Add files from ibiblio as of 2025-03-08 09:08:10HEADmain

1 files changed, 0 insertions, 21016 deletions

diff --git a/41936-8.txt b/41936-8.txt
deleted file mode 100644
index 1dd39b3..0000000
--- a/41936-8.txt
+++ /dev/null
@@ -1,21016 +0,0 @@
-The Project Gutenberg eBook, Principles of Political Economy, by Arthur
-Latham Perry
-
-
-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 included
-with this eBook or online at www.gutenberg.org
-
-
-
-
-
-Title: Principles of Political Economy
-
-
-Author: Arthur Latham Perry
-
-
-
-Release Date: January 28, 2013  [eBook #41936]
-
-Language: English
-
-Character set encoding: ISO-8859-1
-
-
-***START OF THE PROJECT GUTENBERG EBOOK PRINCIPLES OF POLITICAL ECONOMY***
-
-
-E-text prepared by Colin Bell, JoAnn Greenwood, and the Online Distributed
-Proofreading Team (http://www.pgdp.net) from page images generously made
-available by Internet Archive/American Libraries
-(http://archive.org/details/americana)
-
-
-
-Note: Images of the original pages are available through
-      Internet Archive/American Libraries. See
-      http://archive.org/details/principlesofpoli00perrrich
-
-
-Transcriber's note:
-
-      Text enclosed by underscores is in italics (_italics_).
-
-      Text enclosed by tilde characters is transliteration of
-      Greek (~dragma~).
-
-
-
-
-
-PRINCIPLES OF POLITICAL ECONOMY.
-
-       *       *       *       *       *
-
-    PROFESSOR PERRY'S WORKS ON
-    POLITICAL ECONOMY.
-
-
-    1. INTRODUCTION TO POLITICAL ECONOMY. Fifth
-        Edition. 12mo. 357 pp. Price, $1.50.
-
-    2. PRINCIPLES OF POLITICAL ECONOMY. 8vo. 585
-        pp. Price, $2.00.
-
-    3. POLITICAL ECONOMY. Twenty-First Edition. Crown
-        8vo. 600 pp. Price, $2.50.
-
-       *       *       *       *       *
-
-
-PRINCIPLES OF POLITICAL ECONOMY
-
-by
-
-ARTHUR LATHAM PERRY, LL.D.
-
-Orrin Sage Professor of History and Political Economy in
-Williams College
-
-
-    _"No task is ill where Hand and Brain
-     And Skill and Strength have equal gain,
-     And each shall each in honor hold,
-     And simple manhood outweigh gold."_
-                                     WHITTIER.
-
-
-
-
-
-
-New York
-Charles Scribner's Sons
-1891
-
-Copyright, 1890,
-by Arthur Latham Perry.
-
-
-
-
-                           Dedication.
-
-             TO MY PERSONAL FRIEND OF LONG STANDING
-
-                       J. STERLING MORTON
-
-                           OF NEBRASKA
-
-                   A FRIEND OF THE PEOPLE ALSO
-
-                      FOUNDER OF ARBOR DAY
-
-
-
-
-PREFACE.
-
-
-It is now exactly twenty-five years since was published my first book
-upon the large topics at present in hand. It was but as a bow drawn at
-a venture, and was very properly entitled "Elements of Political
-Economy." At that time I had been teaching for about a dozen years in
-this Institution the closely cognate subjects of History and Political
-Economy; cognate indeed, since Hermann Lotze, a distinguished German
-philosopher of our day, makes prominent among its only _five_ most
-general phases, the "industrial" element in all human history; and
-since Goldwin Smith, an able English scholar, resolves the elements of
-human progress, and thus of universal history, into only _three_,
-namely, "the moral, the intellectual, and the productive."
-
-During these studious and observant years of teaching, I had slowly
-come to a settled conviction that I could say something of my own and
-something of consequence about Political Economy, especially at two
-points; and these two proved in the sequel to be more radical and
-transforming points than was even thought of at the first. For one
-thing, I had satisfied myself, that the word "Wealth," as at once a
-strangely indefinite and grossly misleading term, was worse than
-useless in the nomenclature of the Science, and would have to be
-utterly dislodged from it, before a scientific content and defensible
-form could by any possibility be given to what had long been called in
-all the modern languages the "Science of Wealth." Accordingly, so far
-as has appeared in the long interval of time since 1865, these
-"Elements" were the very first attempt to undertake an orderly
-construction of Economics from beginning to end without once using or
-having occasion to use the obnoxious word. A scientific substitute for
-it was of course required, which, with the help of Bastiat, himself
-however still clinging to the technical term "Richesse," was discerned
-and appropriated in the word "Value"; a good word indeed, that can be
-simply and perfectly defined in a scientific sense of its own; and,
-what is more important still, that precisely covers in that sense all
-the three sorts of things which are ever bought and sold, the three
-only Valuables in short, namely, material Commodities, personal
-Services, commercial Credits. It is of course involved in this
-simple-looking but far-reaching change from "Wealth" to "Value," that
-Economics become at once and throughout a science of Persons buying
-and selling, and no longer as before a science of Things howsoever
-manipulated for and in their market.
-
-For another thing, before beginning to write out the first word of
-that book, I believed myself to have made sure, by repeated and
-multiform inductions, of this deepest truth in the whole Science,
-which was a little after embodied (I hope I may even say _embalmed_)
-in a phrase taking its proper place in the book itself,--_A market for
-Products is products in Market_. The fundamental thus tersely
-expressed may be formulated more at length in this way: One cannot
-Sell without at the same instant and in the same act Buying, nor Buy
-anything without simultaneously Selling something else; because in
-Buying one pays for what he buys, which is Selling, and in Selling one
-must take pay for what is sold, which is Buying. As these universal
-actions among men are always voluntary, there must be also an
-universal motive leading up to them; this motive on the part of both
-parties to each and every Sale can be no other than the mutual
-satisfaction derivable to both; the inference, accordingly, is easy
-and invincible, that governmental restrictions on Sales, or
-prohibitions of them, must lessen the satisfactions and retard the
-progress of mankind.
-
-Organizing strictly all the matter of my book along these two lines of
-Personality and Reciprocity, notwithstanding much in it that was
-crude and more that was redundant and something that was ill-reasoned
-and unsound, the book made on account of this original mode of
-treatment an immediate impression upon the public, particularly upon
-teachers and pupils; new streaks of light could not but be cast from
-these new points of view, upon such topics especially as Land and
-Money and Foreign Trade; and nothing is likely ever to rob the author
-of the satisfaction, which he is willing to share with the public, of
-having contributed something of importance both in substance and in
-feature to the permanent up-building of that Science, which comes
-closer, it may be, to the homes and happiness and progress of the
-People, than any other science. And let it be said in passing, that
-there is one consideration well-fitted to stimulate and to reward each
-patient and competent scientific inquirer, no matter what that science
-may be in which he labors, namely, this: Any just generalization, made
-and fortified inductively, is put thereby beyond hazard of essential
-change for all time; for this best of reasons, that God has
-constructed the World and Men on everlasting lines of Order.
-
-As successive editions of this first book were called for, and as its
-many defects were brought out into the light through teaching my own
-classes from it year after year, occasion was taken to revise it and
-amend it and in large parts to rewrite it again and again; until, in
-1883, and for the eighteenth edition, it was recast from bottom up for
-wholly new plates, and a riper title was ventured upon,--"Political
-Economy,"--instead of the original more tentative "Elements." Since
-then have been weeded out the slight typographical and other minute
-errors, and the book stands now in its ultimate shape.
-
-My excellent publishers, who have always been keenly and wisely alive
-to my interests as an author, suggested several times after the
-success of the first book was reasonably assured, that a second and
-smaller one should be written out, with an especial eye to the needs
-of high schools and academies and colleges for a text-book within
-moderate limits, yet soundly based and covering in full outline the
-whole subject. This is the origin of the "Introduction to Political
-Economy," first published in 1877, twelve years after the other. Its
-success as a text-book and as a book of reading for young people has
-already justified, and will doubtless continue to justify in the
-future, the forethought of its promoters. It has found a place in many
-popular libraries, and in courses of prescribed reading. Twice it has
-been carefully corrected and somewhat enlarged, and is now in its
-final form. In the preface to the later editions of the "Introduction"
-may be found the following sentence, which expresses a feeling not
-likely to undergo any change in the time to come:--"I have long been,
-and am still, ambitious that these books of mine may become the
-horn-books of my countrymen in the study of this fascinating Science."
-
-Why, then, should I have undertaken of my own motion a new and third
-book on Political Economy, and attempted to mark the completion of the
-third cycle of a dozen years each of teaching it, by offering to the
-public the present volume? One reason is implied in the title,
-"_Principles of Political Economy_." There are three extended
-historical chapters in the earlier book, occupying more than
-one-quarter of its entire space, which were indeed novel, which cost
-me wide research and very great labor, and which have also proven
-useful and largely illustrative of almost every phase of Economics;
-but I wanted to leave behind me one book of about the same size as
-that, devoted exclusively to the Principles of the Science, and using
-History only incidentally to illustrate in passing each topic as it
-came under review. For a college text-book as this is designed to
-become, and for a book of reading and reference for technical
-purposes, it seems better that all the space should be taken up by
-purely scientific discussion and illustration. This does not mean,
-however, that great pains have not been taken in every part to make
-this book also easily intelligible, and as readable and interesting as
-such careful discussions can be made.
-
-A second reason is, to provide for myself a fresh text-book to teach
-from. My mind has become quite too thoroughly familiarized with the
-other, even down to the very words, by so long a course of instructing
-from it, for the best results in the class-room. Accordingly, a new
-plan of construction has been adopted. Instead of the fourteen
-chapters there, there are but seven chapters here. Not a page nor a
-paragraph as such has been copied from either of the preceding books.
-Single sentences, and sometimes several of them together, when they
-exactly fitted the purposes of the new context, have been incorporated
-here and there, in what is throughout both in form and style a new
-book, neither an enlargement nor an abridgment nor a recasting of any
-other. I anticipate great pleasure in the years immediately to come
-from the handling with my classes, who have always been of much
-assistance to me from the first in studying Political Economy, a fresh
-book written expressly for them and for others like-circumstanced; in
-which every principle is drawn from the facts of every-day life by way
-of induction, and also stands in vital touch with such facts (past or
-present) by way of illustration.
-
-The third and only other reason needful to be mentioned here is, that
-in recent years the legislation of my country in the matter of cheap
-Money and of artificial restrictions on Trade has run so directly
-counter to sound Economics in their very core, that I felt it a debt
-due to my countrymen to use once more the best and ripest results of
-my life-long studies, in the most cogent and persuasive way possible
-within strictly scientific limits, to help them see and act for
-themselves in the way of escape from false counsels and impoverishing
-statutes. Wantonly and enormously heavy lies the hand of the national
-Government upon the masses of the people at present. But the People
-are sovereign, and not their transient agents in the government; and
-the signs are now cheering indeed, that they have not forgotten their
-native word of command, nor that government is instituted for the
-sole benefit of the governed and governing people, nor that the
-greatest good of the greatest number is the true aim and guide of
-Legislation. I am grateful for the proofs that appear on every hand,
-that former labors in these directions and under these motives have
-proven themselves to have been both opportune and effective; and I am
-sanguine almost to certainty, that this reiterated effort undertaken
-for the sake of my fellow-citizens as a whole, will slowly bear
-abundant fruit also, as towards their liberty of action as
-individuals, and in their harmonious co-operation together as entire
-classes to the end of popular comforts and universal progress.
-
-                                                A. L. PERRY.
-
-    WILLIAMS COLLEGE,
-      November 25, 1890.
-
-
-
-
-TABLE OF CONTENTS
-
-
-                                            PAGE
-        CHAPTER I.
-    VALUE                                      1
-
-        CHAPTER II.
-    MATERIAL COMMODITIES                      80
-
-        CHAPTER III.
-    PERSONAL SERVICES                        181
-
-        CHAPTER IV.
-    COMMERCIAL CREDITS                       271
-
-        CHAPTER V.
-    MONEY                                    361
-
-        CHAPTER VI.
-    FOREIGN TRADE                            451
-
-        CHAPTER VII.
-    TAXATION                                 540
-
-    INDEX                                    587
-
-
-
-
-PRINCIPLES OF POLITICAL ECONOMY.
-
-
-
-
-CHAPTER I.
-
-VALUE.
-
-
-The first question that confronts the beginner in this science, and
-the one also that controls the whole scope of his inquiries to the
-very end, is: What is the precise subject of Political Economy? Within
-what exact field do its investigations lie? There is indeed a short
-and broad and full answer at hand to this fundamental and
-comprehensive question; and yet it is every way better for all
-concerned to reach this answer by a route somewhat delayed and
-circuitous, just as it is better in ascending a mountain summit for
-the sake of a strong and complete view to circle up leisurely on foot
-or on horseback, rather than to dash straight up to the top by a
-cog-wheel railway and take all of a sudden what might prove to be a
-less impressive or a more confusing view.
-
-The preliminary questions are: What sort of facts has Political
-Economy to deal with, to inquire into, to classify, to make a science
-of? Are these facts easily separable in the mind and in reality from
-other kinds of facts perhaps liable to be confounded with them? Are
-they facts of vast importance to the welfare of mankind? And are the
-activities of men everywhere greatly and increasingly occupied with
-just those things, with which this science has exclusively to do? Let
-us see if we cannot come little by little by a route of our own to
-clear and true answers for all these questions.
