</hi>, Nat. Œk., II, 338 f., demands that all taxes, +salaries of state officials etc., should be regulated in accordance with the price of +corn. This same view has been suggested recently in many German States.</note> +To obtain something that would remain +the same, it would be necessary to combine wheat with +at least one chief commodity, the intrinsic basis of the price of +which had a development independent of the price of grain; +but the whole to be made payable in money. The precious +metals are, in many respects, so diametrically opposed in properties +to wheat, in their dispensableness, transportable character +and durability, for instance, that these two classes of +commodities are best adapted to act as counter-balances to +each other.<note place='foot'>Recognized generally by <hi rend='italic'>Locke</hi>, +Considerations 24. Further, <hi rend='italic'>Galliani</hi>, Della Moneta, II, 2; +<hi rend='italic'>Adam Smith</hi>, I, ch. 5. <hi rend='italic'>Schäffle</hi>, N. Œk., +II, Aufl., 127, maintains that a constant measure of price, such as would enable a person +to stipulate for a salary for instance that would be always of the same value, +is impossible. Similarly, <hi rend='italic'>Hildebrand's</hi> Jahrb., 1871, 315 ff.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXX. History Of The Prices Of The Chief Wants Of +Life.'/> +<index index='pdf' level1='Section CXXX.'/> +<anchor id="Section_130"/> +<head type='sub'>Section CXXX.</head> +<head>History Of The Prices Of The Chief Wants Of Life.</head> + +<p> +The higher civilization advances, the dearer all those commodities +in the production of which the factor nature with +<pb n='390'/><anchor id='Pg390'/> +value in exchange predominates are apt to become; and the +cheaper, on the other hand, all those in which labor and capital +play the principal productive part.<note place='foot'>Compare <hi rend='italic'>J. +Tucker</hi>, Four Tracts on political and commercial Subjects, +28 ff., who maintains that it is a rule, almost without exception, that <q>operose +or complicated manufactures</q> are cheapest in rich countries; <q>raw materials,</q> +in poor ones. Thus, for instance, corn (?), garden products in the +former; cattle, wool, milk, skins, flesh-meat, in the latter. Ships and movable +property are cheaper in the former, whereas wood may be said to be almost the +free product of nature here. See especially <hi rend='italic'>Adam Smith</hi>, Wealth +of Nations, ch. 11, Digr.</note> This is accounted for, +not only by the almost unlimited capacity of labor and capital +to be increased, while the natural forces which have value in +exchange are susceptible of increase to so small an extent; +but also, and especially, because new additions of labor and capital +are wont to cause relatively smaller results in the production +of raw material, and relatively larger ones in industry and commerce. (§ +<ref target="Section_33">33</ref>, ff).<note place='foot'><hi rend='italic'>Senior</hi>, +Outlines 119 f., makes the following calculation: Of the 15d. +which a loaf of bread costs in England, 10d. goes to buy the wheat, the other +5d. to the miller, baker etc. If now, we suppose, that in consequence of an +increased demand, and therefore of increased production under more unfavorable +circumstances, the price of wheat should rise to 20d., the cost of production +would possibly, because of an improved division of labor, come down +to 3-¾d., and hence the price of the loaf of bread would be increased to 23-¾d. +It is quite the reverse in the case of lace, because here a piece of raw material +worth only 2 shillings may, by reason of the labor expended on it, become +worth as much as £105. If the consumption of lace should increase +so that the value of the raw material rose to 4 shillings, the simultaneous +decrease of the cost of manufacture to the extent of one-quarter of the aggregate +price, would leave the price of the manufactured article £78, 19s.</note> +</p> + +<p> +Hence, from the relations the prices of the different classes +of commodities bear to one another, we may draw important +conclusions as to the degree of civilization which a country has +attained. The above law also affords an explanation of the +fact, that a young nation, which has made no great strides in +the way of development, and in which, of course, the production +of raw material preponderates, draw their commercial +and manufactured necessaries, by way of preference, from +<pb n='391'/><anchor id='Pg4391'/> +precisely the most highly civilized foreign nations. The latter +are in a condition, and accustomed, to give the largest quantity +and the best quality of manufactured articles for a required +quantity of raw material; and, of course, <hi rend='italic'>vice versa</hi>. Hence, +in this intercourse of nations, the most urgent want, and the +completest and easiest possibility of satisfying it, meet.<note place='foot'>When, +for instance, the inhabitants of the Baltic coasts, by way of preference, +kept up their relations with the Hanseatic cities, the Dutch and English, +that is with the most important industrial and commercial nations in +their own sphere, they in all this pursued only their own interest. As to +how this intercourse between <q>old</q> and <q>new</q> countries is susceptible of +the very highest development, see <hi rend='italic'>Torrens</hi>, The Budget: On +Commercial and Colonial Policy, 1844, and earlier, <hi rend='italic'>Wakefield</hi>, +England and America, II, 1823.</note> Only +very highly civilized mother-countries can hold fast to colonial +possessions in our day. +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXXI. History Of The Prices Of The Chief Wants Of +Life. (Continued.)'/> +<index index='pdf' level1='Section CXXXI.'/> +<anchor id="Section_131"/> +<head type='sub'>Section CXXXI.</head> +<head>History Of The Prices Of The Chief Wants Of Life. (Continued.)</head> + +<p> +A. In the case of a great many raw materials, we repeatedly +find the following to be the course of development. In +the lower stages of civilization, they grow of themselves, and +in such quantities that a small amount of labor, and that only +the labor of occupation, more than suffices to satisfy the small +demand for them. Here, naturally enough, the price of raw +materials is very low. After this, it rises with every advance +made in civilization, for two reasons: first, because the demand +becomes greater and greater; and then, because the +naturally free sources of production, called into requisition by +other wants, now flow less and less abundantly.<note place='foot'>The clearing up +of primeval forests, the cultivation of natural meadows, etc.</note> This rise in +price continues until the point is reached at which it becomes +customary, instead of the mere occupation of the free gifts of +nature, to bring forth the commodities in question by the more +<pb n='392'/><anchor id='Pg392'/> +laborious process of production proper. From this time forward, +the usual seeking of prices for a level requires that our +commodity should, like all others which suppose an equal sacrifice +of the means of production, claim an equal value in exchange. +If from any peculiar causes, the production of this +commodity is not at all possible, or if it is capable of no great +extension, its price, which would under the circumstances, be +limited only by the purchasing power of the buyer, might +attain the utmost extreme reached in prices under the spur of +vanity or of the mere love of the commodity itself. The +latter is true especially in the case of venison;<note place='foot'>In +Hungary, during the sixteenth century, the choicest venison was consumed +by plebeians and nobles alike. <hi rend='italic'>Herberstein</hi>, Rer. Moscov. Comm., 97. +In Russia, even the lowest classes not unfrequently partake of roast hare and +duck etc. <hi rend='italic'>Kohl</hi>, Reise in Russland, II, 386. Still, in St. +Petersburg, wild-fowl game rose between the time of Peter the Great and Alexander I. 600 +per cent. in price. (<hi rend='italic'>Storch</hi>, Handbuch, I, 368.) In Pittsburg, in +1807, mutton, beef and veal cost from 4 to 6 cents a pound, and game only from 3 to 4-½ +cents a pound. (<hi rend='italic'>Melish</hi>, Travels through the United States, II, 57.) +The more the game laws are enforced, the longer does the low price of game continue, +especially when it is not easy for the poor to procure them. The moderns +have seldom thought of raising game artificially; among the Romans, artificial +raising was confined to the hare and fieldfare. (<hi rend='italic'>Varro</hi>, R.R., III, +12 ff.; <hi rend='italic'>Columella</hi>, R.R., VIII, 10.) Hence, the enormous prices paid +for game, of which <hi rend='italic'>Pliny</hi>, H. N. X., 43, relates an example from the +time of the emperors. On the other hand, Polybius assures us that, in his time, game +was to be had as good as gratis in Lusitania. XXXIV, 8, 7.</note> the former, +in the case of the tame cattle,<note place='foot'><p>In Buenos Ayres, in the nineteenth +century, beggars on horseback were to be seen. (<hi rend='italic'>Robertson</hi>, +Letters on South America, II, 294.) In Krasnojarsk, in 1770, 1-½ rubles was the price +of an ox, 1 ruble of a cow, from 2 to 3 of a horse, from O.3 to O.5 of a sheep; O.15 +of a deer. (<hi rend='italic'>Pallas</hi>, Sibirische Reise, III, 5, II 12.) According +to the Tables of Prices in <hi rend='italic'>Sir F. M. Eden</hi>, State of the Poor, +Append. I, and <hi rend='italic'>Rogers</hi>, History of Agriculture and Prices +(1866), I, 245, 361, the following prices obtained in England; +</p> +<p> +(On an average.) +</p> +<p> +in 1125-26, one ox, 1 shilling; one quarter of wheat, 20 shillings;<lb/> +in 1260-1400, one ox, 13 shillings 1-¼d; one quarter of wheat, 5 shillings 10-¾d;<lb/> +in 1406, one ox, 9-½ shillings; one quarter of wheat, 4-½ shillings;<lb/> +in 1463, one ox, 10-20 shillings; one quarter of wheat, 1-⅔-4-⅔ shillings. +</p> +<p> +Compare <hi rend='italic'>Hume</hi>, History of England, a. 1327. Under Henry VIII. veal, +beef, mutton and pork were food for the poor in England, and cost on an average +1-½d per pound; while wheat cost from 7 to 8 shillings a quarter. (24 Henry VII, +c. 3. <hi rend='italic'>Price</hi>, Observations, II, 148 f.) The same appears from +the <q>reasonable prices</q> which Charles I, in 1663, had established by sworn +juries viz.: that the different kinds of meat were much cheaper comparatively +than corn in our days. <hi rend='italic'>(Rymer</hi>, Foedera, XIX, 511. +<hi rend='italic'>Anderson</hi>, Origin of Commerce, a. 1633.) In many places in the +highlands of Scotland, in the middle of the seventeenth century, one pound of oat-bread +cost as much or more than one pound of the best meat. The union of Scotland with +more highly civilized England soon changed the relation, so that in <hi rend='italic'>Adam +Smith's</hi> time, good meat, in nearly all parts of Great Britain was worth from +2 to 4 times as much as the same weight of wheat bread. (Wealth of Nations, +I, ch. 11, 1.) The Thomas Hospital in London paid, on an average, +for good beef per stone weight: +</p> +<p> +1701-1710: 1s. 7.9d.<lb/> +1764-1773: 1s. 3.7d.<lb/> +1794-1803: 1s. 5.d.<lb/> +1804-1821: 1s. 10.9d.<lb/> +1822-1842: 1s. 1.5d. +</p> +<p> +(<hi rend='italic'>Porter</hi>, Progress of the Nation, III, 112.) Among the most certain +proofs of the high degree of economic civilization attained in upper Italy about +the close of the medieval times is the fact, that the price of cattle, compared +with that of wheat in the thirteenth and fourteenth centuries, varies very +little from what it is to-day. (<hi rend='italic'>Cibrario</hi>, Economia politica del +medio Evo, III, 335-383.) Compare <hi rend='italic'>Rau</hi>, Lehrbuch I, § 185. In +Athens, the cost of a <hi rend='italic'>medimnos</hi> +of wheat was as great as that of a sheep in Solon's time. In the age of Demosthenes, +it cost only half as much. (<hi rend='italic'>Böckh</hi>, Staatshaushalt der +Athener, I, 107, 132.) It is obvious, however, that the price of meat compared +with that of corn, was lowered by the great extension of the artificial +cultivation of meadows; for, when the former has reached its maximum, it +becomes a great spur to the promotion of the latter. Thus, in England, the +price of meat, at the beginning of the sixteenth century, was on an average, +higher than in <hi rend='italic'>Adam Smith's</hi> time. (loc. cit.) To the same cause is +to be ascribed the state of things in Prussia mentioned by <hi rend='italic'>v. +Podewils</hi>, Wirth schaftserfahrungen, II, 15. +</p> +<p> +As a common basis for such calculations, the following may be accepted. +It is plain that meadows, pasturages and forage-fields must yield as much in +meat, as corn-fields of the same dimensions of equal goodness, and situated +as favorably, in corn. According to <hi rend='italic'>Block</hi>, a Prussian acre +(<foreign lang='de' rend='font-style: italic'>Morgen</foreign>) of the +best quality, used as a meadow, produces a hay-value equal to 1,000 pounds, +a clover-value equal to 2,420; as a vegetable field, a beet or potato-value equal +to 6,050-6,930 pounds, <hi rend='italic'>v. Lengerke's</hi> estimate is that 110 pounds +of cattle-fodder expressed in terms of hay, produces on an average 40 pounds of milk, +and from 3-½ to 4 pounds of meat. This would, at most, give 36, 88 and 220-252 pounds of +meat. The yield of wheat, <hi rend='italic'>v. Lengerke</hi> estimates, on the best soil, +and on an average, at 14 Prussian <foreign lang='de' +rend='font-style: italic'>scheffels</foreign> (at 80 pounds, i.e. 1,120 +pounds) yearly per acre (<foreign lang='de' rend='font-style: italic'>Morgen</foreign>). +The three periods in the history of the prices of cattle were clearly recognized by +<hi rend='italic'>Thaer</hi>, Landw. Gewerblehre, 1815, 100.</p></note> +fresh-water fish,<note place='foot'>It is a very characteristic fact, +in relation to the river fisheries, that the fable that servants formerly +stipulated not to eat salmon except twice a week +is to be found in so many places. Thus on the Elbe and the Rhine. Compare +<hi rend='italic'>Thaarup</hi>, Dänische Statistik, I, 112. In Scotland, about the end of +the seventeenth century, the story in places ran, that it was five times a week. +(<hi rend='italic'>Walter Scott</hi>, Old Mortality, ch. 8.) In England, fish seems to +have been a tid-bit among the poorer classes in the fourteenth century. +(<hi rend='italic'>Rogers</hi>, I, 606.) It was dearer especially during Lent. (Statist. +Journ., 1861, 544 ff.) The artificial production of sea-fish seems to have been tried only +by the ancient Romans. On the whole, <hi rend='italic'>Adam Smith's</hi> law that a +ten-fold demand can, as a rule, be met only by a greater than ten-fold labor, applies +here. (I, 370, ed. Basil.) But this relation is obscured to a certain extent, from the fact +that the source of the production of sea-fish, the ocean, which may be claimed at any +time by occupation, is, practically, boundless. Here, therefore, the improvements +made in nautical science, and the progress of geographical knowledge, +may yet for a long time compensate for the exhaustion of the nearer seas, +and even more than counterbalance it.</note> and wood.<note place='foot'>Among +a great many nations in a low stage of civilization, agriculture +consists in the burning down of the forest. In 1594, the Lauenförder forest +produced 1,110 thalers' worth of food for hogs, and wood to the amount of +44 thalers. (<hi rend='italic'>v. Berg</hi>, Staatsforstwirthsch., 213.) The Harzgerode +woods, at the ducal line of Anhalt-Bernburg, were estimated at 6,000 thalers. A hundred +years later, they brought in yearly 70,000 thalers, although, in the meantime, +very little progress was made in the science of cultivating them, (<hi rend='italic'>v. +Justi</hi>, Staatswirthschaft, II, 211.) We may form a notion of the relativity of +the idea of the dearness of wood from the fact that in Bavaria, for instance, +in 1840, there was a great deal of complaint, that in the district of Isark the +price rose from 6 to 9 florins; in the districts of Regen and the lower Maine, +from 11 to 14 florins to from 15 to 18; in the Rhine district, from 20 to 26 +florins per cord (<hi rend='italic'>Klafter</hi>). (<hi rend='italic'>Rau</hi>, Lehrbuch, +III, § 150, a.) Besides, the price of wood in the forest rises, with an advance in +civilization, much more rapidly than it does in the market; in which last, labor and +capital play a greater part. (<hi rend='italic'>Rau</hi>, I, § +385.)</note><note place='foot'>Plan for the artificial production of pearl oysters. +(Novara-Reise, I, 303.) Ostriches seem now to be ceasing to be objects of mere occupation, +and to be becoming objects of breeding. (Ausland, 1869, § 13.)</note> +</p> + +</div> + +<pb n='393'/><anchor id='Pg393'/> + +<div> +<index index='toc' level1='Section CXXXII. History Of The Prices Of The Chief Wants Of +Life. (Continued.)'/> +<index index='pdf' level1='Section CXXXII.'/> +<head type='sub'>Section CXXXII.</head> +<head>History Of The Prices Of The Chief Wants Of Life. (Continued.)</head> + +<p> +B. The rise in prices is observed earliest in that class of +goods in question which by reason of their small volume and +<pb n='394'/><anchor id='Pg394'/> +their comparatively great value, and by reason of the greater +capacity to be kept in a state of preservation for a longer +time, are best adapted to seeking a more favorable market. +This applies particularly to the skins, fleece, hair, feathers, +<pb n='395'/><anchor id='Pg395'/> +teeth, horns, etc., of animals, in which, in the breeding of stock, +etc. people in a low stage of civilization are much more apt +to speculate than in their meat. Here it is considered, and +rightly so, to be much more profitable to raise many animals +which are badly cared for, than a few, that are well cared for; +for the care bestowed on animals has, as a rule, much more influence +on the body itself than on their covering.<note place='foot'><p>Thus +Wolff's experiments made at Möckern have shown that in the case +of sheep fed with hay, the wool becomes much heavier and the flesh +leaner than those of sheep fed with a more concentrated food. While it is +estimated in England, at the present time, that the wool of South-Down +sheep is worth scarcely one-tenth what their flesh is (<hi rend='italic'>Jacob</hi>, On +Corn Trade, 166), mutton, from the year 1260 to 1400, was, on an average, worth +17 pence; and this even at a time when prices were gradually rising; but the +wool of one animal (1 lb., 7-¾ ounces), 5-¼ pence. (<hi rend='italic'>Rogers</hi>, I, +362, 395.) Even under Anglo-Saxon kings the fleece was worth 40 per cent. of the value +of the whole sheep, (<hi rend='italic'>David Hume</hi>.) And so <hi rend='italic'>W. +Macann</hi>, Two Thousand Miles Ride through the Argentine Provinces, 1853, I, 151, says +that in the interior of Buenos Ayres, he purchased 8,000 sheep at 18 pence a dozen, +and after a march of 200 English miles, sold the skins for sixty pence a dozen. +In Goya, formerly, a live horse cost 3 pence, its skin on the coast 12 +pence; and the slaughtering of the beast cost 3 pence, the removal and cleaning +of the skin 3 pence; and 3 pence were paid for transportation. +(<hi rend='italic'>Robertson</hi>.) +</p> +<p> +In Ireland, in 1763, it not unfrequently happened that the skin and tallow +of an ox cost as much in a commercial city as the whole ox had cost in the +nearest market town. (<hi rend='italic'>Temple</hi>, Works III, 13.) In England, from 1260 +to 1400, the average price of a whole cow was 9s. 9d.; of the hide 1s. 8d., and +cows were cheapest in the first decade, i.e., 6s. 2d., and the hides dearer than +they were generally afterwards, i.e., by from 1-9-¼d. (<hi rend='italic'>Rogers</hi>, I, +361, 451.) In Saxony, according to <hi rend='italic'>Engel</hi> (1853), the average price +of horned cattle was about 46 thalers; of their hide, 4 thalers and 21 silver groschens. +Russia exported, 1842-1847, 72,636,166 silver rubles worth of tallow, 1,832,137 silver +rubles worth of horse hair, 10,811,735 worth of bristles (<hi rend='italic'>Borsten</hi>), +7,387,140 of uncured skins, 36,159,452 of sheep's wool, but flesh-meat only to the +amount of 370,362 rubles, and entire animals to the value of 6,853,241 rubles. +(<hi rend='italic'>P. Storch</hi>, Der Bauernstand Russlands, 289 ff.) Tallow is there ten +times dearer than the same volume of wheat. (<hi rend='italic'>Steinhaus</hi>, Russlands +industrielle und commercielle Verhältnisse, 294 ff.); while in Saxony, according to +<hi rend='italic'>Engel</hi> (1821), a pound of wheat cost on an average 7.8 +<hi rend='italic'>pfennigs</hi>, and a pound of tallow 30 <hi rend='italic'>p.</hi> +However, Russia's recent progress in civilization has had for effect: that the exportation +of tallow (1833 = 4-½ million <hi rend='italic'>puds</hi>; 1869 = 2-¼ mill.) has greatly +fallen off; while that of butter and live stock has increased. (<hi rend='italic'>v. +Lengefeld</hi>, R. im 19. Jahrh., 220 ff.) +</p> +<p> +In England, during the fourteenth century, a pound of meat cost, on an +average, ¼d.; of lard, from 1-½ to 2. (<hi rend='italic'>Rogers</hi>, I, 411.) On the +other hand, from 1848 to 1856, the average January price of beef from America was +110 shillings; of tallow from St. Petersburg, 48s. 11d. per cwt. +(<hi rend='italic'>Newmarch</hi>.) And so, in the time of <hi rend='italic'>Pallas</hi>, +the Cossacks chased the deer of their steppes only for the sake of its skin and horns. +(<hi rend='italic'>Pallas</hi>, Reise, III, 524.) While the Greeks got horn from Macedonia +and Thrace (<hi rend='italic'>Herodot.</hi>, VII, 156), it is a striking proof of high +civilization that at Athens (?), about the time of the hundredth Olympiad, an ox-hide was +worth only 3 drachmas, and the whole ox 77 drachmas. (<hi rend='italic'>Böckh</hi>, +Staatshaushalt, I, 105 ff.) +</p> +<p> +As the ox is primarily serviceable as an object of food and an instrument +of labor, and the sheep on the other hand, only an instrument to produce +wool, it is easy to understand why, with the further advance of civilization, +the price of oxen rises comparatively much more than the price of sheep. In +Athens, during the time of Solon, an ox was equal in value to five sheep. +(<hi rend='italic'>Plutarch</hi>, Solon, 23.) So also in countries with a low +civilization in the time of Polybius. (<hi rend='italic'>Polyb.</hi>, XXXIV, 8; +<hi rend='italic'>Gell.</hi>, XI, 1.) Why the same was the case in Rome at the +beginning of the Republic? (<hi rend='italic'>Plut.</hi>, Popl., 11). In +England the proportion between the price of an ox and that of a sheep was, +</p> +<p> +in 927 as 6:1 (<hi rend='italic'>Henry</hi>.)<lb/> +in 1125 as 3:1<lb/> +in 1182 as 6.3:1<lb/> +in 1197 as 9:1<lb/> +in 1229 as 8:1 (<hi rend='italic'>Eden</hi>.)<lb/> +in 1260-1492 (av.) as 9.2:1 (<hi rend='italic'>Rog.</hi>)<lb/> +in 1497 as 10:1<lb/> +in 1500 as 11.6:1<lb/> +in 1511 as 8:1<lb/> +in 1528 as 10:1<lb/> +in 1529 as 12.8:1<lb/> +in 1531 as 9.4:1<lb/> +in 1551 as 10.6:1<lb/> +in 1597 as 8.2:1 (<hi rend='italic'>Eden</hi>.) +</p> +<p> +At present the proportion may be from 10 to 20:1. In Saxony, it is as +48 thalers to 5.27. (<hi rend='italic'>Engel</hi>.)</p></note> In fisheries, +<pb n='396'/><anchor id='Pg396'/> +caviar, sturgeon-bladders, oil and whalebone;<note place='foot'>About 1793, Russia +exported 10,000 rubles worth of fish, 452,000 of sturgeon bladders, 188,000 of +caviar. (<hi rend='italic'>Storch</hi>, Russland, II, 184.) But this had +undergone a great change even in 1850. At present, there are 64 per +cent. of sturgeon bladders, 27 of caviar, and 7 of whole fish. +(<hi rend='italic'>Steinhaus</hi>, Russland's industrielle und commercielle Verhältnisse, +102, 368.) Yet the Astrakan fishermen still throw the greater number of the sturgeon they +catch back into the water. (<hi rend='italic'>Pallas</hi>, Reise im süd. Russland, I, +189; <hi rend='italic'>Steinhaus</hi>, 99.) Salt fish are adapted for transportation to a +distance not only because they can be preserved, but also because they may be caught and +prepared on the great highway of the water. Athens got from the Black Sea besides wood, +tar, wool, hides, cordage, honey, wax and slaves, also salt fish. +(<hi rend='italic'>Wolf</hi>, z. Demosth. Leptin., 252; <hi rend='italic'>Bockh</hi>, +Staatshaush. I, 51.) The latter from Sardinia, Egypt and Spain. +(<hi rend='italic'>Pollux</hi>, VI, 48.)</note> and in forest-culture, +<pb n='397'/><anchor id='Pg397'/> +pitch, tar, potash and, to some extent, building material +etc., play the same part.<note place='foot'>The principal +countries that produce potash are Russia and North America. +It is estimated that a cwt. of potash requires, on an average, 480 cwt. +of wood. (<hi rend='italic'>Pfeil</hi>, Grundsätze der Forstwirthsch. in Bezug. +auf National-Oekon. etc., I, 128.) From 1800 to 1840, wood for fuel in Würtemberg trebled +its price; for building material the price increased 1.6 times. (Deutsche +Vierteljahrsschrift, 1847, No. 4, 104.)</note> +</p> + +<p> +Conversely, the price of those portions which are most difficult +of transportation, by reason of their volume or of the +difficulty of preserving them, rises latest. To this category +belongs milk, the production of which in a fresh state can be +made an object of economic speculation, only where civilization +is at its very highest, and especially in the vicinity of +large cities.<note place='foot'>Whereas barbarous nations +take little trouble to turn the milk from their cows to account +(<hi rend='italic'>Roscher</hi>, Ideen z. Politik und Statistik der Ackerbausysteme, +Archiv. der politische Œkonomie, neue Folge, III, 202), <hi rend='italic'>Reuning</hi>, in +1844, calculated that the milk from all the cows in Saxony amounts to a value +of 10,000,000 thalers, their meat to over 2,000,000, and the labor performed +by them in various ways to 3,000,000. In Silesia, in the last decade of the +eighteenth century, a quart of milk was estimated to be worth 2 +<hi rend='italic'>pfennigs</hi> (Festschrift der deutschen Landwirthschaftsversammlung, +1869, 343), whereas as now it is sold almost everywhere for 12 +<hi rend='italic'>pfennigs</hi>. (<hi rend='italic'>Schmoller</hi>.) In the +rather high state of civilization which Saxony had reached at the end of the +sixteenth century, when game was already dear, and the prices of other meat +were almost as high as in 1800, a <hi rend='italic'>sheffel</hi> of rye was +worth 44 measures (<hi rend='italic'>Mass.</hi>) of milk, and recently 82-⅔ measures. +(<hi rend='italic'>Schmoller</hi>, Tübinger Ztschr., 1871. 336 ff.)</note> +It is indeed possible by its transformation into +butter or cheese to preserve milk and make it capable of +<pb n='398'/><anchor id='Pg398'/> +transportation. But to carry on such a business for the purposes +of trade, a care and a cleanliness are needed which are +national characteristics only of a highly civilized people (§ 229), +and the preparation of a superior quality of cheese, which is always +a very long process, is conditioned by the employment +of capital long in advance of a return, and which no poor +nation is in a condition to make.