-
-If one should take his stand for an hour upon London Bridge, perhaps
-the busiest bit of street in the world, and cast his eyes around
-intelligently to see what he can see, and begin also to classify the
-things coming under his vision, what might he report to himself and to
-others? Below the bridge in what is called the "Pool," which was
-dredged out for that very purpose by the ancient Romans, there lie at
-anchor or move coming and going many merchant-ships of all nations,
-carrying out and bringing in to an immense amount in the whole
-aggregate tangible articles of all kinds to and from the remote as
-well as the near nations of the earth. All this movement of visible
-goods, home and foreign, is in the interest and under the impulse of
-Buying and Selling. The foreign goods come in simply to buy, that is,
-to pay for, the domestic goods taken away; and these latter go out in
-effect even if not in appearance to buy, that is, to pay for, the
-foreign goods coming in. At the same hour the bridge itself is covered
-with land-vehicles of every sort moving in both directions, loaded
-with salable articles of every description; artisans of every name are
-coming and going; merchants of many nationalities step within the
-field of view; and porters and servants and errand-boys are running to
-and fro, all in some direct relation to the sale or purchase of those
-visible and tangible things called in Political Economy _Commodities_.
-Moreover, vast warehouses built in the sole interest of trade on both
-sides the river above and below the bridge, built to receive and to
-store for a time till their ultimate consumers are found, some of
-these thousand things bought and sold among men, lift their roofs
-towards heaven in plain sight. Doubtless some few persons, like our
-observer himself, may be on the spot for pleasure or instruction, but
-for the most part, all that he can see, the persons, the things, the
-buildings, even the bridge itself, are where they are in the interest
-of _Sales_ of some sort, mostly of Commodities. What is thus true of a
-single point in London is true in a degree of every other part of
-London, of every part of Paris and of Berlin, and in its measure of
-every other city and village and hamlet in the whole world. Wherever
-there is a street there is some exchange of commodities upon it, and
-wherever there is a market there are buyers and sellers of
-commodities.
-
-If the curiosity of our supposed observer be whetted by what he saw on
-London Bridge, and if the natural impulse to generalize from
-particulars be deepened in his mind, he may perhaps on his return to
-America take an opportunity to see what he can see and learn what he
-can learn within and around one of the mammoth cotton mills in Lowell
-or Fall River or Cohoes. Should he take his stand for this purpose at
-one of these points, say Lowell, he will be struck at once by some of
-the differences between what he saw on the bridge and what he now sees
-in the mill. He will indeed see as before some commodities brought in
-and carried out, such as the raw cotton and new machinery and the
-finished product ready for sale, but in general no other commodities
-than the cotton in its various stages of manufacture, and those like
-the machinery and means of transportation directly connected with
-transforming the cotton into cloth and taking it to market.
-
-But he sees a host of persons both within and without the mill, all
-busy here and there, and all evidently bound to the establishment by a
-strong unseen tie of some sort; he sees varying degrees of authority
-and subordination in these persons from the Treasurer, the apparent
-head of the manufactory, down to the teamsters in the yard and the
-common laborers within and without; he will not find the owners of
-the property present in any capacity, for they are scattered
-capitalists of Boston and elsewhere, who have combined through an act
-of incorporation their distinct capitals into a "Company" for
-manufacturing cotton; besides their Treasurer present, whose act is
-their act and whose contracts their contracts, he will see an Agent
-also who acts under the Treasurer and directly upon the Overseers and
-their assistants in the spinning and weaving and coloring and
-finishing rooms, and under these Operatives of every grade as skilled
-and unskilled; and lastly he will observe, that the direct
-representatives of the owners and all other persons present from
-highest to lowest are conspiring with a will towards the common end of
-getting the cotton cloth all made and marketed.
-
-What is it that binds all these persons together? A little tarrying in
-the Treasurer's office will answer this question for our observer and
-for us. He will find it to be the second kind of Buying and Selling.
-At stated times the Treasurer pays the salary of the Agent, and his
-own. He pays the wages of the Overseers and the wages of all the
-Operatives and Laborers,--men and women and children. Here he finds a
-buying and selling on a great scale not of material commodities as
-before, but of personal services of all the various kinds. Every man
-and woman and child connected with the factory and doing its work
-sells an intangible personal service to the "Company" and takes his
-pay therefor, which last is a simple buying on the part of the unseen
-employers. Here, then, in this mill is a single specimen of this
-buying and selling of personal services, which is going on to an
-immense extent and in every possible direction in each civilized
-country of the world, and everywhere to an immensely increased volume
-year by year. Clergymen and lawyers and physicians and teachers and
-legislators and judges and musicians and actors and artisans of every
-name and laborers of every grade sell their intangible services to
-Society, and take their pay back at the market-rate. The aggregate
-value of all these services sold in every advanced country is probably
-greater than the aggregate value of the tangible commodities sold
-there. At any rate, both classes alike, commodities and services, are
-bought and sold under substantially the same economic principles.
-
-The inductive appetite in intelligent persons, that is to say, their
-desire to classify facts and to generalize from particulars, almost
-always grows by what it feeds on; and our supposed observer will
-scarcely rest contented until he has taken up at least one more
-stand-point, from which to observe men's Buying and Selling. Suppose
-now he enter for this purpose on any business-day morning the New York
-Clearing-House. He will see about 125 persons present, nearly one half
-of these bank clerks sitting behind desks, and the other half standing
-before these desks or moving in cue from one to the next. The room is
-perfectly still. Not a word is spoken. The Manager of the Clearing
-with his assistant sits or stands on a raised platform at one end of
-the room, and gives the signal to begin the Exchange. No commodities
-of any name or nature are within the field of view. The manager indeed
-and his assistant and two clerks of the establishment who sit near him
-are in receipt of salaries for their personal services, and all the
-other clerks present receive wages for their services from their
-respective banks, but the exchange about to commence is no sale of
-personal services any more than it is a sale of tangible commodities.
-It is however a striking instance of the buying and selling of some
-valuables of the third and final class of valuable things.
-
-At a given signal from the manager the (say) 60 bank messengers, each
-standing in front of the desk of his own bank and each having in hand
-before him 59 small parcels of papers, the parcels arranged in the
-same definite order as the desks around the room, step forward to the
-next desk and deliver each his parcel to the clerk sitting behind it,
-and so on till the circuit of the room is made. It takes but ten
-minutes. Each parcel is made up of cheques or credit-claims, the
-_property_ of the bank that brings it and the _debts_ of the bank to
-which it is delivered. Accordingly each bank of the circle receives
-through its sitting clerk its own _debits_ to all the rest of the
-banks, and delivers to all through its standing messenger its own
-_credits_ as off-set. In other words, each bank buys of the rest what
-it owes to each with what each owes to it. It is at bottom a mutual
-buying and selling of debts. There is of course a daily balance on one
-side or the other between every two of these banks, which must be
-settled in money, because it would never happen in practice that each
-should owe the other precisely the same sum on any one day; but
-substantially and almost exclusively the exchange at the
-Clearing-House is a simple trade in credit-claims. Each bank pays its
-debts by credits. A merchant is a dealer in commodities, a laborer is
-a dealer in services, and a banker is a dealer in credits. Each of the
-three is a buyer and seller alike, and the difference is only in the
-kind of valuables specially dealt in by each. In all cases alike,
-however, there is no buying without selling and no selling without
-buying; because, when one buys he must always pay for what he buys and
-that is selling, and when one sells he must always take his pay for
-what he sells and that is buying. This is just as true when one credit
-is bought or sold against a commodity or a service, and when two or
-more credits are bought and sold as against each other, as it is when
-two commodities or two services are exchanged one for the other.
-
-But the Clearing-House is not by any means the only place where
-credits or debts (they are the same thing) are bought and sold. Every
-bank is such a place. Every broker's office is such a place. Every
-place is an establishment of the same kind where commercial rights,
-that is, claims to be realized in future time and for which a
-consideration is paid, are offered for sale and sold. The amount of
-transactions in Credits in every commercial country undoubtedly
-surpasses the amount in Commodities or that in Services.
-
-Now our supposed observer and classifier, having noted on London
-Bridge the sale of material commodities, and in the Lowell Mill the
-sale of personal services, and within the New York Clearing-House the
-sale of credit-claims, has seen in substance everything that ever was
-or ever will be exhibited in the world of trade. He may rest. There is
-no other class of salable things than these three. Keen eyes and minds
-skilled in induction have been busy for two millenniums and a half
-more or less to find another class of things bought and sold among
-men, and have not yet found it or any trace of it. This work has been
-perfectly and scientifically done. The generalization is completed for
-all time.
-
-The _genus_, then, with which Political Economy deals from beginning
-to end, has been discovered, can be described, and is easily and
-completely separable for its own purposes of science from all other
-kinds and classes and _genera_ of things, namely, Salable things or
-(what means precisely the same) Valuable things or (what is exactly
-equivalent) Exchangeable things. In other words, the sole and single
-class of things, with which the Science of Political Economy has to
-do, is Valuables, whose origin and nature and extent and importance it
-is the purpose of the present chapter to unfold. We have fully seen
-already that this Genus, Valuables, is sub-divided into three
-_species_, and three only, namely, Commodities, Services, Credits. A
-little table here may help at once the eye and the mind:--
-
-    ECONOMICS.
-
-    _The Genus_        _Valuables_
-
-                       { _Commodities_
-    _The Species_      { _Services_
-                       { _Credits_
-
-If only these three species of things are ever bought and sold, then
-it certainly follows that only six kinds of commercial exchanges are
-possible to be found in the world, namely these:--
-
-    1. _A commodity for a commodity._
-    2. _A commodity for a personal service._
-    3. _A commodity for a credit-claim._
-    4. _A personal service for another service._
-    5. _A personal service for a credit-claim._
-    6. _One credit-claim for another._
-
-Though the kinds of possible exchanges are thus very few, the
-exchanges themselves in one or other of these six forms and in all of
-them are innumerable on every business day in every civilized country
-of the globe. And this point is to be particularly noted, that while
-buying and selling in these forms has been going on everywhere since
-the dawn of authentic History, it has gone on all the while in
-ever-increasing volume, it is increasing now more rapidly and
-variously than ever, and moreover all signs foretell that it will play
-a larger and still larger part in the affairs of men and nations as
-this old world gains in age and unity.
-
-Damascus is one of the very oldest cities of the world, and its very
-name means a "_seat of trade_." We are told in the Scriptures, that
-Abraham about 2000 years before Christ went up out of Egypt "very rich
-in cattle, in silver, and in gold," and the only possible way he could
-have acquired these possessions was by buying and selling. He
-afterwards purchased the cave and the field in Hebron for a family
-burial-place, and "weighed unto Ephron the silver which he had named
-in the audience of the sons of Heth, four hundred shekels of silver,
-current money with the merchant." We may notice here, that there were
-then "merchants" as a class, that silver by weight passed as "money"
-from hand to hand, and that in the lack of written deeds to land, as
-we have them, sales were "made sure" before the faces of living men,
-who would tell the truth and pass on the word. Abraham indeed seems to
-have given the pitch for the song of trade sung by his descendants,
-the Jews, from that day to this; for Jacob, his grandson, was a
-skilled trafficker, not to say a secret trickster, in his bargains;
-and wherever in the Old World or the New the Jews have been, _there_
-have been in fact and in fame busy buyers and sellers.
-
-But the Jews have had no special privileges in the realm of trade; on
-the contrary, they have always been under special disabilities both
-legal and social. Even in England, the most liberal country in Europe,
-they were exiled for long periods, maltreated at all points of contact
-with other people, more or less put under the ban of the Common and
-the Statute law, often outrageously taxed on their goods and persons,
-and studiously kept out of the paths of highest public employment even
-down to a time within the memory of living men.[1] Yet so natural is
-the impulse to trade, so universally diffused, so imperative also if
-progress is in any direction to be attained, that the English and all
-other peoples were as glad to borrow money, that is, buy the use of
-it, of the persecuted Jews, as the latter were to get money by buying
-and selling other things, and then to loan it, that is, sell the use
-of it, under the best securities (never very good) for its return with
-interest, that they could obtain. Happily, the mutual gains that
-always wait on the Exchanges even when their conditions are curtailed,
-of course attended the mutilated exchanges between Jews and
-Christians: otherwise, they would not continue to take place.
-
-Christianity, however, as the perfected Judaism, gradually brought in
-the better conditions, the higher impulses, and the more certain
-rewards, of Trade, all which, we may be sure, were designed in the
-divine Plan of the world. What is called the Progress of Civilization
-has been marked and conditioned at every step by an extension of the
-opportunities, a greater facility in the use of the means, a more
-eager searching for proper expedients, and a higher certainty in the
-securing of the returns, of mutual exchanges among men. There have
-been indeed, and there still are, vast obstacles lying across the
-pathway of this Progress in the unawakened desires and reluctant
-industry and short-sighted selfishness of individuals, as well as in
-the ignorant prejudices and mistaken legislation of nations; but all
-the while Christianity has been indirectly tugging away at these
-obstacles, and Civilization has been able to rejoice over the partial
-or complete removal of some of them; while also Christianity directly
-works out in human character those chief qualities, on which the
-highest success of commercial intercourse among men will always
-depend, namely, Foresight, Diligence, Integrity, and mutual Trust; so
-that, what we call Civilization is to a large extent only the result
-of a better development of these human qualities in domestic and
-foreign commerce.
-
-Contrary to a common conception in the premises, the sacred books of
-both Jews and Christians display no bias at all against buying and
-selling, but rather extol such action as praiseworthy, and also those
-qualities of mind and habits of life that lead up to it and tend too
-to increase its amount, and they constantly illustrate by means of
-language derived from traffic the higher truths and more spiritual
-life, which are the main object of these inspired writers. It is
-indeed true that the chosen people of God were forbidden to take Usury
-of each other, though they were permitted to take it freely of
-strangers, and that they were forbidden to buy horses and other
-products out of Egypt, for fear they would be religiously corrupted by
-such commercial intercourse with idolaters; but there is nothing of
-this sort in the law of Moses that cannot be easily explained from the
-grand purpose to found an agricultural commonwealth for religious
-ends, in which commonwealth no family could permanently alienate its
-land, and in which it was a great object to preserve the independence
-and equality of the tribes and families. Throughout the Old Testament
-there is no word or precept that implies that trade in itself is not
-helpful and wholesome; there were sharp and effective provisions for
-the recovery of debts; there were any number of exhortations to
-diligence in business, such as, "_In the morning sow thy seed, and at
-evening withhold not thy hand_"; King Solomon himself made a gigantic
-exchange in preparation for the temple with King Hiram of Tyre, by
-which the cedars of Lebanon were to be paid for by the grain and oil
-of the agricultural kingdom; chapter xxvii of the prophet Ezekiel is a
-graphic description of the commerce of the ancient world as it
-centered in the market of Tyre, a description carried out into detail
-both as to the nations that frequented that market and as to the
-products that were exchanged in it,--"_silver, iron, tin, lead,
-persons of men, vessels of brass, horses, horsemen, mules, horns of
-ivory, ebony-wood, carbuncles, purple work, fine linen, corals,
-rubies, wheat, pastry, syrup, oil, balm, wine of Helbon, white wool,
-thread, wrought iron, cassia, sweet reed, cloth, lambs, rams, goats,
-precious spices, precious stones, splendid apparel, mantles of blue,
-embroidered work, chests of damask, and gold_"; and chapter xxxi of
-Proverbs describes the model housewife in terms like these,--
-
-    "_The heart of her husband trusteth in her,
-     And he is in no want of gain.
-     She seeketh wool and flax,
-     And worketh willingly with her hands.
-     She is like the merchants' ships;
-     She bringeth her food from afar.
-     She riseth while it is yet night,
-     And giveth food to her family,
-     And a task to her maidens.
-     She layeth a plan for a field and buyeth it;
-     With the fruit of her hands she planteth a vineyard.
-     She perceiveth how pleasant is her gain,
-     And her lamp is not extinguished in the night.
-     She putteth forth her hands to the distaff,
-     And her hands take hold of the spindle.
-     She maketh for herself coverlets;
-     Her clothing is of fine linen and purple.
-     She maketh linen garments and selleth them,
-     And delivereth girdles to the merchants._"
-
-Still more explicit and instructive are the words and spirit of the
-New Testament. There cannot be the least doubt that the whole
-influence of Christianity is favorable to the freest commercial
-exchanges at home and abroad, because these depend largely on mutual
-confidence between man and man, of which confidence Christianity is
-the greatest promoter. It may be conceded at once that our Lord
-"_overthrew the tables of the money-changers and the seats of them
-that sold doves_" within the sacred precincts of the temple, but
-this, not because it is wrong to change money or sell doves, but
-because that was not the _place_ for such merchandising; so He himself
-explained his own action in the sequel; provincial worshippers coming
-up to Jerusalem must needs have their coins changed into the money of
-the Capital, and must needs buy somewhere the animal victims for
-sacrifice; but the whip of small cords had significance only as to the
-_place_, and not at all as to the _propriety_, of such trading.
-
-One of our Lord's parables, the parable of the Talents, sets forth in
-several striking lights the privilege and duty and reward of diligent
-trading. "_Then he that had received the five talents went and traded
-with the same, and made them other five talents._" And when this
-servant came to the reckoning, and brought as the result of his free
-and busy traffic "_five talents more_," the prompt and hearty approval
-of his lord--"well done, thou good and faithful servant"--becomes the
-testimony of the New Testament to the merit and the profit and the
-benefit of a vigorous buying and selling. For this servant could not
-have been authoritatively pronounced good and faithful if the results
-of his action commended had been in any way prejudicial to others. The
-truth is, as we shall abundantly see by and by with the reasons of it,
-that any man who buys and sells under the free and natural conditions
-of trade, benefits the man he trades with just as much as he benefits
-himself. But the parable has a still stronger word in favor of
-exchanges. There was another servant also entrusted with capital by
-his lord at the same time, when the latter was about to travel "_into
-a far country_." We are expressly told that distribution was made "_to
-every man according to his several ability_," and thus this servant
-was only entrusted with a single talent, the size of the capital given
-to him being in just proportion to the size of the man,--the smallest
-share falling of course to the smallest man. But he had the same
-opportunity as the two others. The world was open to him. Capital was
-in demand, if not in those parts then in some other, to which, like
-his lord, he might straightway take his journey. But when his time of
-reckoning came, and he had nothing to show for the use of his capital,
-he upbraided his lord as a hard man for expecting any increase, and
-brought out his bare talent wrapped in a napkin, saying, "_I was
-afraid, and I went and hid thy talent in the earth_." His wise lord at
-once denounced this servant as "_wicked and slothful_," insisted that
-his money ought to have been "_put to the exchangers_," and said
-finally in a just anger "_cast ye the unprofitable servant into outer
-darkness_."
-
-It is moreover in incidental passages of the Scriptures, in which the
-methods of business are commended to the searchers after higher
-things, that we see their high estimate of those methods and gains.
-"_Buy the truth, and sell it not; buy wisdom and understanding_"
-(Prov. xxiii, 23). "_Buying up for yourselves opportunities_" (Col.
-iv, 5). "_I counsel thee to buy of me gold refined by fire, that thou
-mayest be rich; and white garments, that thou mayest be clothed; and
-eye-salve to anoint thine eyes, that thou mayest see_" (Rev. iii, 18).
-"_But rather let him labor, working with his hands at that which is
-good, that he may have to give to him that is in need_" (Eph. iv, 28).
-"_But if any one provideth not for his own, and especially for those
-of his own house, he hath denied the faith, and is worse than an
-unbeliever_" (1 Tim. v, 8).
-
-Now, the universal test and proof of any truth is its harmony with
-some other truths. Does an alleged truth fall in with and fill out
-well some other demonstrated and accepted proposition, or a number of
-such other propositions? If so, then that truth is _proved_. Human
-reason can no further go. The mind rests with relish and content in a
-new acquisition. To apply this to the case in hand,--if men were
-designed of their Maker to buy and sell to their own mutual benefit
-and advancement, if mankind have always been buying and selling as
-towards that end and with that obvious result, and if the Future
-promises to increase and reduplicate the buying and selling of the
-Present in every direction without end, and all in the interest of a
-broad civilization and a true and lasting progress; and if, in harmony
-with these truths, the written revelation of God in every part of it
-assumes that buying and selling in its inmost substance and essential
-forms be good and righteous and progressive, and suitable in all its
-ends and methods to illustrate and enforce ends and methods in the
-higher kingdom of spiritual and eternal Life;--then these coördinate
-truths will logically and certainly follow, (1) that Trade is natural
-and essential and beneficial to mankind; (2) that it constitutes in an
-important sense a realm of human thought and action by itself,
-separate from the neighboring realm of Giving, and equally from the
-hostile realm of Stealing; and (3) that a careful analysis of what
-buying and selling in its own peculiar nature is, a thorough
-ascertainment and a consequent clear statement of its fundamental
-laws, and a faithful exposure of what in individual selfishness and in
-subtle or open Legislation makes against these laws, _must be of large
-consequence to the welfare of mankind_.
-
-Accordingly, let us now attempt such Analysis and Ascertainment and
-Exposure. This is precisely the task that lies before us in this
-book--just this, and nothing more. The term, "Political Economy," has
-long been and is still an elastic title over the zealous work of many
-men in many lands; but in the hands of the present writer during a
-life now no longer short, the term has always had a definite meaning,
-the work has covered an easily circumscribed field, and so the present
-undertaking concerns only Buying and Selling and what is essentially
-involved in that. This gives scope and verge enough for the studies of
-a life-time. This has the advantage of a complete sphere of its own.
-Terms may thus be made as definite as the nature of language will ever
-allow; definitions will thus cover things of one kind only; and
-generalizations, although they may be delicate and difficult, will
-deal with no incongruous and obstinate material.
-
-1. The grandfather of the writer, an illiterate but long-headed
-farmer, was able to give good points to his three college-bred sons,
-by insisting that they look "_into the natur on't_." What, then, are
-the ultimate elements of Buying and Selling? What are the invariable
-conditions that precede, accompany, and follow, any and every act of
-Trade? Of course we are investigating now and throughout this treatise
-the deliberative acts of reasonably intelligent human beings, in one
-great department of their common foresight and rational action. We
-have consequently nothing to do here with Fraud or Theft or Mania or
-Gift. Acts put forth under the impulse of these are direct opposites
-of, or at best antagonistic to, acts of Trade. They tend to kill
-trade, and therefore they are no part of trade. These, then, and such
-as these, aside, we will now analyze a single Act of Exchange at one
-time and place,--which will serve in substance for all acts of
-exchange in all times and places, and just find out for ourselves what
-are the Fundamentals and Essentials of that matter, with which alone
-we have to do in this science of Political Economy.
-
-Incidental reference was had a little way back to an Exchange once
-made between King Solomon of Jerusalem and King Hiram of Tyre. Let
-that be our typical instance. (a) _There were two persons_, Solomon
-and Hiram. Those two, and no more, stood face to face, as it were, to
-make a commercial bargain. They made it, and it was afterwards
-executed. The execution indeed concerned a great many persons on both
-sides, and occupied a long period of time; but the bargain itself, the
-trade, the exchange, the covenant, concerned only two persons, and
-occupied but a moment of time. It made no difference with the bargain
-as such, with the binding nature of it, with the terms of it, with the
-mutual gains of it, that each person represented a host of others,
-subordinates and subjects, who would have to coöperate in the carrying
-of it out, because each king had the right to speak for his subjects
-as well as for himself, for commercial purposes each was an agent as
-well as a monarch, the word of each concluded the consent and the
-action of others as well as his own. Nor did it make any, the least,
-difference with this exchange or the advantages of it, that each party
-to it belonged to, was even the head of, independent and sometimes
-hostile Peoples. Commerce is one thing, and nationality a totally
-different thing. The present point is, in the words of the old
-proverb,--"It takes two to make a bargain." And it takes _only_ two to
-make a bargain. When corporations and even nations speak in trade,
-they speak, and speak finally, through one accredited agent. We reach,
-then, as the first bit of our analysis of Trade, the fact, that there
-are always two parties to it, "the party of the first part and the
-party of the second part."
-
-(b) _There were two desires_, Solomon's desire for cedar-timbers to
-build the temple with, and Hiram's desire for wheat and oil with which
-to support the people of his sterile kingdom. "_So Hiram gave Solomon
-cedar-trees and fir-trees according to all his desire: and Solomon
-gave Hiram twenty thousand measures of wheat for food to his
-household, and twenty measures of pure oil._" The desire of each
-party was personal and peculiar, known at first only to himself, but
-upon occasion became directed towards something in the possession of
-the other, and each at length became aware of the desire of the other,
-and also of his own ability to satisfy the want of the other. If
-Solomon could have satisfied his desire for timber by his own or his
-subjects' efforts directly, this trade would never have taken place;
-if Hiram or his subjects could have gotten the wheat and oil directly
-out of their narrow and sandy strips of sea-coast, this trade would
-not have taken place; and so there must be in every case of trade not
-only two desires each springing from a separate person, but also each
-person must have in his possession something fitted to gratify the
-desire of the other person, and each be willing to yield that
-something into the possession of the other for the sake of receiving
-from him that which will satisfy his own desire, and so both desires
-be satisfied indirectly.
-
-Here is the deep and perennial source of exchanges. Men's desires are
-so many and various, and so constantly becoming more numerous and
-miscellaneous, and so extremely few of his own wants can ever be met
-by any one man directly, that the foundation of exchanges, and of a
-perpetually increasing volume of exchanges, is laid in the deep places
-of human hearts, namely, in Desires ever welling up to the surface and
-demanding their satisfaction through an easy and natural interaction
-with the ever swelling Desires of other men. Here too is a firm
-foundation (a chief foundation) of human Society. Reciprocal wants,
-which can only be met through exchanges, draw men together locally and
-bind them together socially, in hamlets and towns and cities and
-States and Nations, and also knit ties scarcely less strong and
-beneficent between the separate and remotest nationalities of the
-earth. It is certain that an inland commercial route connected the
-East of Asia with the West of Europe centuries before Christ, and that
-a traffic was maintained on the frontier of China between the Sina and
-the Scythians, in the manner still followed by the Chinese and the
-Russians at _Kiachta_. The Sina had an independent position in Western
-China as early as the eighth century before Christ, and five centuries
-later established their sway under the dynasty of Tsin (whence our
-word "China") over the whole of the empire. The prophet Isaiah
-exclaims (xlix, 12), "Behold! these shall come from far; and behold!
-these from the North and from the West; _and these from the land of
-Sinim_." The second bit of our analysis leads to Desires as an
-essential and fundamental element in every commercial transaction.
-
-(c) _There were two efforts_, those of the Tyrians as represented by
-King Hiram and those of the Israelites as represented by King Solomon.
-It was no holiday task that was implied in the proposition of Solomon
-to the party of the other part,--"_Send me now cedar-trees, fir-trees,
-and algum-trees out of Lebanon; for I know that thy servants are
-skilful to cut timber in Lebanon; even to prepare me timber in
-abundance, for the house which I am about to build shall be
-wonderfully great._" On the other hand, the efforts insolved on the
-part of the people of Israel in paying for these timbers, and for
-their transportation by sea from Lebanon to Joppa, were equally
-gigantic. Solomon's offer in return for the proposed service of the
-Tyrian king was in these words,--"_And behold, I will give to thy
-servants, the hewers that cut timber, twenty thousand measures of
-beaten wheat, and twenty thousand measures of barley, and twenty
-thousand baths of wine, and twenty thousand baths of oil._"
-
-The reason why two efforts are always an element in every act of
-traffic, however small or however large the transaction may be, is the
-obvious reason, that the things rendered in exchange, whether they be
-Commodities, Services, or Credits, invariably cost efforts of some
-kind to get them ready to sell and to sell them, and no person can
-have a just claim to render them in exchange, who has not either put
-forth these efforts himself or become proprietor in some way of the
-result of such efforts. Efforts accordingly are central in all trade.