<note place='foot'>The principal +cheese-producing countries and cities are Holland, Limburg, +Switzerland, Gloucester, Chester, Ayrshire etc. Compare <hi rend='italic'>Roscher</hi>, +loc. cit., 195 ff.</note> Cows are primarily milk-producing +animals.<note place='foot'>In England, in the year 1000, a cow was worth only as much as +two sheep. (<hi rend='italic'>Anderson</hi>, Origin of Commerce, a., 979.) The best +butter was worth only 1d. per pound in 1550, while pork was worth 1-1/8, veal and mutton, +1-½, and beef, 2-¼d. The price of butter was exceedingly variable in the sixteenth +century. (<hi rend='italic'>Eden</hi>.)</note> Hence their price, as a rule, rises later +than that of oxen, but, in the higher stages of civilization, it +rises much more surprisingly. Something analogous is true +of those products which result from what remains after the +production of other goods or commodities. As long as this +alone supplies the demand, the cost of production of the +former commodity is almost nothing, and hence its price is +very low. For this reason hogs are relatively cheap in two +very different periods of a people's national economy, in a very +low stage of civilization where forests are plentiful and they +are fattened on acorns and the nuts of the beech, and also +when they may be considered as a collateral product of some +great industry, such as distilleries and dairy-farming; and +when raised by a numerous, especially a rural population of +small means and laborers, in order to turn to advantage, in +the former instance, the remains of production, and in the latter +of consumption.<note place='foot'><p>During the middle ages, pork +constituted the most usual animal food even of the best classes. +(<hi rend='italic'>Büsching</hi>, Ritterzeit und Ritterwesen, I, 164.) Immense +importance attached to pork by the <hi rend='italic'>Lex Salica</hi>. (Tit., II, XIV; +Emendatt. Caroli Magni, II, 1 ff.) The archbishop of Cologne used every day 24 large +and 8 medium-sized hogs, and four more on the three great festivals. The +abbot of Corvey used daily five fat and one lean hog, besides two young ones. +(<hi rend='italic'>Kindlingen</hi>, Münsterische Beitr., Urkunden, 147, 126.) In 1345, at +the court of Dauphiny, there were used annually for 30 persons, 30 salt and 52 fresh +hogs; whereas, in modern Paris, with 800,000 inhabitants, only 32,000 hogs +are consumed yearly. (<hi rend='italic'>Roquefort</hi>, De la Vie privée des Fr., I, 310 +f.) Compare herewith the place occupied by the swine-herds in the Odyssey in +Greece's age of chivalry. In England, in the time of William I., woods were +taxed according to the number of hogs they might feed. At present, there +is an enormous production of hogs in Servia, which, in many places, constitutes +the only source of ready money to the agricultural population. +</p> +<p> +And about the end of the eighteenth century, it is said that Servia received +from Austria alone 1,300,000 florins yearly for hogs. (<hi rend='italic'>Ranke</hi>, Serb. +Revolution, 95.) In 1864, Servia's total exports amounted to 62,500,000 piasters, +of which 28,162,260 were for hogs, 7,043,000 for wool, 7,662,000 for the +skins of sheep and deer, 5,732,000 for cattle, 1,222,400 for tallow. +(<hi rend='italic'>Kanitz</hi>, Serbien, 598 ff.) Great production of hogs also in the +Moldau and in Wallachia, in the United States and Mexico, where, instead of butter, only +lard and suet are used; also in Lombardy, the Prussian Rhine province, Belgium, +the English milk-producing districts, Gloucester, Wilt, Dumfries, Galloway +and the districts where agricultural proletarians abound—Ireland and Yorkshire. +It is a consequence of the same law that, among the South Sea Islanders, +the hog was the principal domestic animal, as it still is among the +Chinese. Similarly in the whole of Asia, beyond the Ganges (<hi rend='italic'>Ritter</hi>, +Erdkunde, IV, 938, 1101); in semi-barbarous upper Italy in the time of +<hi rend='italic'>Polybios</hi> (II, 15); in Gall itself, in the time of Augustus. +(<hi rend='italic'>Strabo</hi>, IV, 192, 197.) The America of the ancient Greeks, Sicily, +exported hogs, mainly, in the time of Hermippos. (<hi rend='italic'>Athen.</hi>, I, 27.) +And even among the Romans, the consumption of pork was much greater than the consumption +of beef. (<hi rend='italic'>Marquard-Becker</hi>, Handbuch, V, 2, 39.)</p></note> +Where neither of these two reasons obtains, +<pb n='399'/><anchor id='Pg399'/> +the price of hogs is wont to increase largely with an advance +in civilization.<note place='foot'>In the cities of Prussia +subject to a tax for the privilege of maintaining slaughter +houses, a pound of beef cost on an average, in 1846, from 2 silver +groschens, 5 <hi rend='italic'>pfennigs</hi>, to 3 s. gr. 4 pf.; pork, from 3 s. gr. 2 pf. +to 4 s. gr. 4 pf. (<hi rend='italic'>Dieterici.</hi>) In Moscow, also, the latter is +dearer at present. Before the time of Peter the Great, it was cheaper. +(<hi rend='italic'>Storch</hi>, Handbuch I, 364.) It was a sign of high civilization, too, +that in Florence, in the fifteenth century, veal cost, on an average, 2-½ soldi; mutton, +2-⅓ soldi; but pork, 4 soldi. (<hi rend='italic'>Pagnini</hi>, +Saggio sopra il giusto Pregio delle Cose, 325 f., Cust.) It is especially the +lower middle class who ask for fat meats. The very fat English sheep are +taken not to London, but into the manufacturing districts. +(<hi rend='italic'>Lauderdale</hi>, Inquiry, 322 f.) As to whether the relatively high +price of pork, and the fact that in the later times of Rome, the wild boar was the most +fashionable dish, compare <hi rend='italic'>Becker</hi>, Gallus, II, +186.</note><note place='foot'>The production of fowl is similar in this, that they are +frequently fed from remains of consumption; only their production is not adapted to +uncivilized countries, because it is difficult to protect them there. In Texas, it +is said, it costs more to raise ten chickens than to bring up ten children. +(<hi rend='italic'>Kennedy</hi>, Czarnkowski's translation, 1846, 115.) The independent +breeding of fowl is advisable only where there are a great many rich consumers; for +the reason that they are naturally a delicacy. Enormous production of pigeons +in Cambridge, Huntington etc. (<hi rend='italic'>McCulloch</hi>, Statistical Account, I, +189.) In Paris the consumption of pork and fowl has gained somewhat since the Revolution. +(<hi rend='italic'>M'Chevalier</hi>, Cours. I, 113.)</note><note place='foot'><p>According +to <hi rend='italic'>Schuckburg</hi>, Philosophical Transactions of 1798, and +<hi rend='italic'>Kraus</hi>, Vermischte Schriften, I, tab. I, the prices of the following +species of animals rose in England between 1550 and 1795: horses, 904 per cent.; oxen, +896 per cent.; sheep, 876 per cent.; cows, 2050 per cent.; hogs, 1964 per cent.; +geese, 300 per cent.; butter rose from 5d. per pound to 11-½d.; beer from 1d. +per gallon to 2-¾d.; agricultural day wages from ½s. to 1s. 5-¼d.; wheat 326 +per cent. Compare, however, Edinburg Review, III, 246 ff. In Germany +also, cows and hogs have increased much more in price than horses and +sheep. (Tübinger Ztschr., 1871, 342.) <hi rend='italic'>Dutot</hi>, Réflexions, 946 ff., +éd. Daire, says that the value of the precious metals in France decreased in value between +the times of Louis XII. and Louis XV. in the ratio of 3-79/91:1. On +the other hand, the prices of different commodities rise in very different degrees: +</p> +<p> +Fat sheep, from 7 sous to 10 livres.<lb/> +Lean sheep, from 5 sous to 5 livres 10 sous.<lb/> +Hogs, from 10 sous to 25-35 livres.<lb/> +Capons, from 1 sou to 12 sous.<lb/> +Hens, from 1-½ sous to 6 sous.<lb/> +Pigeons, from 1-½ sous to 3 sous.<lb/> +Deer, from 1-½ sous to 15 sous. +</p></note> (See Roscher, Nationalökonomik +des Ackerbaues, §§ 177 ff.) +</p> + +</div> + +<pb n='400'/><anchor id='Pg400'/> + +<div> +<index index='toc' level1='Section CXXXIII. History Of The Prices Of The Chief Wants Of +Life. (Continued.)'/> +<index index='pdf' level1='Section CXXXIII.'/> +<head type='sub'>Section CXXXIII.</head> +<head>History Of The Prices Of The Chief Wants Of Life. (Continued.)</head> + +<p> +C. Those raw materials which, from the very first, have +been obtained by the means of production properly so called, +maintain a much greater uniformity in price. In the lower +stages of civilization, they are never found permanently in +excess; and as the economy of a people advances, the growing +dearth of natural forces may be more or less counterbalanced +<pb n='401'/><anchor id='Pg401'/> +by the greater cheapness of capital and labor. This +is true, especially of wheat. (See § <ref target="Section_129">129</ref>, +and Roscher, Nationalökonomik des Ackerbaues, p. 43.)<note place='foot'><p>Thus, +in Thuringia, the average price in silver of corn from the sixteenth +century until the period 1848-61 increased in the ratio of from 1 to 3-4; the +price of the different kinds of animals, on the other hand, from 1 to 5-10. +(<hi rend='italic'>Knies</hi>, in <hi rend='italic'>Hildebrand's</hi> Jahrbb., 1863, +78.) The price of the different kinds of corn as compared +with one another may, however, be modified by many +different circumstances. Thus the Capitulare Saxoniæ of 797, c., II, estimated +the prices of rye, barley and oats to be to one another as 30:30:15; +while the Magdeburg Chamber of 1804 estimated them to be as 17:14:8. +In the kingdom of Saxony, in 1841-9, the average prices of wheat, rye, +barley and oats stood to one another in the ratio of 144:100:75:47 +(<hi rend='italic'>Engel</hi>); while, in the middle ages, wheat, rye and +oats were as 9:6:3 (<hi rend='italic'>Gersdorf</hi>, +Cod. Depl. Sax., II, p. XXXIV); under Prince August, corn, barley and oats +were as 24:22:12. Assuming the price of rye to be equal to 100, the cost +was: +</p> +<p> +At Brussels, in the 16th century, wheat 126.7, barley 80, oats 50<lb/> +At Brussels, in the 17th century, wheat 138.8, barley 82.9, oats 51.9<lb/> +At Brussels, in the 18th century, wheat 147, barley 86.7, oats 55.2<lb/> +At Brussels, 1815-1844, wheat 156<lb/> +At Brussels, 1841-1850, wheat 153, barley 82.7, oats 51<lb/> +At Berlin, 1789-1818, wheat 135, barley 74.8, oats 54<lb/> +At Berlin, 1819-1832, wheat 143.5, barley 74.9, oats 52 +</p> +<p> +(<hi rend='italic'>Rau</hi>, Lehrbuch, I, § 183.) To understand this, it is necessary to +bear in mind the relatively great increase of wheat bread, beer made of barley, and +horses, as objects of luxury. The unusually low price of oats in North +America, as compared with the price of wheat, is dependent on the facility +of exporting the latter. In Florence, in the fifteenth century, the price of +wheat was 22-⅔, of rye, 12, of barley, 8 <hi rend='italic'>soldi</hi>. +(<hi rend='italic'>Pagnini</hi>, Sopra il giusto +Pregio delle Cose, 325.)</p></note> +</p> + +<p> +D. In the case also of those raw materials which are objects +of occupation, and never of real production, as, for instance, +minerals, a progressive public economy, by altering the different +elements of price in an opposite direction, may leave their +price on the whole unchanged. Here, indeed, the discovery +of new and especially of rich natural stores may exert an incalculable +influence; but such <q>accidents</q> underlie the laws of +human development only to the extent that those ages which +are intellectually most active are those also which are most industrious +and fortunate in the discovery of their natural resources.<note place='foot'><p>The +English so called custom-house prices (<foreign lang='de' +rend='font-style: italic'>Zollhauspreise</foreign>) correspond to +the market prices of 1696. If these are assumed = 100, the price +</p> +<p> +Of steel and iron was, in 1826, 83, in 1831, 56<lb/> +Of coal was, in 1826, 47, in 1831, 45 +</p> +<p> +Between 1835 and 1850, Scotch iron had already become cheaper by one-half +(<hi rend='italic'>Meidinger</hi>, 387), and coal in London by one-third +(<hi rend='italic'>Porter</hi>).</p></note> +</p> + +</div> + +<pb n='402'/><anchor id='Pg402'/> + +<div> +<index index='toc' level1='Section CXXXIV. History Of The Prices Of The Chief Wants Of +Life. (Continued.)'/> +<index index='pdf' level1='Section CXXXIV.'/> +<head type='sub'>Section CXXXIV.</head> +<head>History Of The Prices Of The Chief Wants Of Life. (Continued.)</head> + +<p> +E. The products of industry become cheaper and cheaper +as economic culture advances; whereas, for instance, in England, +towards the end of the middle ages, a single shirt was +considered of importance enough to be made not unfrequently +an object of testamentary bequest.<note place='foot'><hi rend='italic'>Rogers</hi>, +History of Agriculture, I, 67.</note> And, indeed, the price of +industrial products sinks lower the more important the part +played in their production by capital and the division of labor +is as compared with the part played by the raw material.<note place='foot'>In +England, in 1172, an ox cost 2 shillings; in 1175, green cloth cost per +ell, 2-10/12 shillings; red cloth, 5-½ shillings. (<hi rend='italic'>Eden.</hi>) In the +western states of North America, the farmer gives two pounds of coarse wool for one pound +of woolen yarn; he sends 4 bushels of wheat to the miller for the flour of +three bushels (Ausland, 1843, No. 68), while in Ravenna, in the thirteenth +century, the miller's fee was 1/10 (<hi rend='italic'>von Raumer</hi>, Hohenstaufen II, +437); according to the fixed prices in <hi rend='italic'>Fantazzi</hi>, (Monumen. +Ravennet.); in Germany, during the last centuries of the middle ages, 1/8 +(<hi rend='italic'>J. Grimm</hi>, Weisthümer, III, 8); at the end of the sixteenth +century from 1/8 to 1/5 (<hi rend='italic'>Coler</hi>, Oeconomia, II, 3); in +modern Germany, generally 1/16 of the raw material, and in the steppes of +southern Russia, when the wind is still, in summer, even the half. (Mitth. +der freien ökonom. Gesellsch. zu Petersburg, 1853, 85.) In Guiana, in 1806, +a very ordinary saddle and bridle could not be had under 10-½ guineas. +(<hi rend='italic'>Pinckard</hi>, Notes on the West Indies, III, 1806.) +<hi rend='italic'>Count Görtz</hi> was obliged to pay 2 dollars, in Demarara, for the +cleansing of a rifle, and another person for the oiling of a carriage, 5 dollars. +(Reise um die Welt, 1864, 327.) A lady's dress in Mobile costs four times +as much as in London or Paris. (<hi rend='italic'>Ch. Lyell</hi>, Second Visit +to the United States, II, 70.) In Athens, articles of clothing, +even for the poorer classes, were never as cheap as they are in civilized +countries to-day. (Compare <hi rend='italic'>Plutarch</hi>, De Tranquill. Anim., +10.)</note> +<pb n='403'/><anchor id='Pg403'/> +On this account, in recent times, fine cloths have grown, relatively +speaking, much cheaper than coarse ones.<note place='foot'>In Upper +Italy, between 1261 and 1400, a lady's chemise and the making +of it cost 14.77 lire; Rheims linen, 7.04; ordinary mourning cloth, O.45; black +cloth from Moriana, 2.83; cloth from Mecheln, 43.83; from Ypres, 47.04; +scarlet cloth, 80.44 per ell. (<hi rend='italic'>Cibrario</hi>, 1. 1.) On the +other hand, to-day, in the Leipzig market, the difference in price of the dearest and of +the cheapest cloth will scarcely surpass the ratio 18:1. Even +<hi rend='italic'>Scaruffi</hi>, Sulle Moneta, 1679, 163, Cust, remarks that hemp-linen +and similar coarse articles had increased much more in price than brocades; but he +ascribes this circumstance to the disordered state of the coinage. It is much better +accounted for by <hi rend='italic'>Adam Smith</hi>, Wealth of Nations, I, 386, ed. +Basil.</note> Lead, which during the middle ages in England was much cheaper +than iron, because of the difficulty of mining the latter, has become +much dearer in our days.<note place='foot'>Before the plague in the fourteenth century, +the cwt. of lead was worth 10-½d.; of iron, 4s. 1d. (<hi rend='italic'>Rogers</hi>, I. +599.) On the other hand, between 1848 and 1856, the average January price of +bar-iron was £7, 11s.; of lead, over £20. (<hi rend='italic'>Newmarch.</hi>)</note> +Conversely, where raw +material plays the most important part in manufactures, the +price of the manufactured article may increase with an advance +in civilization. Hence, articles made of wood are procured +at the cheapest rates in mountainous countries, where +the division of labor is not carried very far, but where the +raw material is cheap.<note place='foot'><p>Thus, in England, the price: +</p> +<p> +Of glass was, in 1826, 387; in 1831, 369 per cent.<lb/> +Of leather was, in 1826, 285; in 1831, 123 per cent.<lb/> +Of silk goods was, in 1826, 158; in 1831, 249 per cent.<lb/> +</p> +<p> +of the price of the same articles in 1796. (<hi rend='italic'>Rau.</hi>) Of 29 chemical +products of the Parisian manufacture, the wages of labor is on an average only 7.4 +per cent. of the selling price; and, in some cases, only from 1 to 2 per cent. +(<hi rend='italic'>Chabrol</hi>, Richerches Statistiques sur la Ville de Paris, 1821; +<hi rend='italic'>Hermann</hi>, Staatsw. Untersuch., 137.) In Buschtiehrad, between 1670 +and 1870, barley rose from 1 to 4.8; hops to 6.52; fire wood to 6.14; the excise to 6.54; +but beer only to 2.81; although wages increased ten fold. (<hi rend='italic'>Inama +Sternegg</hi>, Gesch. der Preise im österreich. Ausstellungsbericht von 1873, +43.)</p></note> +</p> + +<pb n='404'/><anchor id='Pg404'/> + +<p> +F. But the price of commodities decreases, especially in the +higher stages of civilization, to the extent that it is dependent +on commerce.<note place='foot'>A silk cloak lined with fur cost in +the time of Charlemagne, 400 scheffels of rye, one not so lined 200. +(<hi rend='italic'>Hullmann</hi>, Finanzgeschichte, 212 ff.) In +Florence in the fifteenth century, one pound of sugar was equal in value to +15 pounds of mutton. (<hi rend='italic'>Pagnini</hi>, 326.) In Turin, in +the fourteenth century, 1 pound of pepper was equal in value to 28 pounds of +salt. (<hi rend='italic'>Cibrario</hi>, III, 359, 362.) As late as the middle +of the fifteenth century, the court of Duke William of Saxony paid for one +pound of sugar 1 thaler and 8 groschens, while ducal fees paid to servants and +workmen seldom exceeded 2 gr. Hence, even at a princely meal, often scarcely +½ a pound was consumed. (<hi rend='italic'>Büsching</hi>, Ritterzeit, I, 137 f.)</note> +Here capital and human labor almost exclusively +are effective, and the modern improvements of communication, +legal security and competition are especially striking.<note place='foot'>Charlemagne's +capitularies suppose a merchant's profits to be from 100 to +200 per cent. (a. 809, c. 34.) And even in our own day, merchants in the +markets of Cabul are frequently not satisfied with a profit of from 300 to 400 +per cent. (<hi rend='italic'>K. Ritter</hi>, Erdkunde, VII, 244), and the caravans +which leave Maroc for the Soudan are wont, in exchange for commodities amounting in +price to 1,000,000 piasters, to return with a supply of other commodities worth +10,000,000. (<hi rend='italic'>Stein-Wappäus</hi>, Handbuch, Africa, 33.) According +to <hi rend='italic'>Büsch</hi>, Geldumlauf, II, 10, the price of East Indian +products in Hamburg was some 70 per cent. higher than at home, while +<hi rend='italic'>Pliny</hi>, H. N. IV, 26, speaks of a price one hundred times +(?) as high; and its spices, at the time of Portuguese dominion, were sold at +a profit of at least 600 per cent., in Europe. (<hi rend='italic'>Crawfurd</hi>, +History, VII, 360; <hi rend='italic'>Ritter</hi>, Erdkunde, V, 872.)</note> +</p> + +<p> +G. Since personal services are, as a rule, performed and +received only by individuals, the principle in accordance with +which labor in general becomes cheaper in the higher stages +of civilization, does not apply to them to any great extent.<note place='foot'>When +Humboldt found a missionary near Cumana who paid 7 piasters +for a cow, and was obliged to pay 17 piasters for blood-letting, rather unskilfully +performed, he found an illustration of one of the peculiarities of colonial +life—to have all the wants of higher stages of civilization but not the +means of satisfying them. (Relation historique, I, 374.)</note> Yet +we may claim that advancing civilization has pretty universally +a twofold influence on the price paid for personal services. In +the first place, freedom of competition, with the more accurate +and equitable determination of price which it produces (in contradistinction +to servitude, privilege and custom) always tends +<pb n='405'/><anchor id='Pg405'/> +to obtain the upper hand; and further, by the growing combination +of labor and of use (§§ <ref target="Section_56">56</ref>, ff. 207), a better and better +and more clearly defined gradation between ordinary services and +those of a higher order is effected. When the latter cannot +be increased at pleasure, the price paid for them may, as the +wealth of consumers increases, become, from motives of vanity +or of custom (<foreign lang='de' rend='font-style: italic'>Gebrauchsgründen</foreign>), +almost unlimited. The dancing maid, to whom Herod (Mark, 6, 23) promised even +the half of his kingdom, is both in a politico-economical and +in a moral sense a warning example to over-refined nations.<note place='foot'>Enormous +payments made to distinguished virtuosi, actors, sophists and +hetares at the time in question, also to Appelles, Aristides etc., for works of +art. (<hi rend='italic'>Plin.</hi>, XXXIV, 19, 2, XXXV, 36, 19.) The actor Aesopus +(see § 233, note 6) had a fortune worth 20,000,000 sesterces, while Pompey, for instance, +had 70,000,000. Roscius received from the state for every day he played, +286 thalers, and earned 43,000 a year. (<hi rend='italic'>Mommsen</hi>, Römische +Geschichte, III, 483, 547.) Compare <hi rend='italic'>Cicero</hi>, pro Roscio Comœdo, +10, and <hi rend='italic'>Plin.</hi>, H. N. IX, 59, X, 72. The zither-player, +Amoebaeos, received one talent for each appearance. (<hi rend='italic'>Athen.</hi> +XIV, 623.) According to <hi rend='italic'>Pliny</hi>, H. N. XXIX, 5, the Roman +<hi rend='italic'>principes</hi> gave the most distinguished doctors yearly 250,000 +sesterces, and even more as an honorarium. At the end of the eighteenth century, the +greatest Parisian actors received from 4,000 to 5,000 francs per annum. Now +100,000 is considered a moderate income for one. (Journ. des Economistes, +May, 1854, 279.) It is said that Frederick Hase earned $30,000 in America +in ten weeks. (Leipz. Tagebb., 15 Jan., 1871.) <hi rend='italic'>Steuart</hi>, +Principles, II, ch. 30. <hi rend='italic'>Adam Smith</hi> frequently represents +it as a rule, that superfluous goods like gold and silver, are dearest among +the richest nations, necessary goods among the poorer, and +<hi rend='italic'>vice versa</hi>. But the supply has much more to do with +the permanent price of a commodity than the demand for it has. And the +principle above mentioned applies only in so far as the supply is here an unlimited +and there a limited one. Hence, the comparison of silver with painters' +and sculptors' works is not an apposite one—in the case of these there is a +natural monopoly, while the former, on account of its durability and capacity +for transportation, may, on the contrary, be increased almost at pleasure.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXXV. History Of The Values Of The Precious +Metals.—In Antiquity And In The Middle Ages.'/> +<index index='pdf' level1='Section CXXXV.'/> +<head type='sub'>Section CXXXV.</head> +<head>History Of The Values Of The Precious Metals.—In +Antiquity And In The Middle Ages.</head> + +<p> +It is impossible to write a real history of the values of the +precious metals in ancient and medieval times: the sources of +<pb n='406'/><anchor id='Pg406'/> +information are too few. But it does seem possible to suggest +some fragments and something of the development of that +history,<note place='foot'>Besides <hi rend='italic'>Böckh.</hi>, Staatshaushalt +der Athener, 1817, Book I, compare <hi rend='italic'>Arbuthnot</hi>, +Tables of ancient Coins, Weights and Measures, 2d ed., 1754, +<hi rend='italic'>Reitmeyer</hi>, Ueber den Bergbau der Alten, 1785, and +Michaelis, De Pretiis Rerum apud veteros Hebræos, in the Comment. Societ. +Gottingensis, vol. III. The principal sources of information among the +ancients are <hi rend='italic'>Diodor.</hi>, V; <hi rend='italic'>Strabo</hi>, +III, V; <hi rend='italic'>Plin.</hi>, H. N., XXXIII.</note> at least in outline. +</p> + +<p> +Thus, for instance, the supply of the precious metals furnished +by the mines, in the earlier times of ancient history, +was kept from entering the market by the system which then +prevailed everywhere, of hoarding treasure by the state, by +the temples etc., and later by great reserves of treasure kept by +individuals.<note place='foot'>The money revenue of the Persian king, to +the amount of 14,560 talents yearly, was transformed into bars and thus +deposited in the treasury. <hi rend='italic'>Herodot.</hi>, +III, 95 f. Even the little vassal prince Pythios of Celænæ had a treasure +of 2,000 talents of silver and 4,000,000 pieces of gold. (Ibid, VII, 26 f.) +On the money stores of private persons, see <hi rend='italic'>Plin.</hi>, H. +N., XXXIII, 47.</note> The revolutions in prices in ancient times were +produced as frequently by the sudden opening of such reservoirs, +as by the discovery of richer sources. Thus, for instance, +such events as the dissipation of Pericles' treasures, the +subsidies of the Persian kings, the spoliation of many temples +in consequence of declining religiousness, the distribution of +Persian treasures by Alexander the Great,<note place='foot'>An +ox was worth, in Solon's time, 5 drachmas; in 410 B.C., 51 dr.; 374 +B.C., 77¼ dr.; a medimnos of wheat in Solon's time, 1 dr., about 390, 3 dr., +under Alexander the Great, on an average, 5 dr. (<hi rend='italic'>Böckh.</hi>, +I, 102, f.) The usual amount of ransom paid for a prisoner of war, in Kleomenes' time, +was 2 minæ (<hi rend='italic'>Herodot.</hi>, V, 77, VI, 79); under Dionys., I, +300 m. (<hi rend='italic'>Aristot.</hi>, Oeconom, II, 21); under Philip of Macedon, +from 300 to 400 m. (<hi rend='italic'>Demosth.</hi>, De fals. Legat., 394); under +Demetrios Poliorketes, 1,000 for a free man, 5 for a slave. +(<hi rend='italic'>Diod.</hi>, XX, 84.)</note> had a vast influence +on the undeniable rise in the price of Greek commodities +in the century succeeding the Peleponnesian war.<note place='foot'>This +booty for Susa alone amounted to from 40,000 to 50,000 talents; for +Persepolis, to 120,000; for Pasargadæ, to 600. <hi rend='italic'>Curtius</hi>, +V, 2, 6; <hi rend='italic'>Strabo</hi>, XV, 731; <hi rend='italic'>Justin</hi>, +XI, 14; <hi rend='italic'>Arrian</hi>, III, 16; <hi rend='italic'>Diod.</hi>, +XVII, 66, 71; <hi rend='italic'>Plutarch</hi>, Alex., 36.</note> Later, +it is said that in Rome, the price of pieces of land was doubled +<pb n='407'/><anchor id='Pg407'/> +by the influx of Egyptian war-booty.<note place='foot'><hi rend='italic'>Oros.</hi>, +VI, 19; <hi rend='italic'>Dio, C.</hi>, LI, 21; <hi rend='italic'>Suet.</hi>, +Aug., 41. Decline of the value of +money under Constantine the Great, when the precious objects of the heathen +temples were coined. (Monitio ad Theod., Aug. de inbidenda Largitate, +<hi rend='italic'>Thes.</hi>, Antt. Renn., XI, 1415; <hi rend='italic'>Taylor</hi>, +ad Warm. Sandvic, 38.)</note> It is a remarkable +proof of the undeveloped condition of trade in the earlier periods +of ancient history, that the perturbations in prices were, +apparently, at least, so entirely local. Phœnicia, Palestine +etc., must have experienced, in the age of Solomon, a formal +deluge of the precious metals, while Greece, for instance, was +then, and for centuries after, extremely poor in them.<note place='foot'>Compare +I Kings, 10, 14, 27 ff.; I Chron., 22, 2 ff.; II Chron., 9, 15 f., +12, 10 ff. On Ophir: <hi rend='italic'>K. Ritter</hi>, Erdkunde, XIV, +407 f.; on the wonders of the discovery of Spain: <hi rend='italic'>Herodot.</hi>, +IV, 152. <hi rend='italic'>Aristot.</hi>, De Mirab., 146; Diodor, +V, 35 ff. On the other hand, of Greece, <hi rend='italic'>Athen.</hi> VI, 19 +ff.</note> It is not, on the whole, to be doubted, that the value in exchange +of the precious metals was on a continual decline until the +most flourishing time of the Roman emperors.<note place='foot'>Compare +<hi rend='italic'>Plin.</hi>, H. N., XIV, 1. Yet the value of money in the time of +the Cæsars seems to have stood much higher than it is now, as is proved, for +instance, by the endowments by Trajan (16 sesterces per month for boys, +and 12 sesterces per month for girls), as the <hi rend='italic'>alimenta</hi> +furnished them according to Digest XXXIV, 1, embraced their entire support. +Compare the excellent essay on this subject by <hi rend='italic'>Rodbertus</hi>, +in <hi rend='italic'>Hildebrand's</hi> Jahrbb., 1870, I.</note> During the +middle ages, it seems to have stood much higher again; because +the great loss of treasure caused by the migration of +nations etc., the almost complete cessation of production at the +mines, and the slowness of the circulation of money, played +a much more important part than the decrease of trade.<note place='foot'>The +conquest of the Avares seems to have temporarily produced a considerable +cheapness of the precious metals. (<hi rend='italic'>Guérard</hi>, Polyptiques, +I, 141.) Increase of the value of money in Scandinavia, during the later part of the +middle ages. (<hi rend='italic'>Wilda</hi>, Gesch. des deutschen Strafrechts, I, 323 +ff.)</note><note place='foot'>In England, from 1279 to 1509, there were coined on an +average only 6,868½ pounds sterling; from 1603 to 1830, on the other hand, 819,415 pounds +sterling. The average in the time of George IV., per annum, was 4,262,652 +(<hi rend='italic'>Jacob</hi>, ch. IV.) An evidence of the uncertainty of the history +of prices in the middle ages is, that <hi rend='italic'>Jacob</hi>, ch. 12, +infers, from the price of corn, that the price of silver remained rather stationary +from 1120 to 1550, while <hi rend='italic'>Adam Smith</hi>, I, ch. 11, 3, infers from +the same fact, a remarkable rise in the price of silver from 1350 to 1570. +Concerning the latter, see <hi rend='italic'>Leber</hi>, Fortune +privée au moyen Age, 16 f. <hi rend='italic'>Tooke-Newmarch</hi>, History of Prices, +VI, 391; whereas <hi rend='italic'>Rogers</hi>, Statist. Journ., 1861, 544 ff., finds +that in England, between 1300 and 1532, there was no change whatever in the price +of silver. According to <hi rend='italic'>Soetbeer</hi>, Forschungen zur deutschen +Geschichte, VI, 94, wheat and rye were, as compared with silver, worth during the +Carolingian period, about one-fourth of its value, between 1750 and 1850. +<hi rend='italic'>Hegel</hi>, Shassburger Chroniken, II, 1012, ascribes to gold over +2½ times as great a purchasing power in the 13th and 14th centuries as in the 19th +century; and to silver, a purchasing power about three times as great.</note> +</p> + +</div> + +<pb n='408'/><anchor id='Pg408'/> + +<div> +<index index='toc' level1='Section CXXXVI. Effect On The Discovery Of American Mines Etc. +On The Value Of The Precious Metals.'/> +<index index='pdf' level1='Section CXXXVI.'/> +<head type='sub'>Section CXXXVI.</head> +<head>Effect On The Discovery Of American Mines Etc. +On The Value Of The Precious Metals.</head> + +<p> +The discovery of America influenced the market of the +precious metals less by the peculiar wealth of the mines in that +part of the world than by their almost incredible number.<note place='foot'>The +silver ores of Peru and Mexico yield, on an average, only from 2 to +3 per 1,000 of metal; those of Potosi, at present, scarcely 1 per 1,000; those +of Mexico, according to <hi rend='italic'>Humboldt</hi>, on an average, from 3 to 4 +ounces per cwt.; so that many of the European ores are decidedly richer. While the +veins of the Saxon mine, Himmelsfürst, have a breadth of only from 0.2 to +0.3 meters; the Veta-Madre of Guanaxuato, is in few parts less than 8, and +it is sometimes even 50 meters broad; and the Veta-Grade of Zacatecas is +from 5 to 10 meters in breadth. In Pasco there are veins of silver ore which +have 114 and even 123 meters. <hi rend='italic'>Tschudi</hi>, Reise in Peru, K., 12; +<hi rend='italic'>Chevalier</hi>, Cours, III, 184 ff., 241 ff. According to +<hi rend='italic'>Humboldt</hi>, Essai sur la Nouvelle Espagne, III, p. 413, eleven +times as many miners are needed at Himmelsfürst +as at Valenciana to obtain the same quantity of silver.</note> +The sources of wealth that the conquistadores first lighted +upon were, however, much over-estimated.<note place='foot'>Thus, for instance, the +celebrated ransom-money of Athahualpa (even according to <hi rend='italic'>Garcilaso +de la Vega</hi>) amounted to only 5,000,000 thalers, while the French King John, after +the battle of Poitiers, in 1356, had to pay 41,000,000 francs for his ransom. +(<hi rend='italic'>Leber</hi>, Fortune privée au moyen Age, 121 ff.)</note> +The production of the American mines first assumed great importance after +the discovery of Potosi, in 1545, which was soon followed by +the working of the American mines at Guanaxuato. (1558.) +<pb n='409'/><anchor id='Pg409'/> +Coincident with this was the extraordinary <q>chance</q> of +Medina's invention, in 1557; by means of which, it became +possible to separate silver from foreign elements by the cool +process of amalgamation, instead of melting it as had hitherto +been done; an invention all the more important in America, +for the reason that in that country, where there is so much +rich ore, there is scarcely any fuel, in the neighborhood<note place='foot'>Compare +<hi rend='italic'>M. Chevalier</hi>, III, 190 ff. Discovery of the quicksilver mines +of Guancavelica, 1567.</note> of +where it is found. During the first hundred years the mines +of Peru occupied the most prominent place; whereas they +were afterwards completely overshadowed by the Mexican.<note place='foot'>The yield +of Potosi amounted from 1545 to 1638, to 395,619,000 pesos. +(<hi rend='italic'>Ulloa</hi>, Viage, II, I, 13.) Up to the present time, +the aggregate yield there has been estimated at from 6,000 to 7,000 +million francs.</note> +According to Humboldt,<note place='foot'>On the worse grounded assumptions of +former writers, see <hi rend='italic'>Humboldt</hi>, +N. Espagne, IV, 237.</note> the annual export of gold and silver +from America to Europe, between 1492 and 1500, amounted +to 250,000 piasters; between 1500 and 1545, to 3,000,000;<note place='foot'>There +was really introduced into Spain, about 1525, not much over 2,000,000 +francs annually; and after 1550, six times as much. (<hi rend='italic'>L. +Ranke</hi>, Fürsten und Völker, I, 347 ff.) Compare <hi rend='italic'>Humboldt</hi>, +Ueber die Schwankungen der Goldproduction, in the Vierteljahrsschrift, 1838, IV, +18.</note> +from that time to 1600, to 11,000,000; in the seventeenth century, +to about 16,000,000; during the first half the eighteenth +century to 22,500,000; during the second half, to 35,300,000. +</p> + +<p> +The production of gold in Brazil began to be important +after the commencement of the eighteenth century,<note place='foot'>On the Brazilian +exports of gold in the 18th century, see <hi rend='italic'>Schäfer</hi>, Gesch. +von portugal, V, 192 ff.</note> and the +working of the Mexican silver mines of Valencia, Biscaina etc. +from the middle of the same century. In the beginning of the +nineteenth century, Mexico produced, annually, 537,512 kilogrammes +of silver, and 1,609 kilogrammes of gold; Peru, +140,078 and 782 of silver and gold respectively; Buenos +Ayres, 110,764 and 506; Chili, 6,827 and 2,807; New Granada, +4,714 kilogrammes of gold; Brazil, 3,700 kilogrammes of +<pb n='410'/><anchor id='Pg410'/> +gold; the whole of America together, 795,581 kilogrammes of +silver and 14,018 kilogrammes of gold, worth about 60,750,000 +thalers.<note place='foot'>According to <hi rend='italic'>Humboldt</hi>, N.E., IV, +218, the amount up to the beginning of this century was 17,000 kilogrammes of gold +and 800,000 kilogrammes of silver.</note> During the uprisings between 1810 and 1825, +which separated Spanish America from the mother country, the +production of the mines diminished as surprisingly as it had +increased in the previous generation by reason of the greater +liberality of Spanish colonial policy.<note place='foot'>Thus, for instance, Mexico, +during this period yielded, on an average, 65,000,000 francs, instead of the former +amount of from 130,000,000 to 140,000,000. In Carro de Potosi, there were, in 1826, +of the former 132 pool-works only 12 in operation. Compare +<hi rend='italic'>Adams</hi>, The Actual State of the Mexican Mines, 1822. +<hi rend='italic'>Jacob</hi> assumes that about 1830, the quantity of money +in Europe and America was 1/6th less than in 1809. (Ch. 28.)</note> Since that time, +a certain increase has, indeed, been noticed, which, however, +had not immediately before the discovery of the gold mines of +California by any means attained the height reached in 1808, +but only an annual production of 701,570 kilogrammes of silver, +and of 15,215 kilogrammes of gold, with an aggregate +value of more than 56,000,000 thalers.<note place='foot'>Of this, 1,800 kilogrammes of +gold from the United States.</note> +</p> + +<p> +In Europe, also, the obtaining of the precious metals during +the fifteenth and sixteenth centuries took a great stride, +especially in Germany;<note place='foot'><hi rend='italic'>Fischer</hi>, Geschichte +des deutschen Handels, 2d ed., II, 616 ff., 673 ff. But +the Schwaz mines, in the Tyrol, are said to have produced, until 1523, +55,000 marks annually; the Freiberg silver mine, from 1542 to 1616, 16,000 +marks annually. Compare <hi rend='italic'>von Langen</hi>, Kurfürst Moritz, II, +56.</note> but, on the other hand, the Spanish +gold and silver mines were closed in 1535 by a law. In the +seventeenth century, there was another lull, followed, at the +end of the eighteenth, by a second period of activity which has +not yet closed. The great development of the production of +gold in the Ural mines since 1819, and in the Altai mines since +1829,<note place='foot'>The Russian gold ores, quite insignificant before the year +1814, have made very great progress since 1840. Their aggregate yield, between 1814 +and 1861, not taking into account the amount embezzled, amounted to 37,000 +<hi rend='italic'>puds</hi>, the <hi rend='italic'>pud</hi> being equal to 16.3 +kilogrammes. The best year, 1847, gave a yield of 1,757 <hi rend='italic'>puds</hi>; +1852-1861, an average of 1,556 <hi rend='italic'>puds</hi>; 1861 alone, 1,442 +<hi rend='italic'>puds</hi>, of which 1,041 came from the private Siberian gold-sand +washings. (<hi rend='italic'>Walcker</hi>, in Faucher's Vierleljahrsschrift, 1869, +II, 115.)</note> the revival of the production of silver in the old Spanish +<pb n='411'/><anchor id='Pg411'/> +mines since 1835,<note place='foot'>Spanish silver production yielded, in 1845, over +184,000 marks; in 1850, over 291,000. (<hi rend='italic'>Willkomm</hi>, Halbinsel +der Pyranäen, 1855, 537.)</note> and Pattinson's discovery, by means of +which the poorest lead ores containing silver may be refined, +are here of great importance.<note place='foot'>Annales des Mines, X, 831 +ff.</note> Shortly before 1848, it was +estimated that all the mines of the old world produced annually +about 274,000 kilogrammes of silver, and 56,000 kilogrammes +of gold, with an aggregate value of over 69,000,000 +thalers.<note place='foot'>Of this amount, there came to Europe, not including Russia, +150,000 kilogrammes of silver, 2,650 kilogrammes of gold; to Russia, 24,000 kilogrammes +of silver and 30,000 kilogrammes of gold (embracing the quantities +probably withdrawn without the knowledge of the custom's authorities); to +the rest of Asia, 100,000 kil. of gold; to Africa, 4,000. (<hi rend='italic'>M. +Chevalier.</hi>)</note><note place='foot'>According to +<hi rend='italic'>Humboldt's</hi> assumption before the time of Columbus, Europe +had a circulation of 170,000,000 piasters; about 1600, of 600,000,000; +about 1700, of 1,400,000,000; in 1809, of about 1,824,000,000. Up to 1803, +there was produced in America, 9,915,000 marks (Spanish) of gold, and +512,700,000 of silver. (N.E., 245.) <hi rend='italic'>Gallatin</hi> estimates that, +before Columbus, there were 1,600,000,000 francs; in 1830, in Europe and America, +from 22,000,000,000 to 27,000,000,000 francs. (Considerations on the Currency and +Banking System of the United States, 1831.) According to <hi rend='italic'>M. +Chevalier</hi>, 1850, all the silver which America produced had a volume of only 11,657 +cubic meters; and all the gold of only 151 cubic meters. The latter, therefore, +would not even fill the half of a French gentleman's <hi rend='italic'>salon</hi>.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXXVII. Revolution In Prices At The Beginning Of +Modern History.'/> +<index index='pdf' level1='Section CXXXVII.'/> +<anchor id="Section_137"/> +<head type='sub'>Section CXXXVII.</head> +<head>Revolution In Prices At The Beginning Of Modern History.</head> + +<p> +The mere discovery of new and richer mines need not, of +itself, lower the price of the precious metals. Their price depends +on their cost of production; and it may be very much +increased, even under the most favorable natural conditions, +by the unskillfulness of labor, the dearness of the means of +<pb n='412'/><anchor id='Pg412'/> +subsistence, of machinery and of auxiliary substances, by insecurity +to property or to the person; by war, oppressive taxes<note place='foot'>All the more +in favor with governments because they affect principally +foreign consumers. Thus, the Spanish government at first imposed a tax of +50 per cent. of the gross yield of the raw material, on the purchaser of silver; +since 1503, under Orando, of 33-⅓ per cent.; and later yet, of 20 per +cent. This last tax was therefore in full force under Cortes. This tax was +reduced in Mexico, in 1725, and in Peru in 1736, to 10 per cent., and later, in +the case of gold, to 3 per cent. Heavy taxation of Russian gold ore (35 per +cent. of the raw material), by virtue of the ukase of April 14, 1849. Compare +<hi rend='italic'>M. Chevalier</hi>, III, 274.</note> +etc. The new mines can produce a decline in the price of the +precious metals only to the extent that, for the same amount +of capital and labor expended, they, spite of all such deductions, +produce a greater result.<note place='foot'><hi rend='italic'>Cantillon</hi>, Nature +du Commerce, 215, 236, shows very clearly how the increase +of the price of commodities was produced, in the first instance, by the +increased consumption of the possessors of gold, and how it, therefore, first +affected those commodities which they especially desired.</note> +</p> + +<p> +I opine that the price of metallic money, since the discovery +of America, has diminished until the present time in the ratio +of from three to four to one.<note place='foot'>This is the opinion of +<hi rend='italic'>Adam Smith</hi>. Similarly of <hi rend='italic'>David Hume</hi>, On +Money. According to <hi rend='italic'>Letronne</hi>, Considérations sur l'Evaluation +des Monnaies Grecques et romaines, 119, and <hi rend='italic'>Böckh</hi>, +Staatshaushalt, I, 88, the average value of wheat in relation to silver was, in +Athens, 400 B.C., as 1:3146; in Rome, 50 B.C., as 1:2681; in France, shortly before +1520 after Christ, as 1:4320; in the nineteenth century it is as 1:1050. +<hi rend='italic'>Th. Smith</hi>, De Republ. Anglorum, I, assumes that the price of +silver, from the age of chivalry to 1625, decreased in the ratio of 120:40. The +Spaniard, <hi rend='italic'>Moncado</hi> (1619), says as 6:1. +(<hi rend='italic'>Jacob</hi>, ch. 19.) <hi rend='italic'>Jacob</hi>, himself, in +comparison with his own time, as 7:1 (ch. 15.) Much more moderate is +<hi rend='italic'>Newmarch</hi> in <hi rend='italic'>Tooke's</hi> History of Prices, VI, +345 ff., who assumes an increase in the prices of commodities of about 200 per cent. +The estimated value of tithe-wine (<foreign lang='de' +rend='font-style: italic'>Zehntwein</foreign>) about doubled in lower Austria, +during the sixteenth century. (<hi rend='italic'>Oberleitner</hi>, Finanzlage N. +Oesterreichs im 16 Jahrhundert, 36.) According to the important researches of +<hi rend='italic'>Mantellier</hi>, Mémoires de la Société Archéologique de l'Orleanais, +vol. 1, 103 ff.; extract of <hi rend='italic'>Lespeyres</hi> in +<hi rend='italic'>Hildebrand's</hi> Jahrb., 1865, I, 1, the purchasing power of silver +as compared with the average value of twenty-seven commodities, assuming it +to have been 1 from 1750 to 1850, was, from 1350 to 1450, 2.9; from 1450 to +1550, 2.8; from 1550 to 1650, 1.5; from 1650 to 1750, 2.1. According to +<hi rend='italic'>Rogers</hi>, the prices of corn in relation to silver were from 1596 +to 1636, at most 2.3 times as high as from 1260 to 1400; from 1637 to 1700, 2.6 times; +from 1701 to 1764, 2.1 times; from 1726 to 1820, 3.2 times. +(<hi rend='italic'>Rogers</hi>, I, 180.)</note> The prices of wheat in France, +<pb n='413'/><anchor id='Pg413'/> +from 1800 to 1850, were about seven times as great as in the +second half of the fifteenth century; and in England about six +times as great. But, it is not to be overlooked here, how +wheat may have grown dearer in itself (<foreign lang='de' rend='font-style: italic'>an +sich</foreign>) and how gold +declined considerably less than silver. True, this decline of +the precious metals was not an entirely steady one. We meet +at the beginning of the modern era with a real revolution in +prices. The prices of rye, in lower Saxony, from 1525 to +1550, were twice as high as from 1475 to 1500. According +to Garnier, the French prices of wheat, from 1450 to 1500, +were, on an average, 408 francs of the present time per <hi rend='italic'>setier</hi>; +from 1501 to 1520, 5 francs; from 1522 to 1540, 11.26 francs; +from 1541 to 1560, 11.69 francs; from 1561 to 1580, 21.33 +francs; from 1581 to 1600, 32.51 francs; during the first half +of the seventeenth century, 22.77 francs; in the second half, +26.83 francs; from 1701 to 1750, 19.64 francs. Similarly in +England, where wheat cost, from 1560 to 1600, 2.64 times as +much as from 1450 to 1500.<note place='foot'>In Germany, the rise in prices was first +observed in the price of foreign groceries, which partly rose 400 per cent. Popular +opinion looked for the cause in the evil disposition of the large commercial houses. +In order to facilitate the competition of the smaller houses with the larger, the +Reichstag, in 1522, prohibited all companies with a capital of more than 50,000 florins; +and, in 1524, the royal treasury wished to bring suit against the violators of +this law. But the cities contrived to avert the blow. (<hi rend='italic'>L. Ranke</hi>, +Geschichte der Reformation, II, 42 ff., 134 ff.) In Spain, the government, especially +between 1550 and 1560, endeavored to oppose the growing dearness of goods +of all kinds, by prohibiting the exportation of the most important commodities, +and by putting obstacles in the way of retail trade. The lower classes in England +ascribed the rise to the suppression of the monasteries (<hi rend='italic'>Percy</hi>, +Reliques of ancient Poetry, II, 296), while Henry VIII. endeavored to improve +the condition of things by laws against luxury, the governmental +establishment of fixed prices, the expulsion of foreign merchants etc. (21 +Henry VIII.) The first writer who seems to have clearly seen the true cause of the +changes in price was <hi rend='italic'>Bodinus</hi>, Response aux Paradoxes de Mr. +de Malestroit touchant l'Enchérissement de toutes Choses et des Monnaies +(1568). This work was translated into Latin by <hi rend='italic'>H. Conring</hi>, 1671; +and done over in the work: Discours sur les Causes de l'extrême Cherté, qui est +aujourd'hui en France (1574). Next, we have the English author <hi rend='italic'>W. +S.</hi>, A Compendious or briefe Examination of certayne ordinary Complaints of divers +of our Countrymen of these our Days, London, 1581. In <hi rend='italic'>Befold's</hi> +Vitæ et Mortis Consideratio politica, 1623, 13 f., we have a right explanation +of the <hi rend='italic'>caritas sine inopia</hi> which is to be considered as the +common property of his time.</note> +</p> + + +<pb n='414'/><anchor id='Pg414'/> + +<p> +Now, the increased production of the mines cannot be the +only cause of this great perturbation in prices. It commenced, +in most countries, at a time when the supplies from America +were still too small to account for such an effect. One of the +chief causes of the phenomenon was, that precisely at this period, +there was in so many nations a transition from a sluggish +circulation of money, made still more sluggish by the custom +which everywhere prevailed of hoarding treasure, to a rapid +circulation, which was made still more rapid by the use of all kinds of substitutes for +money. (§ <ref target="Section_123">123</ref>).<note place='foot'>Similarly +<hi rend='italic'>Quesnay</hi>, 77, Daire. <hi rend='italic'>Sir J. Stewart</hi>, +Principes, ch. 3. <hi rend='italic'>Kraus</hi>, Vermischte Schriften, II, 131 ff. +<hi rend='italic'>Hermann</hi>, Staatsw. Unters., 127. +<hi rend='italic'>Helferich</hi>, Von den periodischen Schwankungen im Werth der +edlen Metalle, 1843, 70 f.</note> In the earliest ripe +fruit of European civilization (Italy), this transition had long +been accomplished; and, on that account, the value in exchange +of the precious metals was there, for a long time previous, +comparatively low.<note place='foot'>According to <hi rend='italic'>Cibrario</hi>, a +hectolitre of wheat was worth, in Turin, from 1289 to 1379, on an average, 905 gr. of +fine silver; that is, about three times as much as in Paris before the discovery of +America, and as much as in Paris from 1546 to 1556. In Turin, from 1825 to 1835, it was +worth about 1702 gr. In the fifteenth century even, the foreign embassadors complain of +the enormous cost of living there. So, for instance, <hi rend='italic'>Raumer's</hi> +histor. Taschenbuch, 1833, 162. Compare also, <hi rend='italic'>Carli</hi>, Del Valore +della Proporzione dei Metalli monetati con i Generi in Italia prima delle Scoperte dell' +Indie, 1760, in which he, indeed, exaggerates the matter, and seeks to prove his +views by the coarsest sophistry.</note> +</p> + +<p> +From the second third of the seventeenth century, the value +of the medium of circulation seems, on the whole, to have remained +stationary.<note place='foot'>The chief result of <hi rend='italic'>Helferich's</hi> +excellent researches. (<hi rend='italic'>Helferich</hi>, loc. cit.) The general +opinion, indeed, is that this <hi rend='italic'>statu quo</hi> of the value of the +precious metals was interrupted about the middle of the eighteenth century by +another decline, and that the latter yielded to a subsequent rise in 1815 and +afterwards. Thus <hi rend='italic'>David Hume</hi>, History of England, ch. 44, App. 31, +ch. 49, App. A. <hi rend='italic'>Young</hi>, Political Arithmetics, ch. 6. More +recently, <hi rend='italic'>Rau</hi>, Lehrbuch, I, § 176. <hi rend='italic'>M. +Chevalier</hi>, Cours, III, 320 ff. One of the principal advocates of the opinion that +every increase made in the medium of circulation produces a corresponding depreciation +is <hi rend='italic'>Nebenius</hi>, Deutsche Vierteljahrsschrift (1841). In England a +quarter of wheat was worth, on an average, 38s. 8/9d., from 1595 to 1685. On a similar +stability of corn prices in Belgium, see <hi rend='italic'>Schwerz</hi>, Belgische +Landwirthschaft, III, 37. According to Suckburg (l.c.), the value in exchange of money +from 1640 to 1700 declined 32-2/9 per cent.; from 1700 to 1760, 43 per cent.; from 1760 +to 1806, 84 per cent.</note> Tooke seeks to demonstrate the steady +<pb n='415'/><anchor id='Pg415'/> +decline of the value of money until late in the eighteenth century, +from the fact that the wages of labor increased during +that time; but I should rather connect the latter phenomenon +with the simultaneous elevation of the classes engaged in +manual labor. And so Adam Smith infers a rise in the price +of money after the beginning of the eighteenth century, from +the prices of wheat;<note place='foot'>From 1637 to 1700 the price of corn in England +averaged 51 shillings; from 1701 to 1764 only 40½ shillings.</note> +but it would be better to consider the +cause of this to be the unusually long series of good crops.<note place='foot'>Thus, +the dearness of wheat in Germany, during the first thirty years +after the Thirty Years' War was caused, in large part, by the depopulation +produced by the War.</note> +An equally unusually long series of bad harvests, during the +second half of the century, accounts satisfactorily for the simultaneous +rise of the medium prices of corn. The great war +which lasted from 1793 to 1815, too, according to a very +prevalent opinion, must have caused the value of money to +decline; a fact which is generally accredited to the increase +of paper money in so many states. +</p> + +<p> +Every great war may very easily have for effect to slacken +the speed of the circulation of money, to promote the hoarding +and even the burial of treasure for a rainy day, and to paralyze +credit and its power to supply the place of money. +Hence, it seems preferable to seek for the cause of the variations +in price, during the great war, in the commodities themselves +whose price was affected; since their production must +<pb n='416'/><anchor id='Pg416'/> +have been enormously disturbed. It rendered the brawniest +men and the most powerful horses unproductive, and even +employed them as agents of destruction. It interrupted trade +in a thousand ways, or drove it into unnatural channels, and +turned the intellectual interests of nations into every direction +save that of economic industry. To this must be added the +absence of security everywhere.<note place='foot'>In Germany, also, the cause of the +enhanced dearness of so many goods during the Thirty Years' War is to be sought for +in the goods themselves.