-Every trade in its inmost nature is and must be either an exchange of
-two Efforts directly, as when one of two farmers personally helps his
-neighbor in haying for the sake of securing that neighbor's personal
-help in his own harvesting, or an exchange of two things each of which
-is the result of previous Efforts of somebody, as when a man gives a
-silver dollar for a bushel of wheat. The third bit of the present
-analysis brings us to Efforts, perhaps the most important factor in
-the whole list.
-
-(d) _There were also two reciprocal estimates_, the estimate of King
-Hiram of all the efforts requisite to cut and hew and float the
-timber, as compared with the aggregate of efforts needed to obtain the
-necessary wheat and barley and wine and oil in any other possible way;
-and the estimate of King Solomon of all the labors required to grow
-and market these agricultural products, as compared with what would
-otherwise be involved in getting the much-wished-for timbers. Such
-estimates invariably precede every rational exchange of products. It
-is not in human nature to render a greater effort or the result of it,
-when a lesser effort or the result of it will as well procure the
-satisfaction of a desire. Efforts are naturally irksome. No more of
-them will ever be put forth than is necessary to meet the want that
-calls them forth. No man in his senses will ever put more labor on
-anything, with which to buy something else, than is necessary to get
-that something else by direct effort or through some other exchange.
-Here we are on ground as solid as the very substance of truth can make
-it. The Jews of Solomon's time were too shrewd and sparing of irksome
-labor to devote themselves for years to the toils of the field and of
-the vat to get by traffic the materials for their temple, if they
-could have gotten those materials by a less expenditure of toil in any
-other way. Those Phoenicians of Tyre and Sidon, the born merchants of
-the East, the founders of commercial Carthage in the West, if they
-could have extorted from the reluctant sands of their coast the
-cereals and the vines and olives requisite for their own support with
-only so much of exertion as was needed to get that to market with
-which to buy them, would never have taken the indirect in preference
-to the direct method. They took the indirect, because it was the
-easier, and therefore the better.
-
-It may, accordingly, be laid down as a maxim, that men never buy and
-sell to satisfy their wants but when that is the easiest and best way
-to satisfy them. It saves effort. It saves time. It saves trouble. It
-divides labor. It induces skill. It propels progress. But in order to
-determine which may be the easier way, requires constant _estimates_
-on the part of each party to a possible trade. Shall I shave myself or
-go to the barber? Before I decide, I estimate the direct effort in the
-light of the effort to get that with which to pay the barber for his
-service. If I trade with him, it is because I deem it easier, cheaper
-in effort, more convenient in time. Trade means comparisons in every
-case--comparisons by both parties--and in the more recondite and
-complicated cases, elaborate comparisons and often comprehensive
-calculations involving future time.
-
-Now these estimates inseparable from exchanges, and these
-calculations which are a factor in all the far-reaching exchanges, are
-mental activities. They quicken and strengthen the _minds_ of men.
-Trade is usually, if not always, the initial step in the mental
-development of individuals and nations. Desires stir early in the
-minds of all children; efforts more or less earnest are the speedy
-outcome of natural desires; direct efforts, however, to satisfy these
-soon reach their limits; it is now but a step over to simple
-exchanges, by which the desires are met indirectly; exchanges once
-commenced tend to multiply in all directions, and the estimates that
-must precede and accompany these are mental states,--the more of them,
-the greater the mental development, the higher the education;
-consequently, commerce domestic and foreign is a grand agency in
-civilization, a constant and broadening impulse towards progress in
-all its forms; and Christianity, as we have already seen, is friendly
-to commerce in its every breath. Those, therefore, who talk and preach
-about Trade as tending to _materialism_, do not know what they are
-talking about. Because Commodities are material things, and because a
-portion of the trade of the world concerns itself with commodities,
-these shallow thinkers jump to the conclusion that trade is
-materialistic. _It is just the reverse._ Let us hear no more from
-Professor Pulpit or Platform that buying and selling is antagonistic
-to men's higher intellectual and spiritual culture, because the
-present careful analysis has brought us indubitably to mental
-Estimates and prolonged comparisons, which are activities of Mind, as
-the fourth and a leading factor among the radical elements of Sale.
-
-(e) _There were two renderings_, King Hiram's rendering at Joppa the
-desired cedars from the mountains of Lebanon, and King Solomon's
-rendering in return at Tyre the food products grown in his fertile
-country. These renderings were visible to all men. Unlike the desires
-and the estimates, which were subjective and invisible; the actual
-exchange of the products, the culmination of the previous efforts, the
-stipulated renderings by and to each party, were outward and
-objective--"known and read of all men." This is the reason why public
-attention is always strongly drawn to this particular link of the
-chain of events which we are now unlocking and taking apart, while
-other links of the series, that are just as essential, almost wholly
-escape observation. The ports and the markets are apt to be noisy and
-conspicuous, when the desires and the estimates and the satisfactions,
-without which in their place there would be no market-places, work in
-silence, and leave no records except the indirect one of the
-renderings themselves.
-
-It is of great moment to note here, that each of the two parties to an
-exchange always has an advantage over the other, either absolute or
-relative, in the rendering his own product, whatever it may be, as
-compared with his present ability to get directly or through any other
-exchange the product he receives in return. Take the example in hand.
-Cedars and sandal-wood were natural to Mount Lebanon; there were no
-other workmen in those regions of country that could "_skill to hew
-timber like unto the Sidonians_"; the Mediterranean afforded a level
-and free and easy highway from its northern coast to the Judean
-seaport at Joppa; and all these natural and acquired facilities put
-King Hiram into a posture of advantage in the rendering of timber, not
-only over the Jews, but also over all the other peoples in the basin
-of the midland sea. Still this advantage, great as it was, could only
-be made a real and palpable gain to themselves, the proprietors of the
-timber, by means of some exchange with somebody else, by which some
-wants of their own greater than their present want of timber, could
-be supplied by means of the timber. They had more of that commodity,
-and more skill to fashion and transport it, than their present and
-immediately prospective needs could make use of; and the only way in
-which they could practically avail themselves of their advantages,
-was, to sell their surplus timber and buy with it something that they
-needed more. Otherwise their very advantage perished with them. God
-has scattered such a diversity of blessings and capacities and
-opportunities over the earth on purpose, that, through traffic, on
-which his special benediction rests, the good of each part and people
-may become the portion of other parts and peoples.
-
-So, on the other hand, of the southern neighbors of the Tyrians. There
-the earth brought forth by handfuls. There was an abundance of corn in
-the land, even to the tops of the mountains. Its fruit did indeed
-shake like Lebanon. But there were no cedars there, no fir-trees, no
-sandal-woods. How short-sighted, then, and futile, would it have been
-for the Jews, to try to hang on in their own behoof to all the natural
-advantages that God had given to them, and to say, We will not part
-with the direct results of any of them, we will build treasure-cities
-as they did in Egypt, we will store up all the fruits of these fat
-years against the possible coming of some famine years in the time to
-come. That is anything in ordinary times but the divine plan. It is
-anything but the letter and spirit of the divine injunction: "_Him
-that keepeth back corn the people curse; but blessing shall be upon
-the head of him that selleth it_" (Prov. xii, 26). Had they talked and
-acted thus, no temple could then have been built in Jerusalem, and the
-people of that generation would have lost the moral and religious
-impulse and uplifting of their service and sacrifice. Their grain
-would have become worthless from its very abundance, and would have
-decayed on their hands. They would have missed a great gain for
-themselves, and would have snatched away from their neighbors to the
-northward a providential opportunity for an equal gain.
-
-The general truth must not be lost sight of here, even in passing,
-that all trade whatsoever is based upon a Diversity of relative
-Advantage as between the parties exchanging products. If, for example,
-the Hills of Judah and the Mountains of Israel had been covered with
-timber suitable for building the temple, and the coasts of Tyre and
-Sidon and the foot-hills of Lebanon had been fertile stretches of
-arable land, this particular trade would never have been thought of
-and could never have been realized. There would have been no gain in
-it for either party, and unless there be a valid gain for both parties
-at least in prospect, no trade will ever spring into being, because
-there would be no motive, no impulse, no reason, in it. Unless the
-Jews could get the timber easier by raising grain to pay for it, and
-the Tyrians get the oil and wheat and barley easier by cutting and
-floating timber to pay for them,--no trade; but the greater easiness
-to each actually came about, because each had an Advantage both
-natural and acquired over the other in his own rendering, and the
-mutual gain of the trade was wholly owing to that circumstance. So far
-as that matter went, the Tyrians had no cause to envy their neighbors
-the superior soil of the south, for they reaped indirectly but
-effectively a part of those harvests for themselves; and the Jews had
-no reason to be jealous of their northern neighbors on account of the
-noble forests crowning their mountains, because through trade they
-secured easily to themselves a share of that vast natural advantage.
-Diversity of Advantage both natural and acquired is the sole ground of
-Trade both domestic and foreign; and consequently by means of trade
-the peculiar advantages of each are fully shared in by all.
-
-It is perhaps less obvious but surely equally true, that the greater
-the relative diversity of advantage as between two exchangers, the
-more profitable does the exchange become to each. If the Vale of
-Sharon had been twice as fertile as it was, and the cedars of Lebanon
-twice as large and lofty as they were, the easier and better would
-Israel have gotten its timber, and the more secure and abundant would
-have become the food of Tyre and Sidon; and, therefore, the more
-unreasonable, or rather the more absurd and wicked, would have been
-any envy or jealousy of either of the superior advantages at any point
-or points of the other. So universally. By the divine Purpose as
-expressed in the constitution of Nature, in the structure of Man, and
-in the laws of Society, Trade in good measure and degree imparts to
-each the bounties of all, arms each with the power of all, and impels
-each by the progress of all.
-
-One other important matter is closely connected with these two
-Renderings, which is the fifth bit in succession of our present
-analysis, namely this, that traffic renderings always make necessary
-new and better routes of travel and transportation. It is mainly for
-this reason, that persons and things have to be carried to distances
-less or greater in order to consummate these Renderings of home and
-foreign commerce, that roads by land and routes by sea have been
-sought for and found, made and made shorter, improved as to method and
-facilitated as to force, from the dawn of History until the present
-hour. It was to get the goods of India, and so find a market for the
-goods of Europe, that the earliest land routes between the two were
-tried and maintained. The ground-thought of Columbus, meditated on for
-years, was to discover a new commercial way to India; Magellan with
-the same intent sailed westward through the Straits that wear his
-name, and so circumnavigated the globe; repeated searches mainly with
-the mercantile view, never long intermitted, have attempted ever since
-the North-West or the North-East passage to India; Vasco da Gama in
-1497 boldly accomplished the East passage, and thus changed for all
-the Continents the channels of trade; the West now trades with all the
-East through the Suez Canal, dug for that express purpose; and the
-words, "Panama" and "Nicaragua" are upon everybody's lips, simply
-because through Central America is the shortest and safest route for
-men and goods to and from all the Oceans.
-
-Quite recently Dr. W. Heyd has announced through the Berlin
-Geographical Society the discovery of two commercial routes from India
-to the West not hitherto described. Trebizond (on the Black Sea) and
-Tana (at the mouth of the Don) were the chief distributing points.
-Through Tana passed westward the pepper and ginger and nutmeg and
-cloves; and the price of spices is said to have doubled in Italy, when
-the Italians were for a time shut out of Tana in 1343. The chief
-overland route from India to Tana ran through Cabul to Khiva by the
-Oxus, and then by land through Astrakhan. The other route to Trebizond
-passed through Persia, and came out by Tabriz to the Black Sea. It may
-perhaps be pardoned, if a far homelier, more modern, and even local,
-illustration be given of the present point, that trade makes roads.
-The western wall of Williamstown is the mountain range of the
-Taconics, whose general height is about 2000 feet above tide water at
-Albany. Within the limits of this town are four natural depressions or
-passes over this range, which is also the watershed between the Hoosac
-River on the east and the Little Hoosac on the west. About the
-beginning of this century, the population was quite sparse in both
-these valleys, while the impulse to travel and traffic over the
-barrier was sufficient to build (wholly at local expense) wagon roads
-over each of the four passes, one of which soon after became a
-turnpike between Northampton and Albany; and another was built mainly
-to accommodate the medical practice on the west side of the mountain
-of Dr. Samuel Porter--a Williamstown surgeon of local eminence. So
-soon as railroads were constructed to run down these parallel valleys
-(railroads themselves are perhaps the best illustration of the point
-in hand), the mountain roads were relatively deserted, and only two of
-them are now open to transient travel.[2]
-
-Lastly, (f) _There were two satisfactions_, the satisfaction of the
-southern king in actually obtaining the excellent timbers, without
-which the cherished national temple could not have gone up; and the
-satisfaction by the northern king in the easy receiving of the
-abundant food products for the daily maintenance of his court and
-kingdom. The simple story of these commercial transactions between Jew
-and Tyrian indicates clearly enough, what might have been anticipated
-and what always happens in such circumstances, not only a mutual
-satisfaction at the completion of each specific exchange, but also a
-general relation of contentment and peace in consequence of
-advantageous commercial intercourse. "_And Hiram, king of Tyre, sent
-his servants unto Solomon; for he had heard, that they had anointed
-him king in the room of his father; because Hiram was ever a lover of
-David. And it came to pass, when Hiram heard the words of Solomon,
-that he rejoiced greatly, and said, Blessed be the Lord this day,
-which hath given unto David a wise son over this great people; and
-there was peace between Hiram and Solomon; and they two made a league
-together._"
-
-It is plain to reason and to all experience, that mutual Satisfactions
-are the ultimate thing in exchanges. Our present analysis can go no
-further, for the reason, that we have now reached in Satisfactions the
-end, for the sake of which all the previous processes have been gone
-through with. Persons do not engage in buying and selling for the mere
-pleasure of it, but always for the sake of some satisfactions
-derivable to both parties from the issue of it. Ordinary
-self-inspection and foresight and industry being presupposed, the
-issue of exchanges is just what was expected by the two persons, the
-satisfaction of each follows as a matter of course, and stimulates to
-new exchanges in ever-widening circles.