</note> +</p> + +<p> +The cessation of these restrictions upon production, in consequence +of the restoration of peace throughout the world and +the great progress afterwards made in almost all branches of +industry, explain why, from 1818 to 1848, the precious metals +have apparently stood higher than during the period immediately +preceding.<note place='foot'>Since 1815, most Birmingham and Sheffield wares have +fallen from 50 to 70 or 80 per cent. in price—at least from 20 to 30. +(<hi rend='italic'>McCulloch</hi>, Statist. Account, I, 705.) The Quarterly Review, +May, 1830, speaks even of an average decline of prices of English commodities in +general, of 50 per cent.</note><note place='foot'>Excellently carried out in +<hi rend='italic'>Tooke</hi>, History of Prices, III, 1838. That the world's market is +not so very readily affected by an increase of the medium of circulation, is +established by this fact, among others, that the immense exportation of French +metallic money in consequence of the issue of paper money between 1716 and 1720, and +again in 1790 and the following years, is coincident with very low prices of wheat in +the neighboring countries. (<hi rend='italic'>Helferich</hi>, loc. cit., 139, 190 ff.) +And yet, in the former case, the amount was 400,000,000 francs, and in the latter, at +least 1,000,000.</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXXVIII. Revolution In Prices.—Influence Of +The Non-Monetary Use Of Gold And Silver.'/> +<index index='pdf' level1='Section CXXXVIII.'/> +<head type='sub'>Section CXXXVIII.</head> +<head>Revolution In Prices.—Influence Of The Non-Monetary +Use Of Gold And Silver.</head> + +<p> +To understand why so great an increase in the production +of the precious metals produced so small a decline of their +value in exchange, we must turn our attention to the other +and further uses of gold and silver. The amount devoted to +these uses can never be very accurately determined, since +<pb n='417'/><anchor id='Pg417'/> +governmental stamping of every new gold or silver article +would afford no evidence as to the number of such articles +manufactured out of old articles etc.<note place='foot'><hi rend='italic'>Jacob</hi> +estimates this part at only 2-½ per cent., <hi rend='italic'>McCulloch</hi>, at 20, +<hi rend='italic'>Lowe</hi> at 25, <hi rend='italic'>Necker</hi> and +<hi rend='italic'>Helferich</hi> at 50, <hi rend='italic'>Humboldt</hi> at 66-⅔ of the +whole quantity worked. It certainly is, in our day, on account of the ever growing +aggregate supply, greater than hitherto; but it is very different in different countries. +<hi rend='italic'>Nebenius</hi>, Deutsche Vierteljahrsschrift, 1851, 56 seq., estimates +the aggregate consumption of new gold and silver for industrial purposes at 14-½ +piasters yearly, and in addition to this seven millions of old gold and silver +(<hi rend='italic'>Bruchgold und Bruchsilber</hi>). The annual wear and tear of +previously existing articles of gold and silver, it is estimated, amounts to 4,420,000 +piasters (1/420); the annual increase of their aggregate amounts in Europe to 6,000,000 +piasters (1-½ per cent., corresponding to the increase of population), and 4,200,000 +(one-fifth of the entire consumption), is employed, as he claims, in +gilding, plating etc. The last item is probably much increased by galvanic +silver-plating, the invention of photography etc.</note> Certain it is, however, +that the aggregate amount of gold and silver thus employed, +increases with the increase of luxury and wealth among modern +nations, and that a quantity of the precious metals thus +used, especially when used for purposes of gilding for instance, +is irrestorably lost.<note place='foot'><hi rend='italic'>Jacob</hi> embraces in the +amount of metal employed in industrial purposes, in the sixteenth and seventeenth +centuries, 1/5 of the amount which, after deducting the loss in Asiastic trade, was +added to the gold and silver stores of Europe; i.e., in the seventeenth century, about +2,500,000 piasters yearly; in the eighteenth century, ⅔ (!); that is, annually, +15,000,000 piasters; in 1830, in England, £2,457,221; in France, 120,000; Switzerland, +350,000; in the rest of Europe, 1,605,490; in North America, about 300,000; altogether, +£5,900,000. <hi rend='italic'>Humboldt's</hi> estimate is 21,000,000 piasters; +<hi rend='italic'>McCulloch's</hi>, £6,050,000. According to the records of the Paris +<hi rend='italic'>Monnaie</hi>, the amount of silver ware in France increased seven fold +between 1709 and 1759. (<hi rend='italic'>Humboldt</hi>.) In England, between +1807 and 1814, 8,290,000 ounces of silver were stamped for manufacturing +purposes, from 1830 to 1837, only 7,387,000; in 1851, 924,000. +<hi rend='italic'>McCulloch</hi> estimates the annual consumption of silver, in +Birmingham alone, for plating purposes, at 150,000 ounces; in Sheffield, at 500,000; and +the gold consumption in the pottery districts at £650 per week. Birmingham consumed +(1831) for gilding purposes, £1,000 gold yearly. (<hi rend='italic'>Whately.</hi>) It now +employs weekly 3,000 ounces of gold and 6,000 ounces of silver in the manufacture +of gold and silver ware, besides the quantity intended for gilding +and silver-washing purposes. (Quart. Rev., April, 1866, 381.) The jewelers +of New York manufacture yearly 3,000,000 of dollars worth of gold and +silver ware, mostly new material. (Economist, April 16, 1853.) There were +in Vienna, in 1781, only 167 workers in gold and silver; in 1840, 229; in 1847, +539. (<hi rend='italic'>Baumgartner</hi>, in the Wiener Akademie, May 3, 1857.) +<hi rend='italic'>Jacob</hi> estimates the aggregate mass of gold and silver ware, in +plate, instruments etc., in Europe and America, to be 1-¼ as great as that of the ready +money; and in England alone to be twice as great (ch. 28); while +<hi rend='italic'>Tengoborski</hi> thinks that at the beginning of the nineteenth +century, the coin constituted ⅔ of the entire amount of the precious metals. Sometimes a +movement in the opposite direction takes place, as, for instance, in those revolutions +in which the silver of the church was confiscated; in the unfortunate wars of Louis +XIV., etc. <hi rend='italic'>Nebenius</hi>, loc. cit., 17, mentions a South German +silversmith who melted down in the years succeeding 1802, monastery silver to the +amount of 11,000,000 guldens.</note> In addition to this, there is the wear and +<pb n='418'/><anchor id='Pg418'/> +tear of coin in circulation, which is naturally greater in the case +of large pieces than of small, and, therefore, in the case of +silver than of gold. There is, further, the damage caused by +the loss of coin in conflagrations and shipwrecks, and that +occasioned by buried and forgotten treasure.<note place='foot'>On the wear and tear of +coin, see § <ref target="Section_120">120</ref>, and <hi rend='italic'>Hermann</hi>, in +the Archiv. der politischen Oek., I, 1841. Compare also, <hi rend='italic'>Faust</hi>, +Concilia pro Aerario, 1641, 263 ff. This wear and tear is so great that +<hi rend='italic'>M. Chevalier</hi> supposes that it alone would suffice to reduce an +amount of money under Constantine the Great of 5,000 millions to 300 millions, in the +time of Philip IV. (ob. 1314.) Cours, II, 322. How great a number of coins, especially +of the smaller denominations, are entirely lost is evident from the fact, that at the +time of the demonetization of the 15-sous and 30-sous pieces of 1791-92, amounting to +25,000,000, only 16,000,000 were presented for redemption. Of the 10-centime +pieces stamped with an N, amounting to 3,286,932 francs, there were only +2,000,000 left when they were withdrawn from circulation, and this although +individuals had added to the coinage. (<hi rend='italic'>M. Chevalier</hi>, III, 321.) +The total loss caused on this score, <hi rend='italic'>McCulloch</hi> estimates at 1 per +cent. per annum, and <hi rend='italic'>Helferich</hi>, at ¾ per cent. The greater the +aggregate stock of gold and silver, the greater the absolute amount of wear and tear. +If, therefore, there were annually an equal influx of mineral products to the markets, +the pressure of this increase of supply from that cause alone would take the shape of a +converging series of prices. (<hi rend='italic'>Tooke</hi>, History of Prices, II, 151 +ff.)</note> +</p> + +<p> +But, lastly, the principal cause consists in the powerful increase +of the demand for money, which, during the last two +centuries, the great impulse given to the rapidity of circulation, +and the great increase in the substitutes for money, have +scarcely been able to outweigh. Besides the great growth +<pb n='419'/><anchor id='Pg419'/> +of population and of wealth, at least in Europe and the new +world, I need call attention only to the immense advance made +in the division of labor, and to the transition from trade by +barter to trade through the instrumentality of money. The +entire war and merchant marine of England, about 1602, had, +according to Anderson, a capacity of only 45,000 tons,—that +is, not one-fifth of what the small city of Bremen has now; a +capacity which at the close of the year 1873 amounted to +237,206 tons—while in 1872 its merchant marine alone had +a capacity of 7,213,000 tons. The aggregate foreign trade +of England, France, Russia and the United States, in 1750, +amounted to about 260,000,000 thalers; in 1864, it was over +5,400,000,000, and between 1871 and 1872, in one year, +over 9,000,000,000 thalers. Nor should it be forgotten that +Europe's trade with the East, since the beginning of the sixteenth +century, increased immensely. This, at present, produces +uniformly a very <q>unfavorable balance</q> for Europe, +which can be made up for only by very large shipments of +silver to foreign parts.<note place='foot'><p>The British East India Company +exported gold and silver on an average per annum from: +</p> +<p> +1711-1720, £434,000<lb/> +1721-1730, 532,000<lb/> +1731-1740, 487,000<lb/> +1741-1750, 631,000<lb/> +1751-1760, 571,000<lb/> +1761-1770, 152,000<lb/> +1771-1780, 43,000<lb/> +1781-1790, 393,000<lb/> +1791-1800, 352,000<lb/> +1801-1807, 852,000 +</p> +<p> +<hi rend='italic'>Milburn</hi>, Oriental Commerce, 1813, 419. According to +<hi rend='italic'>M. Chevalier</hi>, Introduction +aux Rapports de l'Exposition de 1867, the trade of Europe and +North America, with India, China, Japan and the Australian islands, +amounted in 1800, to only 410 million francs, in 1866, to 4,024 million. Yet, +for a time, the largely increased exportation of English manufactures to East +India and of East Indian opium to China, had changed the relation so that +the exportation of the precious metals from South Asia, by a great deal, more +than counterbalanced the imports. On the other hand, between 1853 and 1856 +240,000,000 thalers were shipped to India and China from England and the +Mediterranean harbors; in 1863 and 1864, even as much as 300 millions, to +be, for the most part, buried there. Moreover, the immense quantity of cash +money—often as much as from 12 to 15 million in pounds sterling—in the +state treasury, and silver ornaments (§§ 44, 123) customary in India, demand +a considerable yearly supply to make up for wear. <hi rend='italic'>Newmarch</hi> speaks +of 400 million pounds sterling which can be maintained in its condition hitherto by +a yearly increase of 1 per cent. (History of Prices, VI, 723.) From 1865 to +1869, English steamships carried gold and silver to the East in the following +quantities, yearly: 93.9, 66.3, 24.6, 70.2 and 60.4 million thalers, in addition +to which almost as much came directly from California. Statist. Journ., +1871, 122 seq.</p></note> If China and India were suddenly to +<pb n='420'/><anchor id='Pg420'/> +draw on us for other commodities instead of gold and silver, +the result would be a great revolution in prices in Europe. +</p> + +</div> + +<div> +<index index='toc' level1='Section CXXXIX. History Of Prices.—Californian And +Australian Discoveries.'/> +<index index='pdf' level1='Section CXXXIX.'/> +<head type='sub'>Section CXXXIX.</head> +<head>History Of Prices.—Californian And Australian +Discoveries.</head> + +<p> +Tengoborski is of opinion, that the flow of gold from Siberia +alone would have been absorbed by the ever-increasing +want of civilized nations of money; but that the coincident discoveries +in California and Australia, in September 1847, and +February 1851, must sooner or later produce a revolution in +prices. And, indeed, the fecundity of these countries is unparalleled. +North America, which in 1846 produced only +3,600 pounds of gold, according to Sœtbeer, produced in the +years from 1849 to 1863, respectively, 118,000, 148,000, 178,000, +195,000, 180,000, 165,000, 165,000, 165,000, 160,000, 145,000, +125,000, 120,000, 115,000 and 110,000. Austria produced in +the years from 1851 to 1863 respectively, 27,000, 196,000, +250,000, 160,000, 170,000, 195,000, 180,000, 175,000, 160,000, +150,000, 160,000, 160,000, 170,000, pounds of gold. +</p> + +<p> +From 1864 to 1867, the aggregate production of gold in the +world was, according to the last mentioned authority, a yearly +average of 188.4 millions of thalers, and of silver, 94.8 millions. +In Europe, Russia not included, the production was, in 1863, +<pb n='421'/><anchor id='Pg421'/> +3,960 pounds of gold and 405,000 pounds of silver; in the +Russian Empire, 46,500 pounds of gold and 40,000 of silver; in +Mexico 12,000 pounds of gold and 1,250,000 pounds of silver; in +South and Central America, 12,500 pounds of gold and 520,000 +pounds of silver; in Africa, India and Lesser Asia, 30,000 pounds of gold and 40,000 +pounds of silver—a total of 384,000 pounds of gold, and 2,905,000 pounds of +silver. F.X. Neumann<note place='foot'><hi rend='italic'>Tooke-Newmarch</hi>, History of +Prices, VI, 147 ff., estimates the aggregate stock of gold at +the end of 1848 at £5,600,000; in 1856, at £172,000,000 more. +According to <hi rend='italic'>Lavasseur</hi>, the amount of silver in the East +increased, between 1848 and 1857, from 22 to 24 milliards of francs; and the amount of +gold from 9-½ to 15-½ milliards. (Annuarie d'Economie politique, 1858, 632.) The +total amount of gold and silver in the civilized world, <hi rend='italic'>Wolowski</hi> +estimated at from 55 to 60 milliards of francs, in 1870. (L'Or et l'Argent, Enquête, 19.) +Compare <hi rend='italic'>Mason</hi>, The Gold Regions of California from the Official +Reports, 1848. <hi rend='italic'>Tengoborski</hi>, Sur les Gîtes aurifères de la +Californie et de l'Australie, 1853. Goldfield's Statistics issued from the Mining +Department in Victoria, 1862. <hi rend='italic'>W. R. Blake</hi>, The Production of the +precious Metals, or statist. Notice of the principal Gold and Silver producing Regions +of the World (New York, 1869).</note><note place='foot'><hi rend='italic'>Soetbeer's</hi> +Denkschrift betr. die deutsche Münzeinigung Mai, 1869, and earlier yet, in +<hi rend='italic'>Faucher's</hi> Vierteljahrsschrift, 1865, II. According to +<hi rend='italic'>M. Chevalier</hi>, all the mines of the world, a short time previous +to 1865, produced 284,000 kilogrammes of gold, and 190,000 kilogrammes of silver in a +year: a total of 373,000 thalers (Journal des Economistes, June, 1866), while, in +1848, the total amount of gold coinage in the world was estimated at 560,000,000; +Great Britain, France, North America and Sidney had, since that +time and up to 1871, added to this £597,780,000. The additions have been +made in decreasing quantities: thus, 1857-59, 37.2 millions annually; 1869-71, +16.99 millions annually. (Statist. Journ., 1872, 376 ff.) The estimates as to +how much a gold-digger might make in a day have been variously estimated. +Thus, <hi rend='italic'>Larkin</hi> estimates it from $25 to $50; +<hi rend='italic'>Mason</hi>, at $10; <hi rend='italic'>Folson</hi>, at $25 to +$40; <hi rend='italic'>Butler King</hi>, at $16, reckoning one ounce at $16. All these +estimates seem to give an altogether too high average. In Australia, according to +<hi rend='italic'>Khull</hi>, Colonial Review, June, 1853, a digger can produce only one +ounce daily, or less than 4 thalers. According to <hi rend='italic'>W. Stamer</hi>, +Recollections of a Life of Adventure, II, 1866, a gold-washer in Victoria earned in +1858, on an average, £250 per year; in 1865, only £70; while day labor was worth 15 +shillings. Hence, great hopes have to be built on the lottery-nature of gold-washing. +On the Rhine, a gold-washer is satisfied with ⅔ of a gramme of +gold, that is worth from 13 to 18 silver groschens. (<hi rend='italic'>Daubrée</hi>, +Comptes rendus de l' Académie des Sciences, XXII, 639.) It should be borne in mind, +however, that the Rhine-lander devotes to gold-washing only the leisure time +which his avocation as a fisherman leaves him, while the gold-washer in the +new world, as a rule, devotes his whole time to it; and that his labors are interrupted +by the long rainy season, attacks of fever etc. To this must be +added the great difference of the average prices of the means of subsistence +and the difference of all social conditions.</note> +estimates that the whole world produced, in the years +<pb n='422'/><anchor id='Pg422'/> +1868-1870, annually, 192.8 million thalers of gold, and 94 million +thalers of silver; and in 1873, of both metals, 291 million +thalers. +</p> + +<p> +The question, whether in this second half of the nineteenth +century, we are to have a revolution in prices similar to that +which took place in the sixteenth century can be answered +only hypothetically. The gold diggings now most productive +will, probably, as we may judge from analogous cases in the +past, be soon exhausted.<note place='foot'><p>Compare, for instance, on the early +productiveness of the Brazilian gold districts which soon ceased: +<hi rend='italic'>Spix und Martius</hi>, Reise nach Brasilien, I, 262 f., +350. <hi rend='italic'>Gardner</hi>, Travels in the Interior of Brazil, 1846. On +Hispaniola, see <hi rend='italic'>Benzoni</hi>, N. Mundo, I, 61, and +<hi rend='italic'>Peschel</hi>, Gesch. der Entdeckungen, 304, 556. +Hitherto, gold had been obtained by the usual mining process, only in very +few places. As a rule, it has been found in alluvial land not far from the +surface. Compare <hi rend='italic'>Ansted</hi>, The Gold-Seekers' Manual, 1849. These +circumstances have made the production of gold important from the first; and +they still make it comparatively easy, while it causes little demand for capital +but for great skill. As soon, therefore, as the greater part of the country +washed for gold has been worked, which does not require a long time, the +whole is abandoned, while in the production of silver the great amount of +capital fixed in pits, shafts, kilns etc. ties the parties engaged in the enterprise +to the spot, and necessitates the continuation of the enterprise. In recent +times, however, Australia and California have developed the mining and +machine production of gold to a surprising extent. According to +<hi rend='italic'>Laur</hi>, La Production des Métaux précieux en Californie, 1862, 33, +and the Journal des Economistes, Nov. 1862, Californian gold-quartz produced, in 1851, +on an average, 635 francs per ton; in 1860, only from 80 to 85 francs; but the +gold-washing methods have become cheaper in the ratio of 2,500:1. However, +the production of the precious metals seems even now to be decreasing. +According to the Statist. Journal, 1866, 99, it amounted on an average to: +</p> +<p> +in 1849-51, gold £23.9 million, silver £15.5 million.<lb/> +in 1852-56, gold 38.7 million, silver 16.1 million.<lb/> +in 1857-59, gold 36.5 million, silver 17.1 million.<lb/> +in 1860-63, gold 33.5 million, silver 18.2 million.<lb/> +in 1864-68, gold 30.0 million, silver 19.5 million. +</p> +<p> +The number of gold-diggers in Victoria steadily decreased from 125,764 in +1857, to 63,053 in 1867.</p></note> But it is entirely possible that, for +<pb n='423'/><anchor id='Pg423'/> +a long series of years, other diggings will be found equally +rich. It is almost certain that the restless activity of the English +and of North Americans will not cease until they have +exhausted the favors of nature.<note place='foot'>One of the +chief difficulties in the way of the production of gold is the +loss by embezzlement, which is estimated at an average of 20 per cent. +Small companies of men working on their own account would be less exposed +to temptation, and the Anglo-Saxon races and the North Americans +are very well adapted thereto. (<hi rend='italic'>M. Chevalier</hi>, III, +261.)</note> Every improvement in agriculture, +in the means of communication, and in the public security +of the gold lands, makes the cost of production smaller. +There are doubtless in other countries a great many <hi rend='italic'>placers</hi> +which need only to be touched with the finger of European +civilization to produce gold in abundance.<note place='foot'>Gold +is in a certain sense one of the most widespread of metals, although +it is found anywhere only in small quantities; so that on the Rhine, for instance, +it takes from 17 to 22 millions of gold grains to make a kilogramme. +An extraordinary large number of places owe their civilization to gold-seekers. +Compare <hi rend='italic'>Tacitus</hi>, Agr., 12. I select the following <q>finds</q> +from <hi rend='italic'>Ritter's</hi> Erdkunde. The Shangallas (I, 249); still more the +terrace of Fazoglu itself (I, 253, compare <hi rend='italic'>Bruce</hi>, Travels, V, 316, +VI, 255, 342), in Monomotapa (I, 140); in Manica, west from Sofala (I, 145), especially +since the suppression of the slave trade (I, 305, 471); in Mandigo land (I, 360, 372); +on the road from Gambia to Timbuctoo (I, 457); on Lake Mangara (I, 493); between +Timbuctoo and Finnin (I, 445); in Nubia (I, 667, seq.); unused silver and +quicksilver mines on the lower Bagradas (I, 493); gold wealth at Malacca, +<hi rend='italic'>aurea chersonesus</hi> (V, 6 f., 27); Tonkin, Lao and Ava (III, 926, 1, +216, IV, I, 213); Assam (IV, 294); smaller Thibet (III, 657); Kashmere (III, 1,155); on +upper Setledsch (III, 654 ff., 668); in the mountainous sources of the Indus +(III, 508, 529, 593, 608); on the Cabool (VII, 23); in Peshaver (VII, 223); +Badakschan (VII, 795); rich silver mines abandoned for want of wood near +Herat (VIII, 243); in Armenia (X, 273). It is said that in southern China +there are great treasures of the precious metals, the removal of which has +been opposed thus far. (IV, 756.) Arabia's richness in gold mines, spoken of +by <hi rend='italic'>Diodor.</hi>, II, 50, III, 45, and +<hi rend='italic'>Agatharch</hi>, De Mare rubro, 60, is of doubtful +existence, as no traces of them are to be found in the country to-day. +On the other hand, on both shores of the Pacific Ocean, the portions of the +earth richest in volcanoes seem to possess almost everywhere quantities of gold +equal to those of California and Victoria. (Edinburgh Review, Jan., 1863, +82 ff.) What an amount of treasure can be obtained at times from old and +long since forgotten <q>finds</q> is proved by the Altai (that is gold mountain), +which even the old Tschudi had rummaged (<hi rend='italic'>K. Ritter</hi>, II); and where +Herodotus' (III, 16) love of truth, so frequently called in question, has recently +been so brilliantly vindicated. Compare <hi rend='italic'>v. Ungern-Sternberg</hi>, Gesch. +des Goldes, 1835. <hi rend='italic'>A. Erman</hi>, Ueber die geographische Verbreitung des +Goldes, 1835. According to <hi rend='italic'>Murchison</hi>, Siberia, ch. 17, gold is to +be found only <q>in crystalline and paleozoic rocks, or in the drift from these rocks, +which is a tertiary accumulation of the pliocene age;</q> and that it is found most +abundantly <q>in quartz-ore, vein-stones and traverse altered Silurian slates, +chiefly lower Silurian, frequently near their junction with eruptive rocks.</q></note> +It would, indeed, +be necessary that this same civilization should make these +same countries better markets for the precious metals by increasing +their demand. +</p> + +<pb n='424'/><anchor id='Pg424'/> + +<p> +So far as silver is concerned, there can be no question that +America possesses mines unlimited in extent, and, as yet, +almost untouched. <q>The time will come,</q> says Duport,<note place='foot'>Compare +<hi rend='italic'>Humboldt</hi>, N. Espagne, IV, 147 ff.; <hi rend='italic'>St. Clair +Duport</hi>, Essai sur la Production des Metaux précieux en Mexique, 1843; +<hi rend='italic'>M. Chevalier</hi>, Cours., III, 483 ff.</note> <q>a +century sooner or later, when the production of silver will +have no other limits than those put to it by the continual +decline in the price of silver.</q> There seems, also, to be no +lack of quicksilver, especially in California; and the cost of +its production hitherto may be lessened very much by the +labor of better workmen, machines and means of transportation.<note place='foot'>The +cost of a kilogramme of silver, expressed in terms of silver itself, +up to the moment that it is shipped, is estimated by <hi rend='italic'>Duport</hi> as +follows: salt and <hi rend='italic'>magistral</hi>, 61 grammes; quicksilver, 112 +grammes; stamping it, 171 grammes; transformation of the ore, 72 grammes; rent and +superintendence, 38; duties etc., 145; smelting, transportation and shipping, 35. There +remains as profit for mining it, 336 grammes. As to how the production of American +silver increases and runs parallel with the cheapness of quicksilver, see +<hi rend='italic'>Humboldt</hi>, N. Espagne, IV, 91 ff.</note> +All this supposes great progress of the mining countries +in civilization in general; and yet, thus far, Mexico's republican +independence etc., as compared with the later years of the +Spanish colonial system there, is a great retrogression. The +conquest of Spanish America by the United States would +give a vast impetus to economic improvement; and here, +<pb n='425'/><anchor id='Pg425'/> +again, the increase of production would be attended by an increased +demand. +</p> + +<p> +But especially must the demand for the precious metals, +which naturally increases with the wealth, commerce and luxury +of nations, constitute a decisive element in answering our +question. Nothing, for instance, were a reduction in prices +impending, would promote it so much as a series of devastating +wars or revolutions in Europe. Moreover, it should not +be forgotten, that the money market is now almost commensurable +with the world, and will soon embrace it within its +limits; and that market embraces not only the precious metals +but the numberless representatives of money and media of +credit. The basin, therefore, to which the gold and silver +streams of the world are tributary is immeasurably greater +than it was in the sixteenth century; its level cannot be changed +as readily, and an equal addition made every year to its previous contents can +increase it only by a small amount.<note place='foot'><hi rend='italic'>Wolowski</hi> +calculates that the absolutely much smaller yearly increment +to the amount of the precious metals in the sixteenth century, frequently 1/12, +now constitutes only 1/50 of the greater existing amount. (L'Or et l'Argent +Enquête, 50.)