-
-Since the desires of all men, which the efforts of other men can
-satisfy through exchange, are indefinite in number and unlimited in
-degree, there is no end of human Satisfactions to be reached along
-this road of reciprocal trade; and since the very object of all trade
-and the actual result of all trade (the exceptions are infinitesimal)
-is to multiply and reduplicate continually mutual Satisfactions among
-men; we can see right here what a loss and wrong it is, what a wanton
-destruction of possible human happiness it is, what a bar to progress
-among men in comforts and powers it is, for nations to impede and to
-prohibit commerce by legislation! As we shall see more fully in a
-later chapter, Governments can have no moral or constitutional right
-to restrict the trade of their people, except in the sole interest of
-revenue or health or morals.
-
-Such is the constitution of the universe, that a really good thing is
-usually cognate with and inseparable from a good many other good
-things. Buying and selling, as we have now clearly seen, springs right
-out of the nature of men in the circumstances in which they are
-providentially placed on the earth, and ends in the satisfaction of
-innumerable wants common to all men. This makes trade a thoroughly
-good thing in itself; and consequently it is intimately associated
-with many other good things. The scriptural instance, that we have
-been examining, gives a neat illustration of this: "_and there was
-peace between Hiram and Solomon; and they two made a league
-together_." The mutually profitable exchange of commodities led to a
-feeling of amity between the two neighboring kings; the feeling of
-amity led to a treaty of Peace between the two adjacent nations; and
-the "_league_" so ratified not only kept out war from their borders,
-but also permitted the unhindered continuance of profitable exchanges
-between them.
-
-So it is always. Peace waits on Commerce. Good-will among the nations
-is strengthened by the ties of interest and profit among their
-citizens. The mercantile classes as such are always averse to war,
-because war is the natural enemy of exchanges. Thus traffic leads to
-peace and tends to maintain it, and peace preludes increased
-prosperity, and commercial prosperity under freedom is wholly friendly
-to mental and moral progress, and Christianity walks before and all
-along this line of individual and national blessing. The commercial
-treaty of 1860 between France and England has tended powerfully,
-perhaps more powerfully than any other single cause, to keep those
-formerly inter-belligerent nationalities in peace and amity ever
-since.
-
-We will now put into a little table the final results of the present
-analysis of Buying and Selling. The ultimate elements seem to be
-these:
-
-    1. _Two Persons._         4. _Two Estimates._
-    2. _Two Desires._         5. _Two Renderings._
-    3. _Two Efforts._         6. _Two Satisfactions._
-
-The thoughtful reader will note in this table the fact, that three of
-these elements are objective, that is, outward and visible; and the
-other three are subjective, that is, inward and invisible. Persons,
-Efforts, Renderings, are seen and known of all men; Desires,
-Estimates, Satisfactions, can be directly known only to the persons
-who feel and make them. This is a peculiarity of Political Economy,
-that has been far too little observed even when it has been observed
-at all. Objective and subjective elements in it meet and mingle in
-each transaction. Indeed, they alternate, as is shown in the table
-above: first a Seen, and then an Unseen, Element throughout. It is
-this commingling of outward and inward, visible and invisible, that
-makes all the difficulty and gives all the fascination in Political
-Economy. Whatever carries us into the steady though billowy play of
-universal human nature is at once difficult and fascinating.
-
-Quite contrary, however, to a common impression, the _certainty_ both
-of action and prediction in all the other Sciences as well as in
-Economics lies rather in the unseen elements than in those that are
-seen. Take for an example the calculation of an eclipse: it is not so
-much from what is visible in the heavens and on the earth that the
-astronomer infers and predicts to the instant the shadow of one orb
-thrown upon another, as it is from the wholly hidden but ever-enduring
-forces of gravitation constantly relating these orbs one to the other.
-So it is of the Sciences generally; progress is made in them and
-certainties are reached in connection with them, "_while we look not
-at the things which are seen, but at the things which are not seen;
-for the things which are seen are but for a time; but the things which
-are not seen are everlasting_." Invisible Desires and Satisfactions
-felt in connection with Exchanges are among the most constant elements
-of human nature; they, as it were, give birth to the relatively more
-transient (though visible) data of Efforts and Renderings; while
-inferences and conclusions and even predictions may be securely drawn
-from all of these, giving a solid ground for Political Economy to
-stand on,--almost as solid as the ground of the chief Physical
-Sciences.
-
-2. We will next examine the inmost nature and the outward
-manifestations of _Value_. "Value" is by much the most important word
-in the Science of Economics; and we must, therefore, comprehend it
-thoroughly, root and branch. Nearly all the writers in English have
-used in place of this the word "Wealth" and those in other languages
-some equivalent and equally concrete word; but the present writer
-fully satisfied himself some twenty-five years ago, that it is
-impossible to use that word to any advantage in economical
-discussions, owing to its inherent ambiguities and concrete
-associations in the minds of men. He utterly discarded the word at
-that time, and has found not the least occasion to pick it up again
-since, and believes now that his substitution of the word "Value" in
-place of it will ultimately be seen to have been his greatest
-contribution to that Science, to which he devoted his life.
-
-Even professed and excellent logicians, like John Stuart Mill, found
-the word "Wealth" an insoluble element in the science of Economics; he
-commenced his great work by writing, that it was not really needful to
-_define_ the word which nevertheless he laid at the foundation of his
-discussions, that "every one has a notion sufficiently correct for
-common purposes of what is meant by Wealth"; he goes on, however, to
-give at least a half-dozen definitions of the word, no two of which
-are at all consistent with each other, only one of which embodies a
-clear and scientific conception, and even to this one he himself does
-by no means coherently adhere throughout his treatise. No wonder, that
-this great man died thoroughly dissatisfied with his own work in
-Economics, and wishing for longer life in which to recast and improve
-it! No wonder, too, that the crowd of writers both English and
-American, many of them able and thoughtful and otherwise logical, who
-have been content to continue to use this irreducible and utterly
-unscientific word at the bottom, have made a mess of it!
-
-In dropping the word, "Wealth," accordingly, Political Economy has
-dropped a clog, and its movements are now relatively free and certain;
-and it is all the more incumbent on the Science for that very reason
-to define the good word that it substitutes for a bad one with
-absolute clearness, to explain it through and through until it become
-quite transparent, and then always to use it in its defined and
-economical sense, and none other, even though the same word be
-properly enough used in other senses in common speech and in other
-than scientific relations. Exactly that is what we are now going to
-attempt to do in a simple and consecutive order.
-
-(a) Perhaps it will help us to find out precisely what Value _is_ by
-seeing as clearly as possible at the outset what it is _not_. It is
-not _easy_, and never can be made so, to teach and to learn distinctly
-what Value is in its ultimate nature and constant changes. Here is the
-one unavoidable difficulty that lies at the very threshold of
-Political Economy; and this difficulty, which is not found as in the
-case of "Wealth" in the meaning of the word but in the complex
-character of that which the word describes, once overmastered, and one
-walks thereafter with ease and pleasure throughout the economic
-domain. It would be wrong and cruel to deny that just here is one hard
-place in the road for teacher and pupils to get over. It arises wholly
-from the nature of the subject, as we shall soon see, and not at all
-from the insufficiency of the word, Value. We have already seen fully,
-that Buying and Selling in each and every transaction is complex and
-relative, involving twelve elements every time; that Desires and
-Estimates and Renderings are especially relative,--each party to a
-trade desires something in possession of the other, estimates that
-something relatively to something in his own possession, and finally
-renders to the other his own something for the sake of receiving the
-other's something. Now everybody is used to all this and practically
-understands it perfectly, but it is complicated and reciprocal
-nevertheless, and Value, which is the single birth of the two
-Renderings, though perfectly intelligible to him that takes pains, is
-not a thing to be seized once for all at a passing trot.
-
-Value, then, is _not_ a quality of single things, belonging to them as
-if by nature, as hardness is a quality of a rock or gravity is an
-attribute of gold; because all physical qualities in physical things,
-all that which makes or helps to make anything such as it is, may
-be learned by a study of the things themselves by themselves; a
-careful examination and analysis of the mechanical and chemical
-properties of any physical thing will discover all its distinguishing
-characteristics, all that makes it that particular thing in
-distinction from all other things; but it is plain already, that the
-_Value_ of anything (if it have value) cannot be found out by studying
-that particular thing by itself alone; the questioning of the senses
-however minute, the test of the laboratory however delicate, can never
-determine how much anything is _worth_, because that always implies a
-comparison between _two_ things, or more strictly a comparison between
-two Renderings in exchange. Value is not an attribute of single
-things: not even if the things be physical and tangible.
-
-Now two other kinds of things are bought and sold besides physical and
-tangible things, namely, personal services and commercial credits; and
-it is very plain, that Value cannot be a quality of any one personal
-service rendered, as looked at by itself, such as the service of a
-physician towards a fever patient, because the service in and of
-itself might be the same whether rendered to his own child or the
-child of one of his patrons, while in the former case there would be
-no value, and in the latter there would be; and so too the very name
-"commercial credit" implies an exchange of two Renderings, out of
-which Value always emerges, and not at all an attribute of one credit
-considered by itself. Value is no more a characteristic of single
-intangible services and claims than it is of single intangible
-commodities rendered.
-
-And what makes all this still more certain is, that Value even in
-physical things, and perhaps still more in services and claims, is all
-the while changing under demand and supply, now rising and then
-falling, while the physical properties of things, that make them what
-they are, are fixed and unchangeable. A gold eagle, for example, has
-certain primary qualities as gold, without which it would not be gold;
-it is hard and heavy and colored: gold is gold the world over and in
-all ages: Value is not one of these primary qualities, nor even a
-secondary quality, nor any quality at all, of gold as such; because
-circumstances are readily conceived and have often occurred, in which
-gold has no Value even in exchange; for instance, among a crew
-abandoned at sea, a bag of gold belonging to one of the sailors might
-not buy even a biscuit belonging to another; all the natural qualities
-of the gold are present,--it is still yellow and weighty and
-solid,--but its Value has escaped altogether. Gold is always 19 times
-heavier than water: specific gravity is a _quality_ and is constant in
-all physical things: Value is not a quality in this sense at all,
-inasmuch as it is something that is constantly changing, rising or
-falling, and not infrequently disappearing altogether, leaving no
-sign.
-
-Ignorance of this vastly important truth has pecuniarily ruined
-thousands upon thousands of the people of this country during the last
-20 years. They have gone into the mining of metals, gold and silver
-and copper, sometimes as individuals and more often as companies
-gathering in the driblets of investors, under the notion that if they
-could only get these metals out of the ground their Value would be
-just as secure and fixed as their physical qualities. They found out
-their mistake in bitterness of spirit. For example, the Value of an
-ounce of silver has gone down and down and down as the quantity of
-silver excavated has increased under zealous digging, in accordance
-with the universal and pitiless law of Supply and Demand. So of
-copper. And both these great monetary interests went to Congress and
-secured the passage of laws designed to lift artificially the Values
-that were sinking naturally under increased Supply, the silver men by
-a law requiring the United States to buy and mint at least $2,000,000
-in silver each month whether the silver dollars were needed or not,
-and the copper men by a law imposing a tariff-tax on foreign copper
-that has actually lifted the price two cents a pound on the average of
-the whole 20 years above the average price of copper in the markets of
-the world.
-
-Take another illustration of disappearing Values, this time in lands,
-long supposed to be the most stable in value of all human possessions.
-Whole tiers of farms in the writer's native town in New Hampshire, and
-for that matter all over New England as well, that in his boyhood
-supported large families, and when sold usually brought a fair price,
-are now abandoned of their owners as wholly or comparatively
-worthless, and are allowed to grow up into forest again, without a
-sign of present human habitation upon them. Value is something that
-needs to be studied carefully, if it is to be fully understood.
-
-(b) Perhaps the origin of the word, "Value," will throw some light
-upon its nature and changes. Etymology can never be safely despised in
-scientific discussions, although words are perpetually changing their
-meaning in the mouths of men. No science can afford to build upon the
-transient meaning of a word; and yet it is clearly possible so to use
-words as to reach and describe ultimate and unchanging facts in
-science; and some knowledge of the original meaning of words is always
-a help in getting at those definitions and analyses of facts that are
-permanent in science. Let us hold fast to the cheering truth
-exemplified on all sides of every science, that a just analysis and
-exact description of ultimate facts in any department of knowledge are
-for all time, in spite of the transient meaning of current words.
-
-The present word is derived from the Latin VALERE, _to pass for, to be
-worth_. There is a strong hint of a _comparison_ in the original
-meaning of the word, and the current use of it both in Latin and
-English develops the hint into a certainty. In common language, when
-the Value of anything is asked for, the answer always comes in the
-terms of something else. If the question be, How much is it worth? the
-answer is, So many dollars or cents. Now the cents or dollars are very
-different things from those whose value is thus inquired after; and so
-we see again from another point of view that Value is a relative
-matter, since it clearly implies a comparison between two distinct
-things; and, if so, it is clearly enough not a quality of any one
-thing, and of course it would be useless to try to ascertain the Value
-of anything by a study of that thing alone. Etymology thus easily
-brings us up to our present vital question, and will assist us to
-solve it completely.
-
-(c) _What is Value?_ Plainly it is the result of a comparison
-instituted between two things, using the word, "things," here in its
-broadest sense. But who institutes the comparison? And who is
-competent to announce the result of it in Value? A comparison is
-required in order to ascertain the length of a stick of timber in feet
-and inches, and a carpenter's square is the instrument by which the
-comparison is made, and it makes no difference in the result whose the
-square is or whose the stick of timber is, since the square and the
-stick have in common the physical quality of length, and a simple
-comparison of square with stick determines the length of the latter,
-and one man in this case may determine the result by himself alone,
-and it is not needful that he be the _owner_ of either of the things
-compared.