</note> Nor +could a considerable decline of the value of the precious metals +be readily produced without making the circulation of +money slower, and the employment of means of credit relatively +less frequent, in consequence of which, the further decline +would, to a certain extent, be arrested.<note place='foot'>In the +United States the stock of cash money in 1820 was estimated at +5.1 thalers per capita; in 1849, at 8.6 thalers; in 1854, on the other hand, at +13 thalers.</note> In the case of +other commodities a decline of prices leads only probably to +an absolutely greater demand; in the case of money, it leads +to a demand necessarily greater. That the money market in +our days can stand pretty rude shocks is evident from the +fact, among others, that the price of gold is so high as compared +with that of silver.<note place='foot'>The weight of the mass of +gold introduced into Europe annually stood to that of silver in +the ratio of 1:60-65 in the seventeenth century; in the +first half of the eighteenth century, in that of 1:30; in the second half, in +that of 1:40; and yet the variations in price were not in the least parallel. +According to <hi rend='italic'>Sœtbeer</hi> (Beiträge und Materialien zur +Beurtheilung von Geld und Bankfragen, 1855, 102 seq.), the average silver-course +(<foreign lang='de' rend='font-style: italic'>silbercurs</foreign>) of gold +had, 1852-54, sunk only 2.05 per cent., as compared with that of 1800-40. +And yet the value of the annual production of gold stood to the annual production +of silver, in the beginning of the nineteenth century, as 29 to 71; in +1846, as 47 to 53; in 1848-56, as 3 to 1.</note><note place='foot'><p>While +the public, even since 1850, think they have noticed a depreciation +in the value of money, there are a great many learned political economists +who are by no means prepared to grant it. The principal advocates of this +opinion are <hi rend='italic'>Tooke</hi>, and <hi rend='italic'>Newmarch</hi>, in vol. +VI. of the History of Prices (1857). Also <hi rend='italic'>Lavergne</hi>, in the +Journal des Economistes. And really the enhanced dearness of +many kinds of goods up to 1857, might have been accounted for +by causes affecting the goods themselves: diminished supply by reason of +bad harvests, commercial gluts etc.; increased demand by capitalization on a +gigantic scale, speculation, but especially by the elevation of the lower +classes etc. +</p> +<p> +The London wholesale prices were on the 1st day of January, 1869, nearly +all lower by 10 per cent. than on the 1st day of July, 1857. Only indigo, +cotton and meat had risen. (<hi rend='italic'>Hildebrand's</hi> Jahrb., 1870, I, 328.) In +many instances the enhanced dearness is entirely local, by reason of the +greater facilities for transportation in places where prices were already higher. +But as new truths are very easily exaggerated by their discoverers, +much of Tooke's view concerning these events depends upon a polemic carried +too far against the theory of the balance of trade which was customary +in the so-called currency school. Compare, in opposition to Tooke, +<hi rend='italic'>Lavasseur</hi>, in the Journal des Economistes, March, 1838, and +<hi rend='italic'>M. Chevalier</hi>, La Baisse probable de l'Or, 1858. +<hi rend='italic'>Lavasseur</hi>, from the difference between the +official and real custom-house prices in France, calculates that raw materials +in 1856 were on the average 63 per cent., and in 1858, 20 per cent. higher than +in 1826; and that manufactured articles were in 1856, just as high, and in +1858, 6 per cent. lower than in 1856. An average made of all commodities +showed, in 1856, an enhancement of 30 per cent, and in 1858 of 9 per cent. +(<hi rend='italic'>Hildebrand's</hi> Jahrb., 1864, II, 118.) +</p> +<p> +In the Hamburg market in 1847-65, 87 articles declined in price, 183 rose +in price, and 24 remained about stationary. (Amtl. Statistik von 1887, 18 ff.) +<hi rend='italic'>Jevons</hi> assumes a general rise in the price of commodities between +1849 and 1869 of about 18 per cent. (Economist, May 8, 1869.) He makes this estimate +from the average March prices of 50 of the principal articles. Assuming +the average March price of 1849=100, we have, according to him, for +the following years, respectively: 101, 103, 101, 116, 130, 125, 129, 132, 118, +120, 124, 123, 124, 123, 122, 121, 128, 118, 120, 119. Previous years showed: +1789=133; 1799=202; 1809=245; 1819=175; 1829=124; 1839=144. +(Compare supra, § <ref target="Section_129">129</ref>, note 1.) The budget of a Swiss +teacher's family consisting of five persons has become dearer since 1840 ff., their +consumption remaining the same and of only the simplest articles, by 72.5 per cent. +(Böhmert, Arbeiterervhältnisse etc., I, 302 ff., 355.) That, however, the depreciation +is under-estimated most precisely in England and over-estimated in Germany, +<hi rend='italic'>Knies</hi> very well accounts for by the price-leveling effects of the +more modern means of communication. (Tübinger Zeitschr., 1858, 280 ff.)</p></note> +</p> + +</div> + +<pb n='426'/><anchor id='Pg426'/> + +<div> +<index index='toc' level1='Section CXL. Revolution In Prices.—Its Influence On The +National Resources.'/> +<index index='pdf' level1='Section CXL.'/> +<anchor id="Section_140"/> +<head type='sub'>Section CXL.</head> +<head>Revolution In Prices.—Its Influence On The National +Resources.</head> + +<p> +The ulterior consequences of such a revolution in prices +would contribute to the real wealth of a people only in the +sense that they would place such a people in a way, with less +sacrifice, to employ the precious metals on a large scale in ministering +<pb n='427'/><anchor id='Pg427'/> +to the luxuries of life. This small advantage itself +would be counterbalanced by the depreciation of the metallic +stock, and especially by the necessity of henceforth devoting a larger quantity +of gold and silver to the purposes of circulation.<note place='foot'>Compare +<hi rend='italic'>Leibnitz</hi>, on the consequences which would follow the realization +of the dreams of the alchemists. It would be a great misfortune, since then a +pocket would no longer suffice for the transportation of money, and people +would have to use wheel-barrows as they do now in Sweden. (Opera ed. +Dutens, V, 199, 401.)</note> +But such a revolution would produce a sudden reverse +in the distribution of a nation's wealth among its constituent +members. All those who, by virtue of contracts antecedently +made, have payments to effect, are benefited to the extent of the difference between +the old and the actual price, while those who are to receive such payments +lose to the same extent.<note place='foot'><hi rend='italic'>Beccaria</hi> considers +it equitable that the debtor should always pay the original +value of the metal. (E.P., IV, 2, 17.) <hi rend='italic'>Galiani</hi>, on the other +hand, would not permit individuals, even when the state arbitrarily causes a diminution +in the real value of money, to maintain the real value of the coinage in their +contracts. (Della Moneta, V. 3.)</note> +Therefore, those engaged in industrial enterprises improve +their condition, because they immediately increase<note place='foot'>It is +precisely this class which first comes to an understanding of the essential +nature of the change effected.</note> the prices +<pb n='428'/><anchor id='Pg428'/> +of their own productions; and, for a time at least, continue the +use of capital borrowed from others, of land leased or rented +etc. at the old prices.<note place='foot'>Thus the English lessees, +who in the sixteenth century had leases for a long term +of years, saw themselves rise in the social scale in consequence +of the revolutions in price—a fact of importance in the political struggles +of the seventeenth century. Compare <hi rend='italic'>Sir F. M. Eden</hi>, State of the +Poor, I, 119 ff.</note> +</p> + +<p> +Besides, at the beginning, and before a corresponding depreciation +of its value has taken place, an increase of money +produces as a rule a low rate of interest (§ 185), and an itch to +buy on the part of the public. All this may serve as a powerful +stimulant to production on a large scale.<note place='foot'>Too much stress +is laid upon this by <hi rend='italic'>Tooke-Newmarch</hi>, who, on that account, +considers almost every increase of the precious metals as a blessing. +As a matter of fact, the population of Australia, of the United Kingdom, +and of the United States, increased, between 1848 and 1871, 44.5 per cent.; +the production of coal and of railroads in England, between 1856 and 1869, +by about 60.6 per cent.; the English production of woolen goods, linen and +cotton and yarn, between 1848 and 1870, by from 110 to 335 per cent. +(Statist. Journal, 1872, 376 ff.)</note> Those most +certain to suffer loss are officials<note place='foot'><hi rend='italic'>Luther's</hi> +complaint concerning the poor condition of the clergy. See +<hi rend='italic'>Schmoller</hi>, in the Tübinger Ztschr., 1860. This very clearly +shows how much surer for the crown domains are than a civil list, and donations of land +to a church than payments in money. Law of Elizabeth, 18 Eliz., that, in the +case of university property, ⅔ of the lease rent should be paid in metal and +⅓ in corn. In <hi rend='italic'>Adam Smith's</hi> time, this latter third was worth as +much again as the other two. (I, ch. 5.)</note> with a fixed salary, and so-called +annuitants, creditors of the nation and of individuals. +Even bankers, too, have no means to fix the value of their wares +which they see disappearing, so to speak under their eyes.<note place='foot'>In +the sixteenth century, this class was of small importance in most countries; +in our times, their ruin would cause general disturbance. The wiser +class of capitalists would, indeed, find means to exchange their credits for +more certain values, or make it a condition that they should receive in the +end a large sum.</note> +Of land owners, those who are in debt gain, that is especially +the poorer, and the more speculative among them.<note place='foot'>Thus, for instance, +the son of a deceased land owner who retains the +lands as his own acquits himself towards his brothers who have entered the +military or civil service of their country by paying them a certain sum periodically. +If a revolution were really impending, the owners of land would +soon emulate one another to improve their estates by borrowing capital, if +for no other reason, to turn the depreciation of the medium of circulation to +their own advantage. In the sixteenth century, the indebtedness of land +owners was relatively unimportant.</note> On the +<pb n='429'/><anchor id='Pg429'/> +other hand, owners of large estates who have alienated their +tithe-rights, or right to vassal-service etc. for capital, or for +fixed sums to be paid at regular intervals, that is, in a great +many places the great mass of the nobility, undergo a not +insignificant social fall. +</p> + +<p> +The condition of those who earned a living by manual labor +no doubt deteriorated in the sixteenth century, as may be inferred +from the extraordinary activity of public charity in +that period. +</p> + +<p> +Between 1500 and 1550, silver purchased, in Orleans, from +4.1 to 4.5 times as much common labor as it does now, while +silver, as compared with the average price of twenty-seven +commodities, has grown cheaper in the ratio of only from 2.6 +to 2.7:1. (<hi rend='italic'>Mantellier.</hi>) It was impossible for this class to +raise the price of their wares as rapidly as that of the medium +of circulation declined, because they could not wait, nor hold +back their commodity even for a moment. (§ 164.)<note place='foot'>It appears +from <hi rend='italic'>Roger's</hi> Tables, Statist. Journal, 1861, 551 ff., that, +between 1583 and 1620, a time during which the population of England increased +neither in wealth nor in numbers, there was a considerable increase in the +price of nearly all English commodities. Thus, for instance, wheat was, +from 1591 to 1600, 468 per cent., and from 1611 to 1620, even 495 per cent. +higher than from 1530 to 1533. The Saxon laborer earned, in 1599, in corn, +only half as much as in 1455. (Tübinger Ztschr., 1871, 354.)</note> This +would, indeed, be very different in our day. Wages, because +of the facilities, both physical and moral, which have everywhere +been placed in the way of emigration, were necessarily +one of these articles which rose soonest in price, as compared +with money.<note place='foot'>When labor is indispensable to employers, +it may happen that a small decline in the supply may largely raise +the price. Wages, in almost all branches of labor, rose between +1851 and 1856, by about from 15 to 20 per cent.</note> +Lastly, the state itself profits by the diminished +<pb n='430'/><anchor id='Pg430'/> +thing-value, that is, real value of its public debt;<note place='foot'>This, +also, was of little significance in the sixteenth century, but how +important now!</note> but it loses, +at the same time, on all taxes, duties etc., which are not estimated +at a certain percentage of the value of the articles +taxed.<note place='foot'>Income taxes, <hi rend='italic'>ad valorem</hi> +duties and tithes rise and fall in their nominal +amount as the price of the medium of circulation falls and rises.</note> +As a rule, therefore, it would need to impose new +taxes. Now, the parliamentary right to impose taxes, however +extensive it may juridically be, is, ordinarily, of great +importance in practice only when there is question of increasing +the existing burthen. Hence, this right, wherever it exists, +is brought into the utmost activity by a revolution in +prices.<note place='foot'>Thus, for instance, the victory of the English Parliament +over the unlimited power of the crown, in the first half of the seventeenth century, was +very much promoted by the fact that the crown, in spite of all its economy, +was always in financial straits in consequence of the depreciation of money. +(Power of the purse, power of the sword!) However, any force kept steadily +in action is a two-edged sword. While under favorable circumstances, it +may be thereby developed, under unfavorable circumstances it may be +thereby exhausted. How great a number of representative assemblies, during +the revolutions in prices in the sixteenth and seventeenth centuries, allowed +their energies to grow dormant!</note><note place='foot'>Most of the above +points are very well discussed in the work <hi rend='italic'>W. S.</hi>, cited +above, § <ref target="Section_137">137</ref>.</note> +</p> + +<p> +However, the new additions of gold and silver to the already +existing supply may not immediately produce a corresponding +depreciation of the value of the precious metals. If the +first receivers of the additional supply of money exchange it +rapidly for other goods, it will probably bring them the former +value in exchange of the metal. Not until it has passed into +a third or fourth person's hands is the depreciation apt to be +perceptible. It is, therefore, in this case, a great advantage to +be the first hand. The world-threatening power of Spain, in +the seventeenth century, was very essentially promoted by the +American gold and silver mines;<note place='foot'>As no one then +doubted: Compare <hi rend='italic'>W. Raleigh</hi>, The Discovery of +Guiana, Pref. I refer to Philip of Macedon.</note> nor is it a matter of less +<pb n='431'/><anchor id='Pg431'/> +significance to-day, that the great mineral wealth of the world +belongs to Siberia, California and Australia; that is, especially +to Russia and to countries colonized by Great Britain. Further, +as to the classes into which a nation is divided, it was +only the crown, the Church and a comparatively small number of officials, +soldiers and officers who controlled Spanish America;<note place='foot'>Compare +<hi rend='italic'>Roscher</hi>, Kolonien, Kolonialpolitik und Auswanderung, 1856, +145 ff.</note> +and who can tell how the absolute monarchy of Spain +was strengthened by this fact? In the seventeenth century, +on the other hand, it is principally manufacturers and merchants, +and more especially yet, workmen, who reap the immediate +advantages of new discoveries of gold. +</p> + +</div> + +<div> +<index index='toc' level1='Section CXLI. Effect Of An Enhancement Of The Price Of The +Precious Metals.'/> +<index index='pdf' level1='Section CXLI.'/> +<head type='sub'>Section CXLI.</head> +<head>Effect Of An Enhancement Of The Price Of The +Precious Metals.</head> + +<p> +A great enhancement of the precious metals would naturally and +necessarily produce a revolution in prices in a direction<note place='foot'>Something +similar might have been observed in England in 1819 etc., at +the restoration of a depreciated paper currency. Among nations in a comparatively +low stage of civilization, a variation in the medium of circulation +is of less importance than among more highly civilized nations, because +trade in money, and still more, credit, are relatively speaking undeveloped.</note> +opposite to the one just described, and one which would be +much more injurious to a nation's economy. Such a revolution +would weigh most heavily on the most sensitive, and the +momentarily most productive classes of the people, inasmuch +as the price of the ready product as compared with advances +made for the purposes of production would be a declining one; +and it would benefit those classes who live in leisure on the +fruits of previous labor. There would, at the same time, be +a perceptible growth of consumption in certain departments, +useful, no doubt, in themselves, but apt to degenerate into excess, +and which are, therefore, most easily cared for. (§ 212, seq.) +<pb n='432'/><anchor id='Pg432'/> +To this extent, the gold discoveries of the nineteenth century, +without which an enhancement of the price of money would +undoubtedly have taken place, have warded off a great economic +malady from the nations. Moreover, this inverted revolution +in prices may be moderated by governmental measures, such as a diminution +of taxes, emissions of paper money etc.<note place='foot'><hi rend='italic'>Fawcett</hi> +greatly exaggerates when he says that with an increase of population +and wealth, an increase of money is as much a want as hunger. (Manual, +370.)</note> +</p> + +</div> + +<div> +<index index='toc' level1='Section CXLII. The Price Of Gold As Compared With That Of +Silver.'/> +<index index='pdf' level1='Section CXLII.'/> +<head type='sub'>Section CXLII.</head> +<head>The Price Of Gold As Compared With That Of Silver.</head> + +<p> +The price of gold as compared with that of silver does not, +by any means, depend entirely on the ratio of the quantities of +the two to each other. Rather is it, in the long run, determined +by the average cost of production necessary at those +gold and silver mines which exist under the most disadvantageous +conditions, but which it is still necessary to work in +order to satisfy the aggregate requirement of these metals. +On the whole, with an advance of economic civilization, the +dearness of gold as compared with that of silver has been enhanced. +The former, in the middle ages, was worth from ten to +twelve times as much as the latter,<note place='foot'><hi rend='italic'>Galiani</hi>, +Dellab Moneta, III, 1. At the time of the Lex Salica, 10:1. +After the Edictum Pistense of Charles II., ch. 24 (<hi rend='italic'>Pertz</hi>, Mon. +Germ., III, 488), 12:1. At the time of the Sachsenspiegel (III, 45), again, 10:1. Under +Saint Louis, King of France, 12.5:1. (<hi rend='italic'>Leblanc</hi>, Traité historique +des Monnaies de la France, ch. 1, 2.) In Poland, 1356, 12:1. +(<hi rend='italic'>Muratori</hi>, Dissertt. Medii Aevi, II, 28.) In England, 1262, 9.6; +1272 = 12.5; 1345 = 13.7:1. (<hi rend='italic'>Rogers</hi>, 1, 593 ff.) Under Henry VI., +and in 1494 = 12:1. (<hi rend='italic'>Anderson</hi>, Origin of Commerce, a. 1422, +1494.) In Denmark, under the former Kings of the Union = 8:1. +(<hi rend='italic'>Dahlmann</hi>, Dänische Geschichte, III, 52.) And so +throughout almost the whole of Scandinavia's medieval period, as for instance +in the Graugans. (<hi rend='italic'>Wilda</hi>, Gesch. des deutschen Strafrechts, I, +329.) In Italy, 1579 = 12:1. (<hi rend='italic'>Scaruffi</hi>, Sopra le Moneta, +1582.) In Holland, 1589 = 11.6:1. <hi rend='italic'>Bodinus</hi>, +De Republ., 1584, II, 3, maintains 12:1 as the general +ratio; but the Apostolic Chamber adopted the ratio of 12.8:1. In Germany, +according to the instances cited by <hi rend='italic'>A. Riese</hi>, 1522 = 10:1. +The monetary laws of Germany give it in 1524 = 11-⅓:1, in 1551 = 11:1, 1559 = 11-3/7:1; +<hi rend='italic'>Budelius</hi>, De Monetis, 1591 = 11-¼:1. At the beginning of the +seventeenth century the relation in Spain was = 13.3; in Germany = 12.16; in Flanders = +13.22; in England = 13.5:1. (<hi rend='italic'>Forbonnais</hi>, Finances de la France, +I, 52.) About 1641, in Flanders, it was 12.5; in France, 13.5; in Spain, 14.1. Immediately +after Colbert's death it was, in Genoa, 15.03; in Milan = 14.75:1. +(<hi rend='italic'>Montanari</hi>, Della Moneta, 80.) While in the seventeenth century +gold rose, it sank in the eighteenth, on account of the Brazilian gold washings and the +many bank notes in circulation, which were for the most part of a large denomination. +(<hi rend='italic'>Steuart</hi>, Principles, III, ch. 13.) Still it was in Amsterdam +in 1751 = 14.5:1.</note> while now it is +<pb n='433'/><anchor id='Pg433'/> +worth from fifteen to almost sixteen times as much.<note place='foot'>In Hamburg, +the relation of the price of gold to that of silver bars, varied, +between 1816 and 1852, from between 15.11-16.2 to 1 (<hi rend='italic'>Soetbeer</hi>); in +London, from 1816 to 1837, between 15.80 and 14.97 to 1.</note> In the +same period of time, also, gold in highly civilized countries +is wont to be comparatively dearer.<note place='foot'>In Asia, it is generally lower +than in Europe—for centuries mostly = 10:1. But in Birmah it is = 17:1, +mostly on account of the extent to which indulgence in luxury is carried there. +(<hi rend='italic'>Crawfurd</hi>, Embassy, 433. <hi rend='italic'>Ritter</hi>, +Erdkunde, V, 244, 266.) Concerning China, see <hi rend='italic'>M. Chevalier</hi>, Cours, +III, 359. In Africa, gold is low as compared with silver, in proportion to +the distance from the civilized world. Thus, an ounce of gold in Shenaar +cost 12 piastres; in Suakim, 20; in Djidda, 22. (<hi rend='italic'>Ritter</hi>, +Erdkunde, I, 538.) In Timbuctoo, Mungo Park found the relation of gold to silver to be +as 1-½:1. Compare Marco Polo, II, 39 seq.</note> +</p> + +<p> +These facts are explained as well by the demand as by the +supply. As the production of gold requires so little skill or +capital, and that of silver so much of both, the former may be +considered a natural product to a greater extent than the latter, +and therefore, the rule laid down in § <ref target="Section_130">130</ref> is +applicable to it. (<hi rend='italic'>Senior.</hi>) Besides, in the higher stages of +civilization, especially when the precious metals are cheap, larger payments +are usual, to the making of which, gold is certainly best +adapted; just as in every day trade merchants are wont to +accept a gold piece in payment, even at something of a premium, +while the peasantry hesitate to do so.<note place='foot'>In antiquity, a similar +course is to be observed. According to Manu's Indian laws, VIII, +134 seq., = 2-½:1; in the East, for a long time, = 10:1; under Darius Hystaspis, += 13:1. (<hi rend='italic'>Herodot.</hi>, 111, 95.) In Greece, in the time +of Lysias, = 10:1 (<hi rend='italic'>Lysias</hi>, pro bonis Arist., Conon); +according to <hi rend='italic'>Plato,</hi> = 12:1 (<hi rend='italic'>Hipparch.</hi>, +231); according to <hi rend='italic'>Demosthenes</hi>, adv. Phorm., 214, = 14:1 +(<hi rend='italic'>Böckh</hi>, Staatst., I, 43); Menander's estimate, = 10:1, +probably because Alexander's victory had made gold cheaper. +(<hi rend='italic'>Pollux</hi>, IX, 76.) Among the Romans, about 189 B.C., = 10:1 +(<hi rend='italic'>Livy</hi>, XXXVIII, 11); somewhat later, = 11.9:1 +(<hi rend='italic'>Mommsen</hi>, in the histor. phil. Berichten der K. Sächs. +Gesellschaft, 1851, 184 ff.); in the fourth century after Christ, = 14:1. +(<hi rend='italic'>Theod.</hi>, Cod. VIII, 4, 27.) We sometimes find sudden variations. +Thus, according to <hi rend='italic'>Polyb.</hi>, XXXIV, 10, gold, in Italy, sank +about ⅓ in consequence of the opening of the mines at Aquilea. It sank to the +proportion of 9:1 when Cæsar spent the contents of the Roman treasure, which consisted +of gold. (<hi rend='italic'>Surton.</hi>, Cæs., 54.) The ratio of 17:1, during +Hannibal's wars, was a species of National bankruptcy. See +<hi rend='italic'>Plin.</hi>, H. N., XXXIII, B.</note> +</p> + +<pb n='434'/><anchor id='Pg434'/> + +<p> +It is very much of a question whether gold or silver is, on +the whole, subject to greater variations in price. The fact +that gold is more strictly a natural product would of itself +constitute a powerful element of variation. (§ <ref target="Section_112">112</ref>). +But, on the other hand, its greater durability and the greater care bestowed +on its preservation, have for effect to make the existing +quantity preponderate in importance over its annual increase. +The demand for gold varies more suddenly than +the demand for silver. In case of war or sedition, the former +is more easily carried away or hidden. It is also more desirable +for the state for its military fund. On the other hand, on +account of its greater capacity for transportation, it may follow +such claims when made on it, more easily, from country +to country. On the whole, I am inclined to think that, for +short periods of time, silver maintains its value better, and +gold for longer ones.<note place='foot'>After the February revolution, +the gold-agio, as compared with silver, rose from 10-17 to 70 per 1,000. +(<hi rend='italic'>M. Chevalier</hi> Cours, III, 346.) On the +other hand, since the discovery of America, gold, as compared with commodities, +has declined much less than silver. Compare <hi rend='italic'>Hermann</hi>, Ueber den +gegenwärtigen Zustand des Münzwesens, in <hi rend='italic'>Rau's</hi> Archiv., I, 151 +ff. According to <hi rend='italic'>Lord Liverpool</hi>, Treatise on the Coins of the +Realm, the value of gold coin in the London market, as compared with bank notes, varied +in 40 years, almost 5½ per cent.</note> +</p> + +</div> + +<pb n='435'/><anchor id='Pg435'/> + +<div> +<index index='toc' level1='Section CXLIII. The Price Of Gold As Compared With That Of +Silver. (Continued.)'/> +<index index='pdf' level1='Section CXLIII.'/> +<head type='sub'>Section CXLIII.</head> +<head>The Price Of Gold As Compared With That Of +Silver. (Continued.)</head> + +<p> +If the gold-production of California should be attended<note place='foot'>In +recent times, it has become possible to extract from ancient silver +coins a small quantity of gold, and with some advantage. European industry +produced in this way about 1,600 kilogrammes of gold per annum. One +half of this amount is obtained in France and the rest in Hamburg, Amsterdam, +Brussels and St. Petersburg. (<hi rend='italic'>Michel Chevalier</hi>, Cours, III, +302.)</note> by +a notable depression of the value of that metal, it becomes a +question whether or not silver would be necessarily depreciated +with it. Senior claims that it would not, for the reason +that the two precious metals do not, for most purposes, act as +substitutes each of the other. If a country needed 1,000 pounds of gold and +15,000 pounds of silver as money,<note place='foot'><hi rend='italic'>Senior</hi>, +On the Value of Money, 77 ff. It is certain that a simple variation +in prices would not induce people to have gold table services, or architectural +ornaments of silver.</note> and these +two sums of metal were equal in value, an increase of gold by +one-half, which would depreciate its price in relation to silver +to 10:1, would not overflow the channels of circulation. The +1,500 pounds of gold are now also equal to only 15,000 pounds +of silver, and <hi rend='italic'>vice versa</hi>. +</p> + +<p> +I would put very important limitations to this assertion. +Even a moderate depreciation of gold would drive out the +silver from all those countries which had a mixed coinage +made up of the two metals; and hence the supply of silver +would be increased in the other countries. And so it is quite +possible, up to a certain point, that the larger silver coin should +be replaced by small gold ones, ten and five franc pieces etc. +Rau is certainly right in his surmise that a general rise in the +price of commodities as compared with coin, the result of a +great increase of gold, would go farthest in countries in which +the gold is the medium of circulation, begin later in those +<pb n='436'/><anchor id='Pg436'/> +which had a mixed circulation, and continue for the the shortest +time in those countries which, by force of law, had a +silver circulation only.<note place='foot'><hi rend='italic'>Rau</hi>, Lehrbuch, +6th ed., I, § 277 c. In Rau's opinion (loc. cit.) we may, +in the course of the next decades, expect a decline of the price of gold of +about 76 per cent., and of only 10 percent. of the price of silver (because of +the low prices of quicksilver.) But here he seems to overlook entirely what +influence a change of standard in important commercial districts would +have.</note><note place='foot'>Compare the works already mentioned. +<hi rend='italic'>Fleetwood</hi>, Chronicon preciosum, +or an Account of English Gold and Silver Money, the Price of Corn +and other Commodities etc., for Six Hundred Years last past, 1707; <hi rend='italic'>Dupré +de Saint Maur</hi>, Essai sur les Monnaies ou Réflexions sur les Rapports entre +les Denrées et l'Argent, 1746; <hi rend='italic'>Unger</hi>, Ordnung der Fruchtpreise, +1752; <hi rend='italic'>Paucton</hi>, Métrologie ou Traité des Mesures etc., des anciens +Peuples et les modernes, 1780; the appendix to <hi rend='italic'>Macpherson's</hi> +Annals of Commerce, 1805; the tables in <hi rend='italic'>Garnier's</hi> translation of +Adam Smith, vol. II, 1822; <hi rend='italic'>A. Young</hi>, Inquiry into the +progressive Value of Money in England, as marked by the Price of Agricultural Products, +1812; <hi rend='italic'>W. F. Lloyd</hi>, Prices of Corn in Oxford, in the Beginning +of the fourteenth Century, and also from 1583 to the present Time, 1830; +<hi rend='italic'>Helferich</hi>, in the Tüb. Zeitschrift, 1858, 471 ff. There are +some very interesting notes on the history of prices during the Merovingian +and Carolingian periods in <hi rend='italic'>Guérard</hi>, Polyptiques, I, 141 ff.</note> +</p> + +</div> + +</div> + +<pb n='437'/><anchor id='Pg437'/> + +<div rend='page-break-before: always'> +<index index='toc' level1='Appendix I. Paper Money.'/> +<index index='pdf' level1='Appendix I.'/> +<head type='sub'>Appendix I.</head> +<head>Paper Money.</head> + +<pb n='439'/><anchor id='Pg439'/> + +<div> +<index index='toc' level1='Section I. Paper Money And Money-Paper.'/> +<index index='pdf' level1='Section I.'/> +<head type='sub'>Section I.</head> +<head>Paper Money And Money-Paper.</head> + +<p> +Paper money must be distinguished from other value-paper +or money-paper,<note place='foot'>Thus, for instance, the bonds (and their +coupons) of states, cities, great corporations, certificates of stock, +mortgages, bills of exchange, checks.</note> which may also run to the possessor or +holder, and not unfrequently serve as a medium of payment. +In the case of these bonds or obligations,<note place='foot'>A Prussian regulation +of 1765 (<hi rend='italic'>Goldschmidt</hi>, Handbuch des Handelsrechts, I, 550), calls +money-paper (<foreign lang='de' rend='font-style: italic'>Effecten</foreign>), +instruments of trade in which a value or a <hi rend='italic'>valuta</hi> is +designated.</note> their circulating +capacity is a secondary matter, and the principal thing the +authentication of an economic legal relation; whereas paper +money is intended principally, if not exclusively, to act as +money.<note place='foot'><hi rend='italic'>Garnier</hi>, French translation of +Adam Smith, II, 143 ff., distinguishes between coin-paper +and promise-paper: the latter is never found in circulation at the same time +with the capital which it represents. <hi rend='italic'>Say</hi> says that, for instance, +evidences of state indebtedness, state bonds, call for money if they +would circulate, but they seldom act as money in circulation. (Traité, III, +ch. 2.) <hi rend='italic'>Sismondi</hi> very well determines the difference in his +Richesse Commerciale, I, 160. <hi rend='italic'>Rau</hi>, Lehrbuch, I, § 293, requires +of all good paper money: a., that its mere transfer, even without any proof of its +rightful acquisition, should suffice to vest the property in it in the receiver; b., +that the power emitting it should enjoy universal confidence or be able to compel +universal recognition; c., that its redemption should not be fixed for any definite point +of time.</note> Money-paper appears in a great many different +forms, but it nearly always bears interest. Its value depends +in great part on the rate and certainty of its interest. On the +<pb n='440'/><anchor id='Pg440'/> +other hand, the endeavor to insure a more favorable reception +for paper money by the promise of interest has been exceedingly +seldom successful.<note place='foot'>That it is not possible to keep paper money +from declining in value, by the payment of interest, the people of North America +learned from more than one experiment during the eighteenth century. +(<hi rend='italic'>Benjamin Franklin</hi>, Remarks and Facts relative to the Paper +Money of America, 1765.) The same phenomenon was observed in the case of the Spanish +<hi rend='italic'>vales</hi>, which were created during the North American war in +consequence of the absence of the silver fleet. (<hi rend='italic'>Bour-going</hi>, +Tableau de l' Espagne, II, 38 ff. <hi rend='italic'>Humboldt</hi>, N. Espagne, II, +808.) When the Portuguese <hi rend='italic'>apolices</hi> (since 1797) still +bore six per cent. they depreciated in value; and when the payment of the +interest was suddenly stopped, the rate of exchange did not become any +lower. (<hi rend='italic'>Balbi</hi>, Esai statist. sur le Portugal, I, 323.) In +Austria, in September, 1820, the bank notes which bore no interest were at a premium as +compared with the imperial treasury notes, which did bear interest of 1 per cent., +although the credit of both kinds of paper had ultimately the same foundation, +namely, Austrian state-credit.</note> And in reality, good prospects as +to interest (<foreign lang='de' rend='font-style: italic'>Zinsaussichten</foreign>) +and ease of transfer from one hand to another are two qualities which lie in +very different directions.<note place='foot'>The attempt to make paper +money pay interest suggests (as the Saint Simonists recommend it +should, with much ado; <hi rend='italic'>Enfantin</hi>, Ser les Banques, +d' Escompte in the Producteur, 1826), that awkward sword, invented by +Count Wilhelm von Bückeburg, to the blade of which a pistol is affixed! +Shortly before each term for the payment of interest, the circulation of such +paper money would be arrested. If the rate of discount should sink below +the rate of interest such notes bore, they would be sought after eagerly and +disappear in quantities, and, not be ever seen again until the rate of discount +had risen to a high figure, when they would be suddenly presented for redemption. +Such interest-bearing paper money, therefore, would be a serious +element to aggravate the fluctuations of the money-market between good +and bad times. When interest-bearing paper money pays interest at the rate +usual in the country, it is hoarded by misers, (<hi rend='italic'>v. Struensee</hi>. +Abhandlungen, III, 387.) Compare <hi rend='italic'>Forbonnais</hi>, Principes +économiques, p. 234, ed. Guill., whereas <hi rend='italic'>v. Prittwitz</hi>, Kunst +reich zu werden (1840, 359), takes delight in elaborating +the idea of an interest-bearing paper money.</note> +</p> + +<p> +The many recent writers who claim for paper money the +marks of irredeemableness and forced circulation, confound +the unfortunately too frequent degeneration of an institution +with its real nature. They contradict, too, usage of speech, +which, in countries where silver is the standard, unhesitatingly +<pb n='441'/><anchor id='Pg441'/> +calls gold coins money, although they cannot be forced on any +one.<note place='foot'>Of jurists, see <hi rend='italic'>Thöl</hi>, Handelsrecht, I, +§ 51, and the authorities for and against in <hi rend='italic'>Goldschmidt</hi>, +Handelsrecht, II, Kap. 4, 1, 2. The compulsory circulation of paper +money is an essential element only in reference to the +person that issues it. Of political economists, especially <hi rend='italic'>A. +Wagner</hi> in <hi rend='italic'>Bluntschli's</hi> Staatswörterbuch, Art. Papiergeld, +Band, VII, who, however, is very soon compelled to oppose to paper money <q>proper,</q> +another kind not <q>proper.</q> <hi rend='italic'>Adam Smith</hi> unhesitatingly +accounts bank notes also paper-money. (W. of N., II, ch. 2, p. 28, Bas.) +<hi rend='italic'>Huskisson</hi> understands by <q>paper-money</q> +only the irredeemable paper-money of the state, while bank notes +should be considered as <q>paper currency.</q> (The Question concerning the +Depreciation of our Currency, 1810.)</note> The paper money issued by the state +deserves, indeed, the appellation in the fullest measure; but starting from this +point we find a number of grades in a downward direction, +which may still be called money;<note place='foot'><hi rend='italic'>Seyd</hi>, +Münz, Währungs- und Bankfragen in Deutschland, 50 ff., distinguishes +four classes of paper-money: 1st class, paper-money covered by +cash; 2d class, bank notes covered after the manner of banks; 3d class, state +paper-money; 4th class, such paper money as the notes of the Southern +Confederacy after its defeat.</note> and we shall see especially +that the differences between state paper money and bank +notes so widely asserted are, in great measure, differences not +of kind but of degree. +</p> + +<p> +The idea of replacing the precious metals as a medium of +circulation by a less costly material, even the ancients were +acquainted with; but with the exception of the Carthaginians, +they scarcely ever made any use of it except in cases of need +and transitorily.<note place='foot'><p>Even <hi rend='italic'>Plato</hi>, De Legg., V, +742, was acquainted with money after the Spartan +type, intended only for internal trade: νόμισμα ἐπιχώριον, αὐτοῖς +μὲν ἔντιμον τοῖς δὲ ἄλλοις ἀνθρώποις ἀδόκιμον. Besides the state +kept for foreign trade a supply of the universal Hellenic money, of which +in case of need, private individuals could acquire what portion they needed +by exchange. When Dionysius I. issued tin instead of silver money, all the +Syracusans, although they noticed the forgery, acted in their intercourse +with one another as if they considered the coins genuine. +(<hi rend='italic'>Aristot.</hi>, Œcon., II, 21, <hi rend='italic'>Pollux</hi>, +IX, 79.) Timotheos behaved more honorably when, pressed +by the dearth of money, he gave his troops copper coin tokens, which passed +for the time being for their full value in the camp; but which were later to +be redeemed at their full value in silver. (<hi rend='italic'>Aristot.</hi>, Œc. +II, 22.) Compare <hi rend='italic'>Polyæn</hi>, Strateg., IV, 10, 2. The iron +money which the Klazomenians exchanged with the rich for silver, which bore interest, +but which the rich were forced to take, had a longer duration; the silver was used to +pay foreign state creditors, the iron money circulated for the time being in the city, +and was gradually redeemed. (<hi rend='italic'>Aristot.</hi>, loc. cit, II, 17.) +</p> +<p> +We are still more forcibly reminded of paper money by the Carthaginian +leather money, where any object whatever of the size of a coin was shut up +in a leather envelope with the state seal, and then circulated as if it were the +coin it purported to be. <hi rend='italic'>Mieris</hi>, Beschryving der Munstn, 1726, +explains the saga of Dido's ox-skin by means of this leather money. Certain it is, +however, that the surprise with which the sophistical dialogue, Eryxias, mentions +the matter, is a proof how foreign it was to the Greeks. Concerning the +Roman plated denarii which were stamped with the silver coins, but which +were also accepted by the state treasury, see <hi rend='italic'>Mommsen</hi>, R. +G., I, 405.</p></note> +</p> + +<pb n='442'/><anchor id='Pg442'/> + +<p> +Similarly, the middle ages in Europe; as in general all +greater development of the credit-system—and all paper +money is credit-money—has a natural growth only in the +higher stages of civilization.<note place='foot'>In the middle ages, +leather money was issued as a promise of future payment: by the +doge of Venice in the wars of 1122 and 1126 (<hi rend='italic'>Montanari</hi>, Della +Moneta, 34); by King John, of England, during the struggle of the barons +(<hi rend='italic'>Camden</hi>); Emp. Frederick II. at the siege of Faventia +(<hi rend='italic'>Malespini</hi>, Hist. Fior., 130, +<hi rend='italic'>Villani</hi>, Hist. Fior., VI, 21); by Louis IX. during his +captivity (<hi rend='italic'>v. Raumer</hi> Hohenstaufen, V, 461), John of +France, 1360 (<hi rend='italic'>Anderson</hi>, Origin of Commerce). +On the Frankfurt lead marks which were afterwards redeemed by +the <hi rend='italic'>Rechnerei</hi>: <hi rend='italic'>Kirchner</hi>, I, 541. +Lavallette's copper tokens during the siege of Malta had the inscription: +<foreign lang='la' rend='font-style: italic'>non æs sed fides</foreign>. The paper +money which was issued during the siege of Leyden, the inhabitants afterwards would rather +preserve than have redeemed, <foreign lang='la' rend='font-style: italic'>ad perpetuam +liberationis divinæ memoriam</foreign>. (<hi rend='italic'>Bornitii</hi>, De Nummis, +1605, I, 15. Distress coins, <hi rend='italic'>melacs</hi>, during the siege +of Landau and of the Hungarian <hi rend='italic'>Ragoczy</hi>, +<hi rend='italic'>Marpurger</hi>, Beschreibung der Banquen, 213. +<hi rend='italic'>Krones</hi>, Zur Geschichte Ungarns im Zeitalter R's, +1870.)</note><note place='foot'>The Chinese have had various kinds of paper-money in +their country since the 7th century after Christ. Sometimes they called them <q>flying +coins, convenient coins,</q> and sometimes <hi rend='italic'>coupons</hi>, +<hi rend='italic'>bons</hi>, <hi rend='italic'>conventions</hi> +(<hi rend='italic'>Klaproth</hi>, Mémoires relatives à l'Asie, I, 375 ff.), against +which the caravans, as soon as they had passed the limits were obliged to exchange their +silver (<hi rend='italic'>Pegolotti</hi>, Pratica della Mercatura in Della decima etc., +III, 3). These had compulsory circulation in China. The great Mongolian khans here +became acquainted with paper-money. (<hi rend='italic'>M. Polo</hi>, II, 21.) Thus, +especially in Persia, where refusal to accept such money and the imitation of it was +punished with death (1340). Compare <hi rend='italic'>Ferishta</hi>, ed. +<hi rend='italic'>Briggs</hi>, I, 414 ff. <hi rend='italic'>d'Ohsson</hi>, Hist. des +Mongols, IV, 101 ff.; II, 487. Even here there occurred cases of state bankruptcy +and finally withdrawals of the depreciated paper. (<hi rend='italic'>Klaproth</hi>, +loc. cit.) In Japan, according to <hi rend='italic'>Oliphant</hi>, Narrative of L. +Elgin's Mission to China and Sapan (1859), all foreign coins were required to +be exchanged against paper-money at the offices of the state bankers.</note> +</p> + +</div> + +<pb n='443'/><anchor id='Pg443'/> + +<div> +<index index='toc' level1='Section II. Advantages And Disadvantages Of Paper Money.'/> +<index index='pdf' level1='Section II.'/> +<head type='sub'>Section II.</head> +<head>Advantages And Disadvantages Of Paper Money.</head> + +<p> +Where it is at all possible to give paper money the same +purchasing power as metallic money possesses, it is unquestionable +that the former must have many advantages over the latter. +True, paper money is very inconvenient for small +amounts;<note place='foot'>Adam Smith mentions North American paper money of the amount of +1 shilling, and Yorkshire bank notes of the amount of 1-½ shillings. Sweden +had, until 1828, notes of 28 <hi rend='italic'>pfennigs</hi>.</note> +but all the more convenient for large amounts, as +well for purposes of counting as for purposes of the storing +up of values and for transmission from place to place; a matter +of greater importance in proportion to the badness of a country's +means of transportation, and to the cheapness of the metal +of its currency hitherto.<note place='foot'>Hence in Sweden, with its copper standard +of long duration, the system of banks of issue was developed very early. The +transport-notes (<foreign lang='de' rend='font-style: italic'>Transportzettel</foreign>) +(to be found in that country as far back as 1661) of the Stockholm bank are considered +the oldest bank notes. Compare, however, <hi rend='italic'>Palgrave</hi>, +in the Statist. Journal, 1873. When, in 1768, Catherine II. introduced paper +money into Russia, the people gladly paid ¼ per cent. exchange to the state +treasury for it. (<hi rend='italic'>Brückner</hi>, in +<hi rend='italic'>Hildebrand's</hi> Jahrbücher, 1863, 49.) According to +<hi rend='italic'>Cancrin</hi>, Oconomie der menschl. Gesellschaft, 116, private +individuals in from four to five months exchanged 40 millions of silver roubles for paper. +And thus, in 1780, Berlin bank notes stood a few per cent. above par, and the notes +of the S. Carlos-Bank, in 1788, from 1 to 1-½ per cent. (<hi rend='italic'>Rau</hi>, +Archiv., II, 161.)</note> It seems a still more important matter +to most people that paper money dispenses with the use of a +great quantity of the precious metals for purposes of circulation, +which can now either be turned into utensils, etc. in the +country itself or used in foreign countries to make investments +of capital there, or in the purchase of commodities.<note place='foot'>When +at times in which paper money is looked upon with diffidence, +peasants and others bury their metallic money, this advantage of course is +lost. On the other hand, the exportation of precious metal money, caused +by the emission of paper money, must not be considered a necessary evil, +but rather as the condition precedent which in most cases makes the above +advantages of the paper money possible for the first time. Compare <hi rend='italic'>Ad. +Wagner</hi>, Die russische Papierwährung (1868), 22, 24, 33. +<hi rend='italic'>Ricardo</hi>, Proposals for an economical and sure Currency, 1816, +estimated that England, after the abolition of the bank restriction, needed twenty +million pounds sterling. The interest on this amount of capital inclusive of wear and +tear etc., should be estimated at at least ten percent.; that is for the whole kingdom +at at least from two and one-half to three millions a year. On this +<hi rend='italic'>Ricardo</hi> founded his proposal to base the bank notes on gold bars. +In its time, the essay: Guineas an unnecessary and expensive Incumbrance on Commerce, or +the Impolity of repealing the Bank-Restriction Bill considered (London, 1802), met with +great approval.</note> In national +<pb n='444'/><anchor id='Pg444'/> +economies whose commerce is a growing one, the same +advantage finds a negative expression in this, that they are not +compelled to satisfy the increasing demand for money by procuring +costly metals.<note place='foot'><hi rend='italic'>Adam Smith</hi> calls attention to +the analogous case in which a manufacturer +replaces a costly machine by a cheap one, sells the former and employs +the difference between the old one and the new in enlarging his +business. (W. of N., II, ch. 2.) When, indeed, all nations have introduced +the use of paper money, the greater portion of the advantages which the one +nation was able to obtain by its means cease, and the only ultimate result is +a depreciation of the value of money and of the precious metals. Formerly +the advantage reaped by the single nation that emitted paper money was +greater than its share in the depreciation. (<hi rend='italic'>Wolowski</hi>, Enquête +de 1865, 108.)</note> Of the individual members of the nation, +all these advantages of convenience will be experienced +by those who employ the paper money. The economical or +saving advantages of paper money are appropriated by the +issuers to themselves, in the form of a non-interest bearing +loan, which they make to those owners of money or to those +who are entitled to a money-claim and to whom the paper +money is acceptable instead of cash money.<note place='foot'>When +E. Seyd calls bank notes more costly than metallic money, because +the former in England require an outlay for administration of 1-½ per cent. +per annum, while the wear and tear of metallic money amounts to 1 per +cent. only in 20 years (Statist. Journal, 1872, 511), he overlooks the loss in +interest and the costs of coinage in the latter case.</note> A diminution +for instance of the number of bank notes or of state paper +<pb n='445'/><anchor id='Pg445'/> +money does not diminish the available capital of the people. +Its only effect is that a smaller portion of it is at the disposal +of the bank or of the government. +</p> + +<p> +But in contrast with these advantages are the great disadvantages, +since paper money is wanting in most of those +properties which originally made the precious metals the best +instruments of exchange and the best measures of value. In +addition to this, paper money may be increased at pleasure, +and at almost no cost; and an occasional surplus of it cannot +flow either into other branches of employment (as a surplus of +metallic money may into utensils, ornamentation, etc.) nor into +other countries. And thus the constancy of value of paper +money, that is, one of the chief requisites of all good money, is +imperiled in the highest degree. True, the payment-power, +or <q>legal tender</q> character given such money by the state +may certainly supplement in some way its matter and form-value. +But this supplement or addition constitutes, in the case +of large amounts<note place='foot'>Related to this +is the fact that in France, during the assignat-crisis, the +large bills of 10,000 francs were harder to get rid of than the small ones. +(<hi rend='italic'>A. Schmidt's</hi> Pariser Zustände, III, 22.)</note> +a small quota; or else the quantity of money +as compared with the amount of money needed for commerce +would have to be fixed very accurately; a thing of peculiar +difficulty in the case of paper money, which is almost costless.<note place='foot'>The +numbering of paper money. A state which should neglect this +would not only reserve to itself the possibility of an unlimited increase, but +would surrender all control of its officials charged with the emission of the +paper money. <hi rend='italic'>Law</hi>, Trade and Money, 162, advises that a large +money reward should be paid to any one who should show the existence of a higher +number than allowed by law, or of a duplicate number. And indeed, as +comptroller-in-chief, he caused the <foreign lang='fr' rend='font-style: italic'>prévôt +des marchands</foreign> to be removed, because charged with the duty of burning +the paper withdrawn from circulation, he (the <foreign lang='fr' +rend='font-style: italic'>prévôt</foreign>) noticed that the same number reappeared +several times.</note> +</p> + +</div> + +<pb n='446'/><anchor id='Pg446'/> + +<div> +<index index='toc' level1='Section III. Kinds Of Redemption.'/> +<index index='pdf' level1='Section III.'/> +<head type='sub'>Section III.</head> +<head>Kinds Of Redemption.</head> + +<p> +While precious metal money carries, so to speak, by far the +greater portion of its value in itself, and this to such an extent +that it appears on the inscription found on its face, the inscription +found on paper money is almost the only reason of its +value.<note place='foot'>If a traveler wished to pay his inn-keeper in the note of a +bank entirely unknown in the place, the latter would certainly refuse it. If, on the other +hand, the traveler were to offer him a silver coin, the stamp and inscription +of which were not familiar, still it would be taken at the value of the metal +it contained, after deduction made of the costs of testing it, re-coining it, and +compensation for the trouble caused. Ignored by <hi rend='italic'>Berkeley</hi>, who, +indeed, considered metallic money nothing but <q>counters</q> or tickets (Querist, No. +23, 26, 441, 475), and who ascribes important advantages to paper money,—which +by <q>stamp</q> and <q>signature</q> is made as costly as gold (440)—over metallic +money (226).</note> (Credit-value.) The issuer promises in one form or another, +expressly or tacitly, that he intends to redeem the note, +almost valueless in itself, in real goods; and the value of this +promise depends on the probability of its fulfillment.<note place='foot'>Any +person who has witnessed a tax-execution, or sale of property for the non-payment of +taxes (<foreign lang='de' rend='font-style: italic'>Stuerexecution</foreign>) will admit +that a tax receipt is at least as real goods as an umbrella or a glass window that +protects one from the storm. <hi rend='italic'>Michælis</hi> considers the amount of +running payments to the state for duties, taxes etc., as the only right basis for +full-value paper money. (Berliner Vierteljahrsschrift, 1863, III.) Better yet when +<hi rend='italic'>Höfken</hi> advises that only as much paper money should be issued as +amounted to the average balance (<foreign lang='de' +rend='font-style: italic'>Bestand</foreign>) in the national treasury. The tax-basis is +defended with great warmth by <hi rend='italic'>L. Stein</hi>. Louis XIV., in 1704 +issued paper money bearing 7 per cent. interest, the acceptance of which by all the +royal officers of the treasury was prohibited! (<hi rend='italic'>Dutot</hi>, +Réflexions, 863, Daire.) <hi rend='italic'>Law</hi>, Trade and Money (1705) ascribes to +parcels of land the greatest constancy of value, because they cannot be replaced, +because they can be neither increased nor decreased, and because they help to produce all +other goods (p. 170). While silver cannot but depreciate, they have a prospect but to +rise (188). Hence <hi rend='italic'>Law</hi> recommended notes based on parcels of land +as the best money. (163, 191, 195.) Similarly, <hi rend='italic'>Benjamin Franklin</hi>, +Modest Inquiry into the Nature and Necessity of a Paper Currency: and the Paper Money of +Pennsylvania, New York and New Jersey was actually based on parcels of land, and was to +be extinguished by the enfeoffed owners, and the interest paid by them. +(<hi rend='italic'>Ebeling</hi>, Gesch. und Erdbeschreib, von N. Amerika, III, 621, IV, +649.)