-
-But it is a different kind of comparison from this that issues in
-Value. Let us suppose an exchange of a bushel of wheat for a mason's
-trowel: there is no common physical quality, as length, between the
-wheat and the trowel; and it is evident, that no _one_ man can measure
-in any form one of these two commodities by means of the other. It is
-a peculiar kind of comparison that is involved in any and every trade;
-and the first peculiarity of it is, as we have already seen in another
-connection, that it always requires "two persons" to make it; and each
-of the two persons must always be the virtual _owner_ of one of the
-two things exchanged. A thief may indeed go through the motions of
-selling a stolen horse, but as he is not the owner of the horse there
-can be no sale, and the actual owner may take his horse wherever he
-finds it even in the hands of an innocent third party. In other words,
-there must ever be "two efforts" also, two legitimate efforts giving a
-valid claim of ownership to each of the two parties in the exchange.
-
-And there is a second distinctive peculiarity in that comparison that
-ends in Value, namely, the two things to be exchanged are not compared
-directly with each other at all, as square and stick are compared,
-but in the light of the "two desires" with which we are already
-familiar, and in that of the "two estimates" resulting therefrom. The
-owner of the wheat desires a trowel, and the owner of the trowel
-desires a bushel of wheat; the former estimates the effort it has
-already cost him to procure the wheat in a sort of comparison with the
-effort that it would otherwise cost him to procure the trowel, and he
-does not trade unless the trowel seem more and better to him than does
-the wheat; the latter estimates the effort it has cost him to procure
-the trowel in a sort of comparison with the effort it would cost him
-to procure otherwise the wheat that he wants, and he does not trade
-unless the wheat then and there seem more desirable than the trowel,
-which he already has; and these two relative estimates of the two
-owners must _coincide_, that is, the owner of the wheat must think
-more of the trowel than of the wheat, and the owner of the trowel must
-think more of the wheat than of the trowel, before these two parties
-can ever trade. So of all traffic whatsoever.
-
-Now the third and last distinctive peculiarity of that kind of
-comparison out of which Value emerges is this,--an _action_ is
-necessary in order to complete the comparison. Desires and estimates
-may have been never so busy, but no Value can ever be born until an
-outward action takes place in the "two renderings" of our former
-analysis. Then first we come out upon plain and solid ground. We leave
-the play of the subjective elements, which yet are essential in the
-premises, and touch firmly objective realities. _The trowel-maker
-passes over his tool in the sight of men to the wheat-grower in firm
-possession and ownership, and takes in return for it from him the
-grain, which the latter passes over to the former for the sake of
-receiving the trowel._ The two "satisfactions" follow as a matter of
-course, and that whole transaction as a commercial exchange and as
-the sole subject of Political Economy is ended.
-
-_But where is the "Value," of which we have been in search?_ The
-answer is easy and certain and unevadible. _The Value is in the
-Renderings, and nowhere else._ The value of the trowel is the wheat,
-that is actually given in exchange for it; and the value of the wheat
-is equally the trowel, for the sake of getting which the wheat was
-rendered. What was the Value of King Hiram's cedar-timbers? The oil
-and wheat actually returned in pay for them. What was the Value of the
-oil and wheat sent northward by King Solomon? The timbers rendered in
-direct exchange for the same. This is not merely the only possible
-answer to the question, _What is Value?_ but it is also a perfectly
-complete and satisfactory answer. Common language here corresponds
-exactly with scientific language. "How much did the horse cost?" "One
-hundred dollars." The dollars have nothing whatever in common with the
-horse, except that they express his Value at the time; the horse has
-nothing in common with the dollars, except that it expresses the Value
-of the dollars at the time. It is just as exact to say, it means
-precisely the same thing to say, the dollars are worth the horse, as
-to say, the horse is worth the dollars.
-
-In general terms, the Value of anything is something else received in
-return for it, when each owner renders the one _for the sake of_
-getting the other. This is the whole of it, so far as any specific
-valuable thing is concerned. We shall indeed need after a little, and
-shall have no trouble in finding, an abstract and universal definition
-of "_Value_," as an abstract and scientific term perfectly
-circumscribing the field of Economics. Here and now we are dealing
-with the simpler concrete question, What is the value of any specific
-valuable thing? The unvarying answer is, Some other specific valuable
-thing already exchanged for the first! There may be expected value,
-estimated value, but actual value there is none, until a real exchange
-has settled how much the value is. The value of anything is something
-else already exchanged for it. Value is not simply a relation
-subsisting between two things, the result of a careful comparison
-between them, but rather an actual fact established in connection with
-them. The universal formula of Value is _quid pro quo_, in which
-formula _quid_ stands for one of the valuables and _quo_ for the
-other, and _pro_ unfolds the motive of each owner for the reciprocal
-receiving and rendering.
-
-Here a caution is needful. Because nobody can tell what the value of
-anything is until something else has been put over against it in order
-to get it and actually received therefor, and because the only
-possible way to express the value of either is in the terms of the
-other,--the trowel is worth the wheat and the wheat is worth the
-trowel,--one must not therefore jump to the conclusion that the value
-of either is settled for all time or even for any future time. It is
-only settled for _this_ time. In Economics as in Christianity, Now is
-the accepted time. There is nothing fixed in Values, and never can be
-from the nature of the case, because Desires are personal to
-individuals, and Efforts fluctuate with times and persons, and
-Estimates that wait on these vary from necessity, and the Renderings
-of to-day may not be the chosen renderings of other persons in the
-same articles to-morrow. Value is not a quality at all, still less is
-it a permanent quality, of anything; it is a relation established
-between two things when these are in the hands of two given persons;
-but now when these are in the hands of two different persons, whose
-views are pretty sure to differ from the former, and a new relation is
-sought to be established between these in the old way of Estimates,
-is it strange that a new balance is struck, and Value is expressed in
-quite different terms?
-
-One of the chief charms of Political Economy is the open secret, that
-it deals not with rigidities and inflexible qualities and mathematical
-quantities and the unchanging laws of matter, but with the billowy
-play of desires and estimates and purposes and satisfactions, all of
-which are mental states, and all of which are subject in the general
-to ascertainable laws, though laws of a quite different kind from
-those of Mechanics. Values come and they go. Within certain limits and
-under certain conditions they may be anticipated and even predicted,
-but never with the precision of an eclipse or the result of a known
-chemical combination. There is a useful and fascinating Science of
-Value, as we shall see indubitably by and by in the present chapter;
-but it is a science that deals primarily with _persons_ and only
-secondarily with _things_, with mind and not with matter, with the
-general undulations of the sea and not with the crests of the waves.
-And all this is so, because Values are relative, because the
-announcements in the market-place to-day may stand listed differently
-to-morrow and very differently next year, and because old values may
-disappear altogether and many new ones come in, all in accordance with
-the incessant changes in the wants and labors and fashions and
-projects of men.
-
-We are now in a good place to see once for all the sharp distinction
-there is between Utility and Value. These two are often confounded to
-the deep detriment of our Science; and no clear thinking is possible
-in Economics without drawing this line sharp, and then holding it
-fast; for the hazard of this confusion is all the greater, because
-Utility is always connected with Value, although it is a totally
-different thing from Value. We will see. Utility is the simple
-capacity of anything to gratify the desire of anybody. This is at
-once the etymological as well as the popular signification of the
-word. It is derived from the Latin _utor_, to make use of, a word that
-is often conjoined in Latin with _fruor_, to enjoy; so much so, that
-the two verbs are often put together, _utor et fruor_, and also often
-without the conjunctive, _utor fruor_. Utility, then, is a quality of
-innumerable things. Anything that is _good for_ anything, anything
-_useful_, anything that has the power to still _the desires_ of any
-person, has Utility. But multitudes of things that have this capacity
-to gratify human desires are never bought and sold, and therefore can
-have no Value, since nobody will give anything for them. The air we
-breathe, the water we refresh ourselves with from spring or brook, the
-light of the sun and moon and stars, the fragrance of the flowers, the
-mountain prospect that delights the eye,--all these, and thousands
-more, possess the highest utility, but no value whatsoever. They are
-free. They are the bounty of God. They are never bought and sold. They
-are a vast class of things by themselves, with which Political Economy
-as such has nothing to do.
-
-Nevertheless the element of Utility comes into every case of Value,
-because the element of Desire comes into every case of Value, and
-whatever merely satisfies the Desire of any person is Utility, whether
-that capacity be the direct gift of God or whether the Efforts of men
-have been employed to bring it about. It is just here that we see the
-precise function of our "two efforts" in each case of Value, in
-distinction from mere Utility in all cases: much of utility is
-absolutely free, no effort of men having been put forth to secure it,
-for example, the fragrance of the wild rose; much more of utility is
-the commingled bounty of Nature and the gratuitous effort of men, for
-example, the fragrance of the domestic rose brought by the householder
-himself into his own yard for the gratification of his own family;
-while by much the most of utility is commingled free gift of God and
-the compensated efforts of men, for example, the fragrance of the bank
-of roses cultivated and cared for by the hired gardener. It is
-important for our purposes to discriminate carefully the three kinds
-of Utility: (1) what is wholly disconnected from the efforts of men,
-and comes freely from the hand of God; (2) what is mingled with the
-unpaid efforts of men, so that the satisfaction of the desire comes
-partly from Nature and partly from unbought effort; and (3) the
-compound utility that is partly free gift and partly the result of
-compensated labor. The last is the only kind of Utility that stands in
-any connection with Value.
-
-And even this is very different from Value. Utility in all three of
-its forms--now free, now onerous, now partly bought--is always a
-quality of one thing by itself, going straight to the satisfaction of
-some desire, and there an end. It is simplicity itself compared with
-Value, which is always a resultant of several things, and is
-specifically a relation of mutual purchase established between two
-"renderings," each of which expresses the value of the other, in each
-of which is embodied an "effort" made by each of the two "persons"
-rendering, and each of which excites a "desire" and an "estimate"
-before being passed over in ownership to another, and a "satisfaction"
-afterwards.
-
-The utility in every valuable rendering comes partly from free Nature
-and partly from compensated effort, but it is remarkable, that a
-principle, with which we are to become very familiar later on, namely,
-Competition, eliminates for the most part from all influence upon
-Value that portion of the Utility that is the free gift of God. The
-great Father never takes pay for anything, and never authorizes
-anybody to take pay in his behalf; and, moreover, has arranged things
-so, that it is exceedingly difficult for any person to extort anything
-from another person on the strength of anything that God has made, and
-man has not improved. Take, for example, ten horses of any general
-grade, brought into the same market by their ten owners for sale.
-These men did not make these horses, but they have cared for and
-trained them, or at least have become proprietors by purchase or
-otherwise of the results of such care and training. The Utility in
-each horse is compound, consisting partly of what God has done for him
-and partly of what man has done for him,--the two parts inextricably
-interwoven,--and all ten are offered now for sale. Each of the owners
-would indeed be glad to get something for his horse on the ground of
-what God has done to make him sound and strong and fleet, in addition
-to a fair compensation for what he (and his predecessors) has done in
-raising and breaking him; but the cupidity of all is likely to be
-thwarted by the ultimate willingness of some to sell their horses for
-a price covering the element of human "efforts" involved, and the
-action of these tends to fix a general rate for the whole ten, and
-thus the gratuitous element is eliminated from influence on Value.
-Even if the ten owners should combine for a higher price, there are
-doubtless a plenty of horses of that general grade elsewhere, some of
-whose owners are content to get back an equivalent for their own and
-others' "efforts" expended on their horses; and so the action of these
-tends to fix the general price for horses of that kind for that time
-and place at a point not above a fair estimate of the onerous human
-elements involved; thus throwing out by the action of competition all
-effect of natural Utility upon the Value of horses then and there. So
-of all other products of that kind.
-
-It is true, that in certain unique cases, in which competition has
-little or no play, because there is only one or a very few owners of
-such unique products, one cannot certainly say that free Utility may
-_not_ influence the Value to lift it above the gauge of human efforts
-involved; but such cases are rare, and relatively unimportant; and the
-tendency is immensely strong, under the natural and beneficial
-condition of things, for Values to graduate themselves through the
-reciprocal estimates and renderings of commerce, down to the actual
-and onerous contribution of _men_ to that Utility that underlies
-Value.
-
-Thus we are brought again and again from differing points of view to
-the "two renderings" as central and determinative in Value, and also
-more specifically to the "two efforts" of persons rather than any free
-contribution of Nature as constituting that portion of the compound
-Utility, whose function it is to gratify the "two desires" that
-precede the realization of Value,--that portion of the utility in any
-rendering that must be _compensated for_ by the other rendering. Now
-in order to reach in a moment more our final definition of "Value," a
-definition, it is believed, that will cover all the cases and take the
-life out of endless disputes, we need a scientific term to carry
-easily and exactly the meaning of any economic _rendering_. Let that
-word be SERVICE. We must have it in its generalized meaning, to cover
-the renderings of all the three kinds, in distinction from the term
-"personal services," which we have already used and shall continue to
-use to designate one class only of things exchanged, in
-contradistinction to "commodities" and to "credits," the other two
-classes.
-
-VALUE IS THE RELATION OF MUTUAL PURCHASE ESTABLISHED BETWEEN TWO
-SERVICES BY THEIR EXCHANGE.
-
-We offer this definition of "Value" to our readers in much confidence,
-that they will find it exact and adequate and altogether trustworthy.