</note> The +only fully satisfactory kind of redemption consists in this, that +every holder of the paper money may, immediately on demand, +obtain its nominal value in good current metallic money. +This only can, in the long run, keep paper money up to its full +nominal value. But experience teaches that even with less perfect +modes of redemption, paper money may maintain a part of +its nominal value, and a part greater in proportion as the following +conditions are approximated to: freedom from personal +considerations, the immediateness of the redemption, and currency +of the goods by means of which redemption is effected. +Thus, for instance, the acceptance of paper money for all debts +due the state, in countries where taxation is heavy, where +there are large state industries etc.; where the lands of the +state are farmed out etc., has a great influence on its course of +exchange. Redemption in parcels of land is a very imperfect +<pb n='447'/><anchor id='Pg447'/> +one, not only on account of the great differences in the value +of pieces of land according to quality, situation, the times etc., +but also because only a very small number of men, especially +where money is the usual medium of exchange, are in a condition +to accept parcels of land.<note place='foot'><hi rend='italic'>F. Renonard de Ste +Croix</hi>, Voyage aux Indes orientales (1810), I, 32, describes +a species of paper money based on parcels of land which had lost 40 +per cent. of its nominal value, although the holders of them were invested +with the fief at only one-half their value. The French <hi rend='italic'>mandats +territoriaux</hi> of 1796, declined in five months to 5 per cent. of their nominal +value, although they contained the provision that the holders might, without public sale +(<foreign lang='fr' rend='font-style: italic'>Auction</foreign>), have a certain amount +of the national estates allotted to them in exchange for the <foreign lang='fr' +rend='font-style: italic'>mandats</foreign>. The assignats were still more defective after +their redemption (at the <hi rend='italic'>Caisse de l'extraordinaire</hi>), which was +at first intended, and their drawing of interest were not fulfilled. Leaving the tax-basis +out of consideration, the notes might, at the sale of the national estates, +be brought in as means of payment: a thing which would not have been inoperative, +provided the amount of the paper money had been strictly limited to +the price of the pieces of land estimated in money. On the 1st of April, 1790, +400,000,000 francs in assignats were issued, and in September, 800,000,000 +more, both together about equal to the secularized property of the church. +(<hi rend='italic'>Ad. Schmidt</hi>, Pariser Zustände, II, 97.) But as afterwards all +proportion between these two magnitudes ceased, or rather as up to January 1, 1793, +3,626,000,000 assignats were issued; up to September, 1794, over 8,800,000,000; +up to September, 1795, 19,700,000,000; and finally up to September, 1796, +45,578,000,000 francs, of which perhaps 6,500,000 were either burned or demonetized, +the price of the national estates on lands must naturally have +risen as vastly as the assignats declined.</note> It is a question whether the +<pb n='448'/><anchor id='Pg448'/> +threat of punishing the refusal to accept paper money, or to +accept it at its full nominal value, can be called a negative +mode of redemption. Certain it is, however, that it is the +most barbarous and in the long run the least efficient mode, +one in which the issuer calculates only on the fear of those +who accept it; and, what is most demoralizing, on the hope +they entertain that they in turn shall be able to dispose of it +to others as timid.<note place='foot'><p>The paper money issued by Colbert's successor, +Chamillard, soon lost on account of its too great amount, 25 per cent. of its value, +spite of the fact that it bore interest, and that ¼ of all payments to private persons +had to be made in it. (<hi rend='italic'>Forbonnais</hi>, Recherches et Considérations, +II, 182.) When the people of the United States, in 1775, issued paper money, it did not +decline in value up to the end of 1776, so long as the amount did not exceed +$20,000,000, as it was considered a matter of honor to take it at par. Afterwards, +when the amount issued continued to increase, not even the law that +a refusal to accept it, or insisting on taking it below par, should be punished +with the loss of the commodity, and that the guilty party should be declared +a national enemy, could keep it from declining in value; so that in May, 1871, +a dollar in specie was worth $200.5 in paper. Compare <hi rend='italic'>Franklin</hi>, +Works, ed. Sparks, II, 421, VIII, 328, 505. +</p> +<p> +France, during the Reign of Terror, on the 2d day of April 1793, threatened +the claiming of a discount in the taking of assignats with six years' +confinement in chains, and on the 1st day of August, on Couthon's motion, +with twenty years' confinement. In addition to this, maximum prices for +the principal necessities of life were fixed and the exceeding of them was punished +by severe penalties; and in France, and still more in the neighboring +conquered countries, there were many persons who preferred to take assignats +instead of payment rather than permit themselves to be robbed by requisitions. +And yet on the 4th of June, 1796, one franc in specie exchanged for +800 francs assignats. Compare <hi rend='italic'>Büsch</hi>, Geldumlauf, III (§ 58 ff., +<hi rend='italic'>d'Ivernois</hi>, Etat. des Finances Française, +1796).</p></note><note place='foot'>The Prussian treasury notes of 1806, by virtue of a +decree published in 1807, were to be taken by all at a rate of exchange to be +officially published from time to time. Between December 1, 1807, and February 28, 1809, +the highest <q>normal course of exchange</q> was 71, and the lowest 27 per cent. In +January, 1815, a refusal to take them at par, except in certain cases, was +threatened with from 500 to 1,000 thalers of a money-fine or from 6 to 12 +months' imprisonment. But indeed, in December, 1812, of 8,000,000 thalers, +there were only 731,625 still circulating. Compare § 7 of the decree of the +19th of January, 1813. In April, 1815, it was ordered that the half of all +taxes should be paid in such notes, or that if not, 8-½ per cent, should be +added as a penalty. This penalty, reduced in 1827 to 1 silver groschen, +was not formally abolished even in 1870, although it had long fallen into disuetude. +There was a run of the owners of the notes in 1830, for redemption, +and again in 1841 and 1848; in 1848 to the extent of at most 40,000 +thalers in one day, and altogether not over 100,000 thalers. +(<hi rend='italic'>Bergius</hi>, in the Tübinger Zeitschr., 1870, 226 ff.) About 1846, +it was estimated that scarcely 1/250 a year of Prussian paper money was presented for +redemption, while ⅓ of the state receipts came in in the shape of paper money. +(<hi rend='italic'>Rau</hi>, Archiv., V, 125, 207.) The Saxon treasury notes never lost +over 2 per cent., although the state treasury redeemed them up to 1804 only at an +<hi rend='italic'>agio</hi> of 9 <hi rend='italic'>pfennigs</hi> per thaler, and +afterwards of 1 <hi rend='italic'>pfennig</hi>.</note> +</p> + +</div> + +<pb n='449'/><anchor id='Pg449'/> + +<div> +<index index='toc' level1='Section IV. Compulsory Circulation.'/> +<index index='pdf' level1='Section IV.'/> +<head type='sub'>Section IV.</head> +<head>Compulsory Circulation.</head> + +<p> +When paper money which is not completely redeemable—and +it is scarcely possible that in the long run it should be +thus redeemable—has sunk below its nominal value, the result +in the case of all private paper money is the bankruptcy (<foreign lang='de' +rend='font-style: italic'>Vermögensbruch</foreign>) of the individual issuing it; in the +case of state paper money, the legal provision that it shall have a compulsory +circulation (<foreign lang='de' rend='font-style: italic'>Zwangcourse</foreign>; +<foreign lang='fr' +rend='font-style: italic'>cours forcé</foreign>).<note place='foot'>Those entitled to +make money claims are either compelled to accept the +paper money at its nominal value or only at its current value for the time +being. In the latter instance, the unjust compulsion is much smaller, but at +the same time the whole expedient is much less productive to the state; and +hence the former is the more usual. It was provided in Austria on the 22d +of May and the 2d of June, 1848, that the former should be the rule, and that +the latter should govern in cases in which gold or foreign silver had been +stipulated for. (<hi rend='italic'>Höfken</hi>, Oesterreichs Finanzprobleme, p. 53.) On +the 7th of February, 1856, it was permitted to contract by express promise for loans +in the metallic currency of the country, both for the interest and the repayment +of the principal. Hence a species of parallel-currency. If it be made +entirely impossible for private individuals to protect themselves against the +compulsory circulation of paper money, the more prudent are forced to send +their capital into foreign countries, which operates very disadvantageously to +poor countries especially. (<hi rend='italic'>Wagner</hi>, Tübing. Zeitschr., 1863, +441.)</note> To what extent +<pb n='450'/><anchor id='Pg450'/> +the real rate of exchange of paper money shall fall in any +case depends not only on the amount issued as compared with +the wants of trade, but also and still more on the degree of confidence +which the state of public affairs inspires.<note place='foot'>Thus, for +instance, the Frederick coins, and for a time the French assignats +were helped by the popular enthusiasm, while Gustavus III., of Sweden, +could give little value to his paper. (<hi rend='italic'>v. Struensee</hi>, Abh., III, +577.) In France, in 1796, 2,400,000,000 <hi rend='italic'>mandats</hi> were issued +instead of all the outstanding assignats; that is, as many as there were assignats at the +close of the year 1792. And yet the latter were then only 25 per cent. below par; +the former, before one month had elapsed, 80, and in nine months, almost 98 +per cent. below par. (<hi rend='italic'>St Chamans</hi>, Nouvelle Essai sur la Richesse +des Nations, p. 150. <hi rend='italic'>A. Schmidt</hi>, Parisier Zustände, III, 121 ff.) +In Austria, in 1811, the volume of paper money was contracted, but in a manner so violent +and destructive of credit that its rate of exchange did not rise in consequence. +(Tub. Zeitschr., 1763, 1874.) After 1848, also, the rate of exchange +of Austrian paper money was much more perceptibly influenced by the +variations in the political state of affairs than by the changes in its volume. +(Tub. Zeitschr., 1856, 129.) In the summer and winter of 1866, about +650,000,000 paper rubles circulated, with scarcely any increase or decrease; +and yet the ratio of exchange was, during a part of the summer, 66, and in +winter, 84 per cent. of the silver value of the ruble. (<hi rend='italic'>Wagner</hi>, +Russ. Papierwährung, 74.) Instances in which the increase in the price of commodities +began to be more general only after the volume of paper money had +decreased; in Austria, in 1851 and 1866; in Russia, in 1857 (loc. cit).</note> The first +consequence attending a depreciated currency is, that the good +precious metal money is withdrawn from circulation and even +from the country; for the reason that it cannot maintain its +true value side by side with the paper money; the usual effect +in all untenable mixed standards or currencies.<note place='foot'>Then +precious metal money becomes a commodity of which great stores +may be collected in the country itself, at the banks, but chiefly for foreign +trade. It is said that Austrian business men in 1860 and the following years +invested <q>hoards</q> to the amount of several hundred million florins in exchange +on metallic-currency countries. (Tüb. Zeitschr., 422.) Good paper +money will never drive out the whole supply of cash money out of a country, +because a good portion must always be kept for purposes of redemption; +depreciated paper money operates much farther in this direction. Even the +exportation of small change may become a profitable speculation as soon as +the amount of depreciation of paper money exceeds the seigniorage. Then +usually small change of a worse kind is stamped, as, for instance, in Austria, +copper instead of silver; and in 1860, 12 millions florins of paper small +change. Here the exportation of the better money is not a consequence, but +the motive to the manufacturing of the worse.</note> A second, and +<pb n='451'/><anchor id='Pg451'/> +worse consequence is the unrightful revolution produced in so +many income and property relations, based on old contracts, to +the advantage of the debtor, to the disadvantage of the creditor, +and of those who receive nominally fixed salaries.<note place='foot'>During +the assignat-period it could happen that a land owner, after the +term for which he had farmed out his land, might be compelled to surrender +it to the farmers, for the reason that the taxes, requisitions, etc., paid by the +farmers, amounted to more than the farm rent. In the case of the former, +the calculation was based on the recent depreciated value of the assignats; +in the case of the latter, on the higher value the assignats had at the moment +that the contract was concluded. (<hi rend='italic'>Büsch</hi>, Geldumlauf, III, 62.) A +writer in the Revue des deux Mondes, April 15, 1865, thinks that one reason why +the American civil war was so popular in the northwest was because the +paper money issued during the rebellion made it easy for that part of the +country to pay off the mortgage-debts which had burthened it since 1848. +Even of the two law catastrophes, <hi rend='italic'>Duclos</hi>, in his memoirs, remarks +that they produced a great admixture of those who had been formerly separated +by differences of class and wiped out the previous ideas of decorum, fitness, +etc.</note> These consequences are in kind similar to those produced by the clipping +of the coin; but in degree they are much more dangerous.<note place='foot'>During +the time that the clipping of the coin was practiced, it is scarcely +possible to show that money was debased below 11 per cent. of what its value +should have been. See, on the other hand, § <ref target="Section_3">3</ref>. In Austria, +in 1810, a person had to give 1,200 florins in paper money for 100 florins in silver. +(Tüb. Zeitschr., 1861, 593.) In North America, in 1781, it took $280 in paper to +purchase $1 in silver. (<hi rend='italic'>Ebeling</hi>, Gesch. und Erdbeschreib., von +N.A., 1856, III, 580; IV, 440; V, 437.) During the American civil war, the paper money +of the Southern States declined to ½ (December, 1863) and even to 1/35 (October, +1864) of its nominal value. Compare <hi rend='italic'>Hock</hi>, Finanzen der V. Staaten, +514 ff. Observed even by <hi rend='italic'>Storch</hi>, Handbuch, +<hi rend='italic'>Rau's</hi> translation, III, 141 ff. (See, on the other hand, +<hi rend='italic'>C. King</hi>, Thoughts, p. 113.) In Paris in July, 1795, +the greater number of commodities estimated in assignats were worth as +much as if the rate of exchange of the latter was 6-14 per cent. of their +nominal value, while it actually amounted to only 3-½ per cent.</note> +Besides, the depreciation of paper produces, by no +means, an equal rise in the prices of all commodities. The +prices of those commodities, the sellers of which are most +favorably situated in the struggle for prices, rise earliest and +highest. This is true especially of foreign commodities, also +of those inland commodities which can be easily exported, +and most particularly of those commodities which have the +<pb n='452'/><anchor id='Pg452'/> +greatest capacity for circulation, for instance, gold and +silver.<note place='foot'>Where an <hi rend='italic'>agio</hi> of exchange of metallic +money as compared with paper is prohibited, the decline of the latter will manifest +itself not only in foreign rates of exchange, but also in the price of bars of the +precious metals.</note> +Hence, it would be a great mistake in countries where there +is an irredeemable paper currency with compulsory circulation, +to measure its purchasing power at a special discount as +compared with the precious metals. Therefore, a depreciated +paper currency has transitorily an effect on industry similar to +that of a protective tariff, and even as the payment of export +premiums; inasmuch as it enables manufacturers to permit a +part of their cost of production, viz.: that which they have to +pay their workmen, their older creditors, and in part, also, +their furnishers of raw material, to rise in a less degree than +the paper money has declined in value.<note place='foot'>The changes +of the agio or premium depend mainly on the supply and +demand of the precious metals, that is, on the extent and intensity of the business +transactions which have to be made in these metals themselves. +(<hi rend='italic'>Wagner,</hi> Russ. Papierw., 87.) Hence, for short periods of time, +it may be said in a paper currency country, that business transactions based on cash money +have a great element of variation in them. (<hi rend='italic'>Wagner</hi> in +<hi rend='italic'>Bluntschli's</hi> Staats-wörterbuch, III, 971.) The purchase and +lease-hold prices of fixed capital, of houses, for instance, rise much less because most +people look upon the distress as transitory, and of short duration. (<hi rend='italic'>A. +Walker</hi>, Sc. of W., 133.) In Austria in 1859, the rise of the agio of exchange of +silver from par to 40 per cent., and its subsequent fall within 7 months to 20 per +cent., left the price of coin almost entirely unaffected. (<hi rend='italic'>A. +Wagner</hi>, Gött. Anz., 1860, 114.) That country people in general suffer more from a +bad paper currency than the towns people and inhabitants of cities, see +<hi rend='italic'>Bonamy Price</hi>, Currency and Banking, 175, seq. In the northern +states of the American union, in 1864, 12 home kinds of commodities had risen 148 per +cent., 7 foreign kinds of commodities, 164 per cent., and 7 which could be obtained only +from the southern states, 353 per cent. (<hi rend='italic'>v. Hock</hi>, 186 seq.) As +too great issues of paper money are so frequently made on account of war, it is +comparatively easy to understand why it is that articles for which war creates a demand +should rise in price very soon and very high; while the very opposite happens +in times of taxation-distress, in the case of a great many articles of luxury, +which can readily be dispensed with. <hi rend='italic'>Büsch</hi> remarks (Werke, VII, +91), that retail dealers frequently raise their prices in order not to be obliged to +pay out so many small coins as change for the paper dollar.</note> This is indeed a very +inequitable advantage accorded to private individuals in the +<pb n='453'/><anchor id='Pg453'/> +face of the universal distress of the country.<note place='foot'>Compare +<hi rend='italic'>Hufeland</hi>, N. Grundlegung, II, 241. Self-seeking undertakers +(<foreign lang='de' rend='font-style: italic'>Unternehmer</foreign> = men of enterprise) +have, on this account, both in Austria and Russia (<hi rend='italic'>Wagner</hi>, Russ. +P.W., 105), but more so in North America (<hi rend='italic'>v. Hock</hi>, 556 ff.), +opposed measures intended to restore values (<hi rend='italic'>Valuta</hi>), on the +ground that they were anti-national. Even <hi rend='italic'>Sperausky</hi> experienced +this in 1809, when he published very correct ideas on paper money, while in the +<q>fairy</q> times of Catherine II., no one even thought that state paper money +is a state debt. (<hi rend='italic'>Bernhardi</hi>, Russ. Geschichte, II, 2, 636.) One +of the principal representatives of this course is <hi rend='italic'>H. C. Carey</hi>, +Our Resources (1866), and in the New York Herald, 1865. On the other hand, +<hi rend='italic'>Faucher</hi> rightly calls the more active exportation of countries, +with a bad paper currency, an exportation of barbarous nations, the commerce of misery, +to which any price paid in metal or in any higher-standing product of civilization is +acceptable. (Vierteljahrsschrift, 1868, IV, 167.) The nation in the aggregate loses in +international trade for the simple reason that its foreign creditors will accept +its paper money at most at its current rate of exchange against specie, while foreign +debtors force it upon the nation at its nominal value.</note><note place='foot'>The +different provinces also of a large empire may have very different +degrees of depreciation of the same paper money. Thus, in the interior of +Russia its rate of exchange against specie had for a long time not declined +beyond 50 per cent. of its nominal value; while the foreign rate of exchange +supposed a decline to 33-⅓ per cent. (<hi rend='italic'>Cancrin</hi>, Weltreichthum, +68.)</note> And these bad +consequences are aggravated by the downward-path principle +which a depreciated paper money always involves. The +state whose financial distress introduced the evil, sees a great +portion of its revenues melt away before its eyes;<note place='foot'>An enhancement of +duties, taxes (<foreign lang='de' rend='font-style: italic'>Abgaben</foreign>) etc., +will seldom be able to +progress in the same measure as the paper money sinks; in any case, a law +would be necessary to effect this, which, however, comes always later than +the decline. (<hi rend='italic'>Sismondi</hi>, Du Papier Monnaie, 27.)</note> while in +what concerns its outlay, nothing is more calculated to mislead +it than such an imagined creation out of nothing. And a +thing which greatly contributes to this its the frightful sensitiveness +of a depreciated paper currency in the presence of +complications of foreign politics, a quality which may cause +the government as many inconveniences from without as the issue of its paper money +produced conveniences to it at home.<note place='foot'><hi rend='italic'>Wagner</hi>, +Russische Papierwährung, 142, estimates that the Crimean war +depreciated the average current rate of exchange of Russian paper money +by 11.1 per cent., the Italian war of 1859 by 14.5 per cent., the German war +of 1866 by 19.4 per cent., spite of the fact that Russia did not participate directly +in the last two wars.</note> +<pb n='454'/><anchor id='Pg454'/> +Hence recourse is had to additional issues of paper, which are +easily increased in the same measure as the rate of exchange +(<hi rend='italic'>Cours</hi>) has declined.<note place='foot'>The +more than forty-five milliards French assignats, estimated at their +rates current, really produced to the state only about six milliards. +(<hi rend='italic'>Gentz</hi>, Histor. Journ., 1800, II, 317, after +<hi rend='italic'>Lecoulteux</hi>.)</note> Great private interests operate in the +same direction. Between the increase of the volume of the +paper currency in circulation and its consequent depreciation, +some time always elapses; and in the mean time, either the +purchasing power of the money-owner or his loaning capital +is really greater than before. The former increases the demand +for commodities, the latter facilitates their coming into +existence. However, the flight of speculation with which the +increase of paper money is wont to be accompanied<note place='foot'>Very well +explained by <hi rend='italic'>H. Thornton</hi>, Paper Credit of Great Britain, ch. +10. As to how, in Austria, the paper-money crisis contributed to bring the +rigid national resources into a molten state, and to shake off the national inertia +by the feeling of insecurity, see <hi rend='italic'>Buquoy</hi>, Theorie d. Wirthschaft, +1816, 347 ff. <hi rend='italic'>Schäffle</hi>, System, 3 aufl., 254 seq., thinks that +if Austria should first adjust its values, and then, in case of another war, have +recourse to a second depreciation, the disastrous disturbances of its national economy +consequent herein would be produced twice instead of once, and not without +reason.</note> in the +beginning depends on an error shared by many men as to its +true value. Hence it does not last long, and the critical shriveling +up of the inflated bubbles is greater in proportion to +what the previous dimensions of these bubbles were. And +now many believe that the nation's business or economy +might be kept on its course by new emissions of paper money; +and the wise ones hope, at least, to be able thereby to postpone +the catastrophe long enough to enable themselves to get +their property into a safe condition. And in fact, the restoration +of a depreciated currency is accompanied by crises entirely +similar to those which followed its first decline; only +they are in an opposite direction.<note place='foot'>The Prussian +treasury-bills stood, in June, 1809, at 36 per cent. of their +nominal value; June, 1810, 84-½ per cent.; January, 1812, 13-½; December, +1812, 44-½; June, 1813, 26-½; July, 1813, 24-½; December 31, 1813, 49-½; +January, 1815, 88; January 5, 1816, 99 per cent. Austrian paper money expressed +in terms of metallic money, amounted, on an average, between 1849 +and 1855, to 292,000,000 florins: but at certain moments, it fluctuated from +231,000,000 to 337,000,000. (Tübing. Zeitschr., 1856, 124.) The agio of +silver fluctuated during the <hi rend='italic'>Bancozettel</hi> (bank-billets, a species +of Austrian paper money) period from one day to another on Change 40 and even 100 per +cent.: thus, on the news of Napoleon's entry into Paris, between the 25th of +March and the 4th of April, from 330 to 440; on the receipt of the news of +the result of the battle of Waterloo, in three days, from 458 to 412; after +Napoleon's abdication, from 412 to 320. (<hi rend='italic'>Gentz</hi>, Werke, V, 62.) +<hi rend='italic'>Huskisson</hi> +rightly calls a depreciated paper currency a much worse thing than clipped +coin: the clipping of the coin is, so to speak, one great blow after which +people can again calculate with certainty; but bad paper money is one continual +fluctuation.</note> And hence conscientious +<pb n='455'/><anchor id='Pg455'/> +statesmen are frequently deterred from seeking to effect such +a restoration. Yet the darkest side of a paper currency severed +of due connection with precious metal-money consists in +the frequent and violent fluctuations of value to which it is +subject.