-No one of them, however, is precluded from attempts to improve it in
-breadth and brevity and beauty; and all are invited to pick logical
-flaws in it, whether of ambiguity or superfluity or deficiency. Many
-minds and many hands in many lands have left their impress on parts of
-this definition, for example, Aristotle in Greece and Bastiat in
-France and Macleod in Great Britain; the present writer thinks, that
-he has bettered the definition of Bastiat, namely, "_Value is the
-relation of two services exchanged_," by precisely _defining_ the
-relation as one of mutual purchase; and he is sure, that he has
-improved the definition of Macleod, namely, "_The value of any
-economic quantity is any other economic quantity for which it can be
-exchanged_," by making his definition at once more abstract and more
-general and more definite, and also by escaping the slight implication
-in the word, "quantity," that only material things are exchanged in
-economics.
-
-The immense importance of securing _first_ a clear and correct
-Definition of "Value," which is the foundation-word and the
-circumference-word of Political Economy, and _then_ of using that term
-and all other scientific terms in the Science in their defined senses
-only, will certainly be appreciated by those who have wandered in the
-wide wilderness of the discussions on the undefinable word, "Wealth,"
-and especially by those who have reflected most upon the vast and
-illimitable significance of economic Exchanges on the welfare of
-mankind. Associate Justice Miller of the Supreme Court of the United
-States, not an Economist in the technical sense, referred in 1888, in
-words that are worth remembering, to "_the philosophical maxim of
-modern times, that of all the agencies of civilization and progress of
-the human race commerce is the most efficient_." In August of that
-year John Sherman of Ohio, a man far enough from being a technical
-Economist, said in the Senate of the United States, that "_it is
-almost a crime against civilization_" to maintain commercial barriers
-between Canada and the United States.
-
-There were tokens a plenty in the year of Grace just referred to, that
-the Science of Value in all the lands of the civilized world, and
-particularly in the United States, was drawing to itself a new and
-more popular esteem. It was seen more clearly and felt more deeply
-than ever before, that this science has a weighty word for every man
-and woman and child in the world; that there are certain Rights in
-every one inherent and inalienable to buy and sell for his own
-advantage; that most if not all of the Governments, under the lead of
-comparatively few selfish and powerful men, were infringing upon these
-Rights, and robbing under the forms of Law the masses of their
-citizens to immense amounts for the special benefit of these very men;
-that the only sure defences of the people against these abuses of all
-kinds were in the maintenance and diffusion of the scientific and
-consequently disinterested principles and maxims of a sound Political
-Economy; that such a science was only friendly to the broadest rights,
-to universal gains, to illimitable increase in human comforts and
-powers, to international fellowship, to peace on earth and good-will
-among men; that, accordingly, a science of such scope and tendencies
-must be encouraged and cultivated and improved; that what had been
-crude in it, and narrow, and merely national, must be sloughed off;
-that the English and insular and special speculations of a century
-ago, which regarded "Wealth" as consisting of material things only,
-excepting however considerable portions of Adam Smith's immortal book,
-were antiquated and unusable; that the Science had really moved into a
-broader and still a well-circumscribed field, new and more permanent
-foundations were being laid, and fresh contributions from all
-countries should be welcomed; and that the time had fully come, when
-the accepted truths of this Science, like those of the other developed
-sciences, should be practically and steadily applied to the betterment
-of mankind. Under these broadening and inspiriting and uplifting
-conditions Political Economy, as never before, thanked God and took
-courage.
-
-3. Having now a satisfactory definition of Value, and knowing
-accordingly just what Valuables are in clear distinction from all
-other things in the world, we must examine with some care two or three
-of the most general facts and laws and limits of Value, before we pass
-in the next following chapters to study in detail each of the three
-kinds of Valuables, namely, material Commodities, personal Services,
-commercial Credits.
-
-(a) Since Value in general is the relation of mutual purchase between
-two Services, and consequently the specific value of either can only
-be expressed by the other,--one Valuable being always measured by the
-Valuable exchanged against it,--it follows as a matter of course that
-such a thing as a general Rise or Fall of Valuables is an
-impossibility. The rise of one valuable involves of necessity a fall
-in the other, as the fall of one implies the rise of the other. If the
-articles exchanged be bushels of wheat and dollars of silver, and if a
-bushel buys a dollar to-day, then wheat is worth a dollar a bushel;
-but if wheat rises next week, so that a dollar will not buy a full
-bushel, that is precisely the same thing as saying, that the dollar
-has fallen in its purchasing-power as compared with the wheat. Such
-specific changes in the purchasing-power of one Valuable over another
-are incessant throughout the commercial world, and a merchant's
-sagacity consists in anticipating these so far as possible and in
-availing himself of them alertly and prudently; but each one of us
-must needs see clearly and hold firmly in mind, that each fall in the
-purchasing-power of a Valuable means a corresponding rise of power in
-the other Valuable,--if the first buys more of the second than before,
-then the second must buy less than before of the first; and,
-consequently, a general rise of Valuables is a contradiction in terms,
-and so of course is a general fall of Valuables.
-
-This brings us to _Price_. Price is Value reckoned in money; and this
-is the only difference in the meaning of the two terms. When one
-valuable is sold against another, even when one of the two is money,
-each is the _Value_ of the other: Value is the general and universal
-term in Economics. When any other valuable is sold against money, the
-amount of money it buys is called its _Price_: Price is a specific and
-restricted term in Economics. Since we shall study Money thoroughly in
-a later chapter, and there explain the origin and extent of its
-functions throughout, it is only in order to remark here, that it is
-for convenience' sake, that is, to make easy the comparison of
-valuables one with another, that Value in commerce is commonly reduced
-to Price. Money becomes a sort of measure, by means of which to
-compare all other valuables with each other. In order to ascertain the
-Price of a Valuable, it only needs to be sold once against money; but
-in order to ascertain the Value of a Valuable, it would need to be
-sold once against all other valuables whatsoever. This last is clearly
-impracticable; and so Value for practical purposes is reduced to
-Price. The General is made Particular for convenience. Hence we have
-"Prices current," but never Values current.
-
-Now it will be plain to all, how there may easily be and often is a
-general rise or fall of Prices while a rise or fall of Values is
-impossible. Price is a relative word as much as Value is, but it does
-not relate to so many things. Price is specific, and Value universal.
-Both equally involve buying and selling, but one sale of a single
-valuable against money leads to Price, while ten thousand sales of the
-same valuable against other than money would not conduct to complete
-Value. That would require a sale of this valuable against all other
-valuables in the world, and a complete statement of the comparative
-results.
-
-General, or at least universal, changes of Prices in rise or fall in
-any given country are due to general and great changes in the Money
-current there. Subordinate changes in other valuables, money being
-supposed to remain uniform, will of course vary their Prices; but it
-is impossible that such changes should affect equally or even
-generally all the various and numberless valuables of a whole country;
-while some are coming easier, others are coming harder, while some are
-more desired than formerly others are less desired, and this will
-bring in of course altered prices, some higher and some lower; but a
-general rise of all prices, or a general fall in the same, can only
-come about by great changes of some kind in the circulating medium,
-that is, the money, of the country. For example, in the United States,
-between 1862 and 1878 inclusive, a government paper promise, called
-_greenbacks_, was the current money of the country; owing to its
-excessive issue, and to some doubt in the minds of the people whether
-the paper would ever be redeemed in gold, it soon became depreciated
-as compared with gold, the premium on which over the paper money
-varied at different times from 1 to 185 _per centum_; as all other
-valuables were then sold against greenback money, which had declined,
-their prices naturally rose in some sort of proportion as the medium
-fell; general _values_ remained much as before, but general _prices_
-were much enhanced; and when, after the resumption of specie payments
-in January, 1879, gold became again the standard medium, general
-prices declined in full accordance with the same universal principle
-reversed.
-
-(b) Prices, as we have now seen, are only a subordinate form of
-Values: the universal law that regulates all the variations of them
-both, within certain fixed limits to be examined shortly, is called
-the LAW OF SUPPLY AND DEMAND. This is perhaps the most comprehensive
-and beautiful law in Political Economy. We shall look at it now only
-in outline: the filling in will be the pastime and profit of all that
-is to come.
-
-"Demand" is a technical term in Economics, and accordingly needs to be
-defined, and then always used in its defined sense. So is "Supply."
-_Demand is the "desire" of a "person" for something in the hands of
-another person, coupled with the possession of something else capable
-of buying that something._ Mere desire has no function in Political
-Economy: hungry and penniless children passing by the stalls of a
-great market, have no influence on the prices or values of the viands,
-on which they cast their eager glances: only desires accompanied by
-"efforts" competent to excite the desires and to pay for the efforts
-of another are a Demand. Supply is the same thing as Demand looked at
-from the other side. Supply is the correlative of Demand. The Supplyer
-is a person, who has in his possession something desired by the
-Demander, and who in turn desires something in the hands of the
-Demander, when both are willing to exchange their "renderings." There
-is no economical difference in the position of the Demander and the
-Supplyer. Each is equally a Demand and a Supply with reference to the
-other. It is the old and ever-recurring case of Value, the
-propositions being here stated in their most universal terms.
-
-For simplicity's sake, however, and for convenience, without altering
-the substance of the definitions a particle, the valuables when looked
-at as a Demand are practically reduced in all markets to their
-equivalent in Money, so that Money offered or ready to be offered
-against any other exchangeable thing constitutes what is called in
-commercial language a Demand; and this is sufficiently accurate as
-well as current, although it must always be remembered that each
-valuable in any market in reality constitutes a Demand for another,
-and is equally a Supply in reference to that other. _Supply is any
-exchangeable thing offered for sale against any other exchangeable
-thing._ For example, corn in any market is at bottom a Demand and a
-Supply at once for every valuable offered in that market at that time,
-say, ploughs for one thing; but in the talk of the market, the
-presence of corn there, or its being ready to be immediately brought
-there and offered in exchange for money, constitutes what is called a
-Supply of corn; money offered, or ready to be offered, in exchange for
-corn, constitutes what is called a Demand.
-
-On this account Money seems to play a much more important part in
-trade than it actually does play; the corn is sold in the terms of
-money, that is, for dollars and cents as denominations of Value;
-convenience dictates such a reduction of general Value to this
-particular form of it, because this is found to make easier the
-ultimate exchange; but there is not one chance in a hundred, as trade
-runs nowadays in the larger markets, that this seller of corn will
-take his pay for it in actual money whether metallic or paper; money
-is never an ultimate product, but only an intermediate one; this
-seller of corn wants perhaps a plough or some other farming implement,
-and ten to one he will take for his corn a bill or order in some form
-on the seller of ploughs, and it will be corn for a plough, each
-becoming a Demand and a Supply for the other, though money or rather
-its denominations has acted as an agent in bringing about the final
-trade; the details of all this in manner and result will be as plain
-as day when we come to study "Money" and "Credits" in following
-chapters; while the essential point to be noted here is, that all
-Valuables are a Demand and Supply as towards one another. In other
-words, the world over, A MARKET FOR PRODUCTS IS PRODUCTS IN MARKET.
-
-What, then, is Market-Value returned in the terms of Money? And what
-is the universal Law of it?
-
-Market-value is the present rate of exchange between dollars and cents
-and any other valuable, that can be fairly graded in a class made up
-of valuables similar to itself; and the law of market-value is the
-equation of Supply and Demand, that is, the current rate is adjusted
-when money enough is offered to take off within the usual times the
-valuables on hand and offered for sale. If Demand for any reason
-become quickened, and the Supply be not increased, there is
-competition among buyers for the stock in market, and the market-rate
-rises or tends to rise. If, on the other hand, Demand become sluggish,
-the Supply remaining the same, there is a like competition among the
-sellers to dispose of their stock, and market-value sinks or tends to
-sink. So far it is the simple action on Value of the element of one
-"desire" expressing itself through a money-demand, the elements of
-"desire" and of "efforts" expressing themselves through Supply being
-supposed to remain stable, and the pulsations in the market-rate
-follow accordingly.
-
-How far can this simple action go? Demand increasing, Supply remaining
-as before, market-rate rises: how far can it rise from this cause?
-Here we must remember that Demand not only acts upon Value, but also
-Value reacts upon Demand. As Value rises, the number of those whose
-means or inclinations enable them to purchase at the new rate is
-constantly diminished: there are ten persons who may wish an article
-at one dollar, of whom not over four will wish it at two dollars, and
-perhaps only one at three dollars. Every rise in market-rate then,
-under the impulse of enlarged Demand, tends to cut off a part of that
-Demand, that is, to lessen the number of those who will purchase at
-the increased price; and the rate consequently can only rise to that
-point, whatever it be, where an equalization takes place between the
-Supply and Demand, between the quantity of flour, for example, offered
-at the enhanced rate, and the quantity of money in the hands of those
-willing to exchange it for flour at the higher rate.
-
-Just so in the reverse way, when Demand is slackened, Supply
-continuing as before, the market-rate is sure to decline; but
-declining rates tend strongly in turn to increase the demand by
-bringing the article within the range of a larger number of
-purchasers; Society is like a pyramid, each lower stratum is broader
-than the one above; and so the decline of rates under a weaker Demand
-is arrested by a stronger Demand coming from a wider circle of buyers,
-and a new market-rate is determined at the point of equalization
-between the new Demand and the old Supply. Thus every rise or fall of
-Demand tends to check itself, and will check itself in all the great
-classes of valuables, even without any variations in the Supply;
-everything oscillates under the variations of Demand; while the point
-of stable equilibrium, if we may use the expression of anything so
-unstable as Market-value, is always the equation of Supply and Demand.
-
-But all considerable variations of market-rate are commonly checked at
-an earlier point than the one just indicated by variations in the
-Supply. A sharper Demand carries up the market-rate, and a higher
-market-rate commonly acts upon Supply to enlarge it, and an increased
-Supply too checks the rise of market-rate. _Per contra_, a slacker
-Demand lowers market-rates, and lowered rates often lessen the Supply
-by the action of holders and speculators,--holders withdrawing their
-stock for a better market, and speculators buying now when the article
-is cheap to store away until it shall be dearer. Thus rise of
-market-rate from Demand growing stronger is checked doubly; first, by
-curtailing the number of would-be buyers, and second, by enlarging the
-Supply: the fall of market-rate from Demand growing weaker is checked
-doubly; first, by increasing the number of consumers of a now cheaper
-article, and second, by a diminution of Supply by the action of
-holders and speculators. This double and harmonious working of the law
-of the Equalization of Demand and Supply is one of the most
-comprehensive and beautiful laws in Political Economy.