<note place='foot'><q>The only difference here is that it is not +left to individuals to say whether they will join in the game or not.</q> +(<hi rend='italic'>Helferich.</hi>)</note> The consequence of these fluctuations is, that +every commercial transaction, every credit-transaction, and +even every act of saving, in which money plays any part, is +made to bear the impress of a game of chance;<note place='foot'>During +the later assignat-period every house was full of commodities, +every pocket of samples; every <q>exquisite</q> and every lady was a merchant, +because no one had any further confidence in the money. People had retrograded +to the barbarous condition of trade by barter. (<hi rend='italic'>Goncourt</hi>, +Histoire de la Société française pendant le Directoire, 1854.) The French constitution +of 1795 fixed the salaries of members of the Directory at the value of 50,000 +<hi rend='italic'>myriogrammes</hi> of wheat (art. 173, 68). In Delaware, while the +depreciation of paper money lasted, farm rent was usually required to be paid in produce. +(<hi rend='italic'>Ebeling</hi>, V, 37.)</note> a consequence +of far and deep reaching influence, especially in the +higher stages of civilization, where the importance of commerce, +of the credit-system, and of money-economy as contradistinguished +from barter-economy is so great; producing +there a state of uncertainty which is otherwise peculiar only +<pb n='456'/><anchor id='Pg456'/> +to barbarous medieval times.<note place='foot'><q>Of all contrivances +for cheating mankind, none has been more effectual than that which deludes +them with paper money.</q> (<hi rend='italic'>D. Webster.</hi>) The +American Secretary of the Treasury, <hi rend='italic'>McCulloch</hi>, says, in the +report of December 7, 1868, of the legal tender notes: <q>there can be no doubt that +these acts have tended to blunt and deaden the public conscience, and they are +chargeable in no small degree with the demoralization which so generally +prevails.</q> <hi rend='italic'>Niebuhr</hi> attributes the decline of old Spanish +honesty which was formerly so much relied on in all great money centers, principally to +the <hi rend='italic'>vales</hi>. (Nichtphilol. Nachlass, 489.)</note> All this +discourages the best business men and the best husbandmen more than it does +any other class of people, and demoralizes the whole economy +of a nation; and demoralizes it the more in proportion as it is +easier for the state to influence the value of paper money as +compared with specie, and as its influence is more irresistible.<note place='foot'>This +calls to our mind the impersonal mass-crimes to which our own +times so frightfully incline, when many a man who would recoil in horror +from an ordinary act of pocket-picking or from manslaughter with intent to +commit larceny, robs thousands in cold blood by means of a swindling enterprise, +or, for the sake of a fraudulent insurance, destroys the lives of a +whole ship's crew.</note> +The compulsory circulation of paper money is a much more +powerful and yet a much more simple screw by means of +which to practice extortion than is the most burdensome taxation +or forced loan, and at the same time the most comprehensive +power which a government can possess to carry out +both these measures. (<hi rend='italic'>Ad. Wagner.</hi>) +</p> + +<p> +All the horrors of the later Roman republic, the draining +of the provinces by robber-governors with their publicans +and sinners, the building up of monstrous fortunes without +any production proper, but through usury and rapine alone: +all this is made to revive again through the instrumentality of +the national-economic disease called a paper crisis, in a less +violent form, indeed, but in one which is much more insidious +and scarcely less pernicious. +</p> + +</div> + +<pb n='457'/><anchor id='Pg457'/> + +<div> +<index index='toc' level1='Section V. Resumption Of Specie Payments.'/> +<index index='pdf' level1='Section V.'/> +<head type='sub'>Section V.</head> +<head>Resumption Of Specie Payments.</head> + +<p> +The healing of such a paper-money disease as we have described, +it has been endeavored to effect in three ways more +particularly. +</p> + +<p> +A. By the reduction or bringing back of the depreciated +paper money to its full nominal value. And this is best done +by gradually drawing paper money into the state treasury by +means of taxation or by loans, and refusing to allow such paper +money to be again issued. The consequent rise in the +rate at which the outstanding paper money notes exchange +against specie is produced not only by the diminution of the +quantity of paper in circulation, but also by the increasing +confidence in the future which such a governmental measure +inspires.<note place='foot'>Saxon loans of two million thalers treasury notes +(<foreign lang='de' rend='font-style: italic'>Kassenbillets</foreign>), August, +1813, which were then to bear interest in silver and to be paid in silver. The +purchase of the precious metals, or loans made by the state in foreign countries, +with the intention of redeeming paper money, effect the same end at a +much greater cost. (<hi rend='italic'>Peschel</hi>, D. Vierteljahrsschrift, 1858, +III, 254.) If the currency consists of bank notes endowed by the state with compulsory +circulation and an irredeemable character, such a metallic loan made in order +to reimburse the bank for a loan to the state in depreciated notes is a gift +made to the bank without reason; and the metallic money brought into the +country flows back into foreign parts when the bank restriction is removed, +because it, together with the appreciated notes, creates a too abundant +circulation.</note> While this mode of procedure has in the abstract +most in its favor, yet it is not to be recommended in practice +except where the depreciation of paper money has either not +gone very far or where it has existed only a short time.<note place='foot'>Although +in England the suspension of the redemption of notes had +lasted from 1797 to 1819, depreciation of notes during the greater part of this +time either did not occur at all (Summer of 1797 to 1799, 1802 ff.) or was very +small; and even during the last five war years, it did not amount to much +over 30 per cent. About 1817, the notes of themselves again rose to par, +and had lost but little during the following years, in consequence of the great +loans of the continental powers in the English market. Under such circumstances, the +repeated promise of the state to make the notes redeemable at +their full nominal value was certainly a cogent reason for the Peel's Act of +1819. In favor hereof are especially <hi rend='italic'>Tooke</hi>, Hist. of Prices, II, +p. 60 ff., and <hi rend='italic'>J. S. Mill</hi>, Principles, III, ch. 13. Opposed to +it, the so-called Birmingham-Atwood school and also <hi rend='italic'>Lord +Ashburton</hi>, in his statement before the Agricultural Committee, 1836. But according +to <hi rend='italic'>Rob. Muschet</hi>, Tables, exhibiting +the Gain and Loss to the Bondholders arising from the Fluctuations in +the Value of the Currency (1826), the state creditors, on the whole, lost more +by the depreciation of the notes than they gained by their subsequent rise. +<hi rend='italic'>Ad. Wagner</hi> also is decidedly in favor of the course A.</note> +<pb n='458'/><anchor id='Pg458'/> +Otherwise the revolution in all property-relations and the disturbance +of all rightful speculation—always dangerous and +easily abused—produced by the depreciation would be repeated +by the restoration of values, with this difference only +that the disturbance would be produced the second time in an +opposite direction. And that those who were previously injured +should now be compensated for the damage sustained in +the first instance is impossible in proportion as the depreciation +has been of longer duration. Many of the sufferers from the +effects of depreciation are now compelled, even as tax-payers, +to contribute to the enrichment of the speculators who have +accumulated the depreciated paper into their own hands. +</p> + +<p> +B. The extreme opposite of such a course would consist in +this, that the depreciated paper should be allowed to go on +sinking lower and lower until it was practically worthless, +whereupon a new currency, whether of metal or paper, +would have to appear like a new world after the waters of a +deluge had been abated. Hence, therefore, one of two things: +universal bankruptcy entered into with the clearest purpose, +or the resignation of despair!<note place='foot'>This has +occurred not unfrequently in the case of the paper money of +subdued revolt: thus, for instance, the Hungarian of 1849; in the case of the +Southern Confederacy. But the assignats, too, came to this end, although, +according to <hi rend='italic'>Büsch</hi> (Werke IX, 526), the intentions of the country +at first were good; and in Austria, in 1810, many prophecies looking in this direction +were made. (Per contra <hi rend='italic'>Rehberg</hi>, Sämmtl. Schriften. IV, 334.) Not +very differently did it fare with the Swedish coin-tokens (<foreign lang='de' +rend='font-style: italic'>Münzzeichen</foreign>) of Charles XII, which were altered 7 +times between 1715 and 1718; and where besides, the tokens called in in a much too short +space of time were transformed into small change coins 1/32 their value hitherto. +(<hi rend='italic'>Brückner</hi> in <hi rend='italic'>Hildebrand's</hi> +Jahrb. 1864, I, 161, ff.)</note> +</p> + +<pb n='459'/><anchor id='Pg459'/> + +<p> +C. The middle course between these two has, therefore, been +most frequently pursued, viz.: <hi rend='italic'>the legal reduction</hi> of the value of +the coin (<foreign lang='de' rend='font-style: italic'>gesetzliche Devalvirung</foreign>), +which consists in reducing +the nominal value of paper money to its current value at the +moment the law goes into force, and by redeeming it either in +specie or in other paper to be issued in smaller quantities.<note place='foot'>Thus +it was, for instance, in Austria, in 1811 and 1820, at 1/5 and 2/5 of the +nominal value, in 1799 in the United States, in 1813 in Denmark with the +currency notes (<foreign lang='de' rend='font-style: italic'>Courantzettel</foreign>), +in 1816 in Norway with the royal bank dollar notes, in Sweden in 1814 with the bank +notes (<foreign lang='de' rend='font-style: italic'>Bancozetteln</foreign>) at 37-½ per +cent., in 1839 in Russia with the <hi rend='italic'>bankassignationen</hi>, at 2/7 of +their nominal value. Of theoretical writers this course is recommended among others by +<hi rend='italic'>Jacob</hi>, Staatsfinanzwissenschaft, § 980 ff.; +<hi rend='italic'>Nebenius</hi>, Œff. Credit, 2 Aufl., ff.; Deutsche +Vierteljahrsschrift, 1841, I, 65; <hi rend='italic'>Rau</hi>, Lehrbuch, III, § 528; +<hi rend='italic'>Helferich</hi>, Tüb. Ztschr., 1856, 435 ff. According to +<hi rend='italic'>v. Rotteck</hi>, Lehrbuch, IV +402, it may be assumed that paper money is spread among the people of a +country in proportion to their resources: which is also the hypothesis on +which all direct taxation is based. Hence the gradual depreciation of paper +money operates like the imposition of a tax and the <emph>reduction of value</emph> +(<foreign lang='de' rend='font-style: italic'>Deralvirung</foreign>) +is, so to speak, only the release of the same. Besides <hi rend='italic'>Gentz</hi> +(Werke by Schlezier, IV, 58) shows from the example of Austria in 1811, +that in the case of the taking up of a depreciated paper currency it makes a +better impression to give 100 florins in specie for 1,000 florins in paper, than +200 florins in a new kind of paper. The holders of the old paper money have +now lost confidence in all paper currency. Of similar import is the immediate +abolition of the compulsory circulation of paper money at its nominal +value (<hi rend='italic'>Prince Smith</hi> in <hi rend='italic'>Faucher's</hi> +Vierteljahrsschrift, VII, 126 ff.), and the introduction +of compulsory circulation in accordance with the day's quotations +of the actual value of the paper as compared with specie. +(<hi rend='italic'>Strache</hi>, Die Valuta in Œsterreich, 1861; +<hi rend='italic'>per contra</hi>, <hi rend='italic'>Ad. Wagner</hi>, Tüb. Zeitschr., +1861, 606 ff.)</note> Although +this has been not seldom based on the false principle +that the value of every separate amount of money is inversely +as the aggregate amount of all the money in circulation; yet +it cannot be questioned that it is only the open declaration of +the state bankruptcy which the whole measure involves, and +which in most instances has already happened beyond repair. +Here there is no new and dangerous disturbance of the nation's +economy whatever; and the fluctuations of value in the +<pb n='460'/><anchor id='Pg460'/> +future which are inseparable from the gradual contraction of +the volume of paper, continued until it has reached its nominal +value, are avoided: this last, of course, only on the supposition +that either the pure metallic or the redeemable paper +currency is rigidly adhered to.<note place='foot'>Such measures +as were adopted in Austria, in 1811, where a <q>redemption +and extinction deputation,</q> independent of the government was established +and sworn to prevent a further increase of paper money, are not sufficient +of themselves alone.</note> But the problem, how to protect +both parties<note place='foot'>The Code Civil +(art. 1895) makes the nominal value entirely conclusive; +so, also, the Prussian Landrecht (I, § 790): which is to proclaim the omnipotence +and infallibility of the state power in the most ingenuous or else in +the most brutal manner. The power given by <hi rend='italic'>Puchta</hi> to metallic +value (Pandecten, VII, aufl., § 38) is applicable neither to paper money nor to small +coin; and it ignores entirely that stamped coins and currency money are +something different from mere metallic commodities and even from metallic +bars. The Austrian civil law (<foreign lang='de' rend='font-style: italic'>bürgerliche +Gesetzbuch</foreign>) decides in favor of the current value (986 seq.): +a view which most modern jurists since <hi rend='italic'>Savigny</hi> +(Obligationenrecht, I, 404; earlier yet, <hi rend='italic'>Hufeland</hi>, Ueber die +rechtliche Natur des Geldschulden, 180) entertain. But they even fail to recognize that +the depreciation, for instance, of paper money as compared with specie and general +decrease of purchasing power are identical only in the case of such +paper money or reduced coins which have no compulsory circulation. (<hi rend='italic'>A. +Wagner</hi>, Tüb. Ztschr., 1863, 478 ff.)</note> to contracts entered into at a rate of +the currency different from that under which they are to be performed, +from all damage, is one which will never be perfectly solved. +Hence, of the different measures to economically preserve a +state in cases of extraordinary need, the emission of paper +money with compulsory circulation is much more universally +disastrous to the people than the effecting of loans at the very +highest rate of interest, and even than being in arrears in the +matter of paying the officials and creditors of the state.<note place='foot'>Let +us suppose that at the moment the state could perform its duty to +its servants only to the extent of one half. If it should frankly admit this, +pay one-half in good money and remain in debt for the other half, it might +subsequently, in better times, make good to them or to their heirs what it +had now refused; and thus private credit, from the disturbance of which the +state can only suffer, suffer no diminution. Both are quite different when +the state disguises its insolvency under the mask of apparent full payment +in paper money which has lost 50 per cent. of its nominal value. In opposition +to the myth that the assignats saved France, see <hi rend='italic'>Levasseur</hi>, in the +Acad. des Sc. m. et. p.</note> +</p> + +</div> + +<pb n='461'/><anchor id='Pg461'/> + +<div> +<index index='toc' level1='Section VI. Paper Money—A Curse Or A Blessing?'/> +<index index='pdf' level1='Section VI.'/> +<head type='sub'>Section VI.</head> +<head>Paper Money—A Curse Or A Blessing?</head> + +<p> +Considering the double-edged-sword character of this +mighty instrument,<note place='foot'>It not +unfrequently happens that a nation's paper money has been directly +or indirectly affected by an unfriendly state. Thus for instance, England, in +1794, tolerated an assignat manufactory at Lambeth, while Frenchmen imitated +English bank notes. (<hi rend='italic'>Archenholz</hi>, Aenalen XI, 429.) Napoleon in +1812 issued forged Russian bank notes. (<hi rend='italic'>Cancrin</hi>, Œconomie der +menschl. Gesellschaft, 136. <hi rend='italic'>Niebuhr</hi>, Gesch. der Revolution, II, +314.) When Maria Theresa first wished to introduce paper money, Bolza, her minister of +finance, in his urgent appeal to her to desist from adopting such a measure, +foretold the subsequent bankruptcy etc. (<hi rend='italic'>Mailath</hi>, Oesterr. +Gesch., V., 83.) <hi rend='italic'>Adam Smith</hi> compares gold and silver circulation +to a highway which, indeed, produces nothing directly. Paper money is an advance similar +to that which would be produced by the construction of a machine adapted to the +carriage of persons and goods through the air, and which permit the highways +hitherto used to be turned into meadows, arable land etc. <hi rend='italic'>Ad. Smith</hi> +very strongly emphasizes the insecurity of these <q>Dædalian wings</q> as compared +with the <q>solid ground of gold and silver,</q> especially in the transitory +misfortune produced by war. (W. of N., II, p. 78, Bas.) <hi rend='italic'>David Hume</hi> +says of all paper media of exchange, that they share all the harmfulness of an increase +of specie money, enhancement of the price of commodities, aggravation +of the obstacles to exportation; but that they do not share in the useful +properties of specie money. (Discourses, On Money and on the Balance of +Trade.) The younger <hi rend='italic'>Mirabeau</hi> kept Necker from pursuing his plan +to issue paper money with the words: <foreign lang='fr' rend='font-style: italic'>du +papier monnaie c'est la peste circulante!</foreign> Inconsistent +as Napoleon was in his bank policy (compare <hi rend='italic'>Horn</hi>, Bankfreiheit, +304), he always rejected paper money. As in 1805 he wrote to the minister +of justice: <foreign lang='fr' rend='font-style: italic'>je ne veut pas de papier +monnaie</foreign>: so, in opposition to the minister of the interior, he in 1810 +compared it to the plague: <foreign lang='fr' rend='font-style: italic'>le plus +grandfléau des nations</foreign>. (Acad. des Sciences m. et p., 1864, II, 212.) +<hi rend='italic'>Sismondi</hi>, too, compares paper money to the paper cannons of the +Chinese, which render a cheap service until the hour of danger comes. (N. Principles, +II, 107.) Of the banks he says: <foreign lang='fr' rend='font-style: italic'>les +avantages aussi-legers les dangers aussi graves</foreign>. (Eludes, +II. 421). <hi rend='italic'>Cancrin</hi>, Œkonomie der menschl. Gesellschaft, 1845, 152 +ff., says he thinks that possibly it might have been well never to have established +banks, but that yet the craving for the new is preponderately good, it brings +inventions and improvements with it. Even <hi rend='italic'>Tooke</hi> considers the +insecurity of paper money a disadvantage which more than counterbalances its cheapness. +(Considerations on the State of the Currency, 1829, 85.) On the +doubts of <hi rend='italic'>Jefferson</hi> and <hi rend='italic'>Gallatin</hi>, see +<hi rend='italic'>Wolowski</hi>, Enquête, 170, seq. <hi rend='italic'>Webster</hi> +called paper money <q>the most effectual of inventions to fertilize the rich +man's field by the sweat of the poor man's brow.</q> <foreign lang='fr' +rend='font-style: italic'>Tout papier monnaie par lui même est un mensonage.</foreign> +(<hi rend='italic'>M. Chevalier</hi>, Cours, III, 428.) <hi rend='italic'>M. +Niebuhr</hi> calls banks a poison which should be used with moderation. (Bankrevolution +und Bankreform, 1846, 37.) Compare the writers named in § +<ref target="Section_2">2</ref>.</note> and the frightful consequences which its +<pb n='462'/><anchor id='Pg462'/> +abuse produces, it is easy to conceive why so many political +economists have expressed such serious doubts as to whether, +on the whole, the invention of paper money has been more of +a curse or of a blessing to mankind. The controversy is +an idle one to a certain extent, since no mature nation (or individual), +and no nation which considers itself mature will renounce +the possibility of a brilliant growth simply because it +fears that it may not be able to withstand the temptations to dangerous +abuse connected therewith. Politically, the best safeguard +against such temptation is a so-called moderate constitution, +which compels the supreme power in the state by +wise and appropriate counterweights, to allow all rightful interests +to assert themselves, or at least to find expression; +and itself to make use not only of the most skillful but also of +the most highly esteemed instruments and measures. Such +a constitution, indeed, cannot be made; it must be the ripe +fruit of a long continued and well conducted national life.<note place='foot'><foreign +lang='fr' rend='font-style: italic'>Avec la liberté un peuple n'a jamais de mauvaises +monnaies</foreign> (<hi rend='italic'>F. Lenormant</hi>): entirely so, provided +<foreign lang='fr' rend='font-style: italic'>liberté</foreign> be translated <q>true +and insured freedom.</q></note> +Of the extremes of forms of government, unlimited monarchy +and democracy are about equally exposed to the paper-money +disease.<note place='foot'>Law's giddy projects under +the regents of Orleans and the assignats of the first republic; Austria, Russia and the +United States; the Danish absolute monarchy, and Sweden, both under Charles XII., and +its oligarchical times. The history of Rhode Island paper money is peculiarly scandalous. +All debts had to be paid within two years, or to be held invalid, and juries +were dispensed with in such cases. (<hi rend='italic'>Ebeling</hi>, Gesch. und +Erdbeschreib. von N. America, II, 173 ff.)</note> Aristocracies are less exposed to it, +for the reason that from their very nature they eschew centralization; and the +<pb n='463'/><anchor id='Pg463'/> +paper-money system is intimately connected with the latter. +Nothing so strengthens the central authority as the paper-prerogative +with an unlimited power over the prices of all commodities; +and, on the other hand, whenever paper money is to have a wide +field for action, there is supposed<note place='foot'><hi rend='italic'>Ad. Müller</hi> +compares <q>cosmopolitan</q> metallic money to a universal language: +paper money ties one to the country, as people do not like to travel +in foreign parts when they understand only their native language. As paper +money compels subjects to take an interest in the state, a state like Austria +would act very foolishly if it should begin its reorganization by enhancing +its depreciated values (<hi rend='italic'>Valuta</hi>). (Elemente der Staatskunst, 180, +III, 171; II, 339 ff.) Even in 1830, he found fault with the Austrian loan for the payment +of the paper money. (Briefwechsel mit Gentz, 321 seq.) He lauded +paper money because he claimed it led a country back to the barter And +service-economy of the middle ages. (Verm. Schriften, I, 59 ff.) Similarly, +<hi rend='italic'>Gentz</hi>, in his later writings. Compare +<hi rend='italic'>Roscher</hi>, Gesch., der N. Œk., in +Deutschland, II, 762.</note> a far-reaching +and intimate interwearing of the different members of the +nation's economy with one another. And in what concerns +the various economic stages, paper money is far removed from +all medieval times; and for the same reasons that make external +commerce here preponderant and condense all commerce into +caravans, staple-towns, fairs, and recommend the collection of +treasure etc.<note place='foot'>Who, for instance, would lay by a paper dollar in the +savings bank for his godchild? In this respect, too, oriental countries have preserved +much of the medieval. Concerning the aversion of the Egyptians of our day for +all paper money, see <hi rend='italic'>Stephan</hi>, Ægypten, 250 seq. This is all the +more surprising since during several months after the harvest, there are from 4,000,000 +to 8,000,000 piasters in specie sent every day from Alexandria by post to +private individuals in the provinces. In addition to this there is the immense +difference in the French, English and Austrian coins circulating in the country, +and which have very different rates in the different provinces. It is still +worse in Arabia. (<hi rend='italic'>v. Maltzan</hi>, Reise, I, 27.)</note> +Later, on the other hand, we find two stages +especially adapted to paper money. We have first, as yet undeveloped +but intellectually active (and therefore desirous of progress) colonial countries, +possessed in abundance of natural means of production without however +being able to concentrate them into the hands of an undertaker +(<foreign lang='de' rend='font-style: italic'>Unternehmer</foreign>) for +<pb n='464'/><anchor id='Pg464'/> +want of money.<note place='foot'>Compare <hi rend='italic'>v. Schlozer</hi>, +Anfangsgründe, I, 140 ff. <hi rend='italic'>M. Niebuhr</hi> (Rau's Archiv. +N.F. II, 125) finds paper money best adapted to countries without +any exchange-trade, but which at the same time require a species of money +easily computed and easy of transportation (Russia); countries whose national +economy has an extraordinarily rapid growth (the United States); and +in unusually solid countries (Scotland).</note> Here both the saving of the precious +metals and the facilitation of transportation effected by means of +paper money are of greatest utility. And then we have very +highly developed and rich countries; not only because their +economic popular education may protect them against the +dangers of paper money, but because the rich man has relatively +least need of money and may dispense with stores of +specie most readily, because of his influence over the supply +of others.<note place='foot'><hi rend='italic'>List</hi>, Nat. System der politischen +Œk., I, 394. A private individual of +small means who should go on his travels without money would be subject +to all sorts of annoyances; a king or a Rothschild, just as soon as he was +recognized as such, would find credit everywhere. Thus, English businessmen +have outstanding claims in all parts of the world, which might without +any great difficulty be called in in the precious metals. The more the +division of labor is developed, the better may the condition of a nation's +whole economy be seen reflected in the course of its banking system and its +exportation and importation.</note> +</p> +</div> +</div> +</div> +</body> +<back rend="page-break-before: right"> + <div id="footnotes"> + <index index="toc" /> + <index index="pdf" /> + <head>Footnotes</head> + <divGen type="footnotes"/> + </div> + <div rend="page-break-before: right"> + <divGen type="pgfooter" /> + </div> +</back> +</text> +</TEI.2> |