-
-Besides this, we must note the effect on Value of conditions in Supply
-only, Demand being supposed to continue steady. There are three
-classes of valuables in respect to the law of their Supply. (1) When
-the Supply is scant, and cannot be increased at all, as is the case
-with choice antiques and certain gems and paintings by the old
-masters, their value may rise to any point under the action of Demand,
-there is and can be in such cases no market-rate, and the individual
-value will be struck at the point of equalization of the demand then
-existing with the supply there offered. For instance, the French
-Government paid, in 1852, 615,300 francs for a painting by Murillo,
-which had belonged to Marshal Soult. The genuine Murillos are
-comparatively few, and their number cannot be increased, and their
-merit causes a strong "desire" to possess them, and their value rises
-in connection with the limitation of Supply to a point beyond which no
-one purchaser can be found. When this painting was offered in Paris
-for sale, many "persons" of course were anxious to buy it, there was
-but one painting, there could be but one purchaser, value rose under
-the influence of a sharp Demand, the rise could not be checked by any
-duplication of the Supply, and the equation was complete and the value
-for that sale determined when one party distanced all other
-competitors and offered a sum greater than any one else would give.
-The same principle controls all sales of this sort, and is practically
-the principle of the _Auction_, whose very name indicates its nature
-in this regard, that Demand becomes restricted to one party, and that
-the highest bidder.
-
-(2) When the Supply, instead of being absolutely limited, can only be
-increased with difficulty or after the lapse of time, similar but less
-extreme results will be observed. Let us suppose, that pianos are
-selling in some rural community at $300 each, that there are twenty
-persons in the place who want a piano immediately, that there are but
-fifteen pianos on hand, and that the number cannot be increased for
-half a year. The market-rate will certainly rise above $300. How much
-above? To that point, at which only fifteen of the twenty will be
-willing to purchase at the new rate. The equation of Supply and Demand
-will be reached by a rising rate which cuts off five competitors. This
-is the principle, working only roughly in practice through the
-estimates and good judgment of dealers and purchasers. A better
-illustration of this second class of cases is, perhaps, the Grains and
-other agricultural products. When these have been gathered, there is
-no more home supply for a year; and any deficiency in the crops will
-raise their market-rate, not at all in the ratio of the deficiency,
-but according to the relations of the diminished Supply to a new
-Demand. Since the abolition of the Corn-Laws in England in 1846, and
-the resulting ease of grain-imports from abroad, a deficiency of home
-crops has no such effect on the price of cereals as it had before that
-time; when, according to Tooke's History of Prices, an expected
-falling-off of one third in the crops often doubled and sometimes
-quadrupled the usual prices; which shows that the world ought to
-become one country in respect to all food supplies, as indeed happily
-it is now for the most part, each country allowing them to be
-distributed freely everywhere in accordance with this law of Demand
-and Supply. Speculation is more busy in grain, in cotton, and in such
-things generally, because a new Supply can only be had once a year;
-early information is eagerly sought at the trade centres in regard to
-the prospects of the growing crops, and has its influence one way or
-the other on current prices; but the world is so wide and all the
-parts of it now so closely connected together by steamship and
-telegraph, that the prices of the great food staples are remarkably
-uniform over the earth, and Speculation has not the chance it once had
-to count and "corner."
-
-(3) In the only remaining and by far most comprehensive class of
-cases, in which the Supply of Commodities and Services and Credits can
-be readily and indefinitely increased to meet enhanced Demand, and
-easily withdrawn from market and stored when Demand declines, each
-rise and fall of market-rate tends to be speedily checked through the
-mere action of Supply; and the doubly and harmoniously working Law but
-just now referred to keeps Value in this class of cases comparatively
-steady all over the world.
-
-(c) It only remains in this branch of the general discussion on Value,
-to indicate the Limits, within which all oscillations of Value are
-contained. These extreme limits are specially to be found in the
-element of Value which we have called "Efforts." We have clearly seen
-already, that "efforts" (or Labor) are not, as has been often
-asserted, the cause of Value, but only one of several constituent
-causes; if Labor be asserted to be the sole cause of Value, the
-inquiry becomes instantly pertinent, what is the cause of the value of
-Labor; yet we know, that "efforts" always stand in preconnection with
-value, and, the mutual "desires" being presupposed, there must always
-be Limitations of Value lying partly in the efforts made by the person
-serving and partly in the efforts saved to the person served. In every
-valuable transaction, each of the parties is reciprocally serving and
-served, and it is clear, that the two would not exchange "renderings"
-unless the service which each renders to the other is less onerous
-than the "efforts" which each would have to make if each served
-himself directly. For example, it takes a certain effort for me to
-bring water from the spring for the use of my family; I am willing to
-pay a neighbor for bringing it for me, but I should not be willing to
-make a greater effort for him in return than the effort is to bring it
-myself; neither should I be willing to make an effort for him in
-return which I regarded just as onerous as the bringing the water
-myself; and unless there is some service which he will accept less
-onerous to me than that, I shall continue to bring the water. On the
-other hand, he will surely not render the service to me of bringing
-the water, unless it be less onerous to him to do so than the doing
-that for himself which I am ready to do for him.
-
-This principle, applicable to all exchanges whatsoever, draws on the
-one side the outermost line, beyond which Value never can pass. It may
-be asserted with confidence, that no person will ever knowingly make a
-greater effort to satisfy a desire through exchange, than the effort
-needful to satisfy it without an exchange. Therefore, it follows,
-that all exchanges lessen onerous efforts among men relatively to the
-satisfaction of their desires, and tend to lessen these more and more
-as exchanges multiply in number and variety, otherwise the exchanges
-would not take place.
-
-Moreover, within this outermost Limit of Value, which is made by the
-comparative onerousness of the respective "efforts," there is a second
-limitation of a similar kind to be found specially in the element
-which we have called "estimates." The estimate of each exchanger is
-based at once on his own effort about to be rendered and on his desire
-for the return service offered: the element of effort in the case of
-both being considered for the time as fixed, Value will vary according
-to the varying desire of each for the return service of the other,
-affecting of course the "estimate" of each, and furnishing also a
-secondary Limit of Value. To pursue the same illustration, suppose I
-regard the effort required to bring the water myself as 10; that there
-are several persons, who would be glad to do that service for me at a
-return service which I consider as 8; that there are two persons, who
-are willing to do it for something which I estimate at 6; and that
-there is only one person, who will do it for a return service which I
-regard as 5. It is evident, that the extreme limits of that service to
-me are 10 and 5. Higher than 10 it cannot go, lower than 5 it cannot
-sink. But why have I before me three possible classes of renderers?
-Because the persons in each class, while estimating their own efforts
-alike in the proposed rendering to me, have varying "desires" as
-towards a possible rendering from me to them, and consequently put
-differing "estimates" upon the possible transactions. The man who will
-bring the water for 5 has for some reason (no matter what) a stronger
-desire for the return than anybody else, and I should of course
-employ him so long as he would serve me on those terms; if he decline
-the exchange, I fall back on one of the two persons in the class above
-him, and Value rises now from 5 to 6, and will be steadier there than
-it was before; if each of these in turn should give out, I should fall
-back upon the larger class ready to serve me at 8, and Value would be
-very steady at that rate, because there are numerous competitors; and
-by no possibility could it rise above 10. Between 10 and 5 the value
-may fluctuate, but it cannot overpass these Limits in either direction
-under existing circumstances.
-
-Therefore we may conclude, that the _maximum_ Value of any Service in
-exchange will be struck at the point where the recipient will prefer
-to serve himself, or go without the satisfaction, rather than make the
-exchange; and the _minimum_ Value of any Service in exchange is struck
-at the point below which the recipient cannot get himself served even
-by him who most highly estimates the return service offered.
-
-(4) We come now to the last and most important Inquiry in this initial
-chapter, namely this, _Can there be, and is there, a strict Science of
-Buying and Selling? Is there a Science by itself, clear and certain,
-that covers and controls Valuables?_
-
-Here we must go slowly, if we would go surely. We must first find out
-exactly what a Science is in general, and then ascertain in particular
-whether Political Economy bears all the marks and stands all the tests
-of the other genuine Sciences. What is a Science?
-
-_A Science is the body of exact definitions and sound principles
-educed from and applied to a single class of facts or phenomena._
-
-The very first condition, accordingly, of any science is, that there
-be a single class of facts, objective or subjective, that can be
-separated from all other classes of facts, in the mind by a
-generalization and in words by a definition, and that such
-generalization and definition be clearly made and held; the second
-condition is, that the class of facts so circumscribed and defined be
-open to some or all of the logical processes of construction, of which
-the most important are Induction and Deduction; the third condition
-is, that the subordinate definitions and working principles within the
-inchoate Science be all educed from and applied to these circumscribed
-facts in strict accordance with these well-known logical processes;
-and the last condition is, that these definitions and principles have
-gradually become "_a body_," in which there is an organic arrangement
-of parts, all being placed in a just order and mutual interdependence.
-There is no old Science, and there can be no new Science, in which
-these four conditions do not meet and become blended; and the beauty
-of it is, that this Definition applies to any Science in all stages of
-its growth. No one of all the Sciences is as yet completed; but just
-so soon as any correct definitions and principles are drawn from and
-applied to any _class_ of things clearly circumscribed as such, and
-these definitions and principles are orderly arranged in a _body_,
-there is an incipient Science; and its progress towards perfection
-will proceed in precisely the same manner in which its foundations
-have been laid; new facts and principles and definitions will
-gradually be discovered, and these when reapplied to the class of
-things out of which they have sprung, will lead to corrections and
-adjustments and enlargements of the Science; and no matter how far
-these logical processes may be carried, the general Definition with
-which we start will also be found ample at the end of the journey.
-
-All of the Sciences without exception have been developed into their
-present position in just this manner; and they fall easily into three
-great classes, namely, the Exact, the Physical, and the Moral
-Sciences. The ground of this triple classification is partly the
-distinct subject-matter in the three classes of Sciences, and partly
-the distinctive prominence of one or more of the logical processes of
-construction in each.
-
-Thus, the class of the Exact Sciences consists only of the formal
-Logic, and pure Mathematics. These two are distinct from all other
-sciences, because their logical method of procedure is wholly
-Deductive. Deduction is the process of the mind, by which we pass from
-a _general_ truth to a _particular_ case under it, that is to say,
-from _more_ to _less_ inclusive propositions. Stuart Mill argues at
-much length in his book on Logic, that even the axioms of pure
-Mathematics are originally gained by Induction, while others claim
-that the truth of these axioms is perceived _intuitively_, but no
-matter how this point is decided, the construction process of the Pure
-Mathematics is from the General to the Particular. So it is also with
-the Aristotelian logic, whose Major Premise, whether only _supposed_
-to be true or intuitively _perceived_ or inductively _proved_ is
-always General in its terms. This is the form of Aristotle's
-Syllogism:--All sinners deserve to be punished; John is a sinner; and
-therefore, John deserves punishment.
-
-Physical Sciences are those concerned with the classifications and
-laws of action belonging to material substances. There are a great
-circle of these, of which Astronomy, Botany, and Chemistry, may serve
-as examples. They have been mostly developed since the time, and in
-accordance with the methods, of Lord Bacon; who, in strong reaction
-against the Deductive logic of Aristotle, exalted Induction or the
-mode of generalizing from _particulars_, as the true way of building
-up Sciences; and, as the subject-matter of each of the physical
-sciences is well open to observation and experiment, to Induction and
-Deduction, and to corrective verifications, both inductive and
-deductive, the new method proved remarkably pregnant and successful.
-Each of these sciences has a distinct _Class_ of objects or phenomena
-to which its attention is directed; the class is circumscribed by the
-scientific Conception and Definition; its devotees as a rule are
-skilled in using the Baconian tools; and consequently, its conclusions
-receive the confidence and control the action of men. All of the
-Physical Sciences are constantly enlarging "the body of exact
-definitions and sound principles" connected with their several classes
-"of facts or phenomena."
-
-Moral Sciences are those concerned with the classifications and laws
-of action belonging to beings having Thoughts and Desires and Will.
-The most developed of these sciences at present are Metaphysics,
-Ethics, and Economics. Each of these is concerned with a single class
-of phenomena, which may be exactly conceived of and defined, and is
-open to the logical processes by which alone Sciences can be built up.
-But Induction cannot march up with quite so sure a stride, nor
-Deduction descend with so large degrees of certainty, in relation to
-_persons_ endowed with free-will, as in relation to physical
-substances held firm in the grip of unvaried law. Still, the doubt
-always attaches far more to the actions of an _individual_ than to the
-actions of the _masses_ of men. It is much easier to know human nature
-in general, than one man in particular, because many Inductions guided
-by observation and History make it almost certain how masses of men
-will act under a given set of conditions, while any one _may_ act in a
-contrary way. Deduction, accordingly, cannot hold quite the same place
-in the Moral Sciences so far as individuals are concerned, as it holds
-in the Physical and Exact Sciences; but this lack is perhaps more
-than made up by other advantages. _Experience_ in the moral sciences
-corresponds to _Experiments_ in the physical sciences. Then there is
-the great advantage of _Introspection_; since each man has within
-himself the means of interpreting and testing the inductions of
-Metaphysics, Ethics, and Economics. Then also there is the great
-resource of _Feigned Cases_, which, provided only they be cases
-possible to occur, open up to Reasoning a new means of proving and
-correcting. Besides these, which it enjoys in common with them,
-Economics, as we shall soon see, possesses one other great advantage
-over and above the rest of the Moral Sciences.
-
-Since, then, Political Economy deals primarily with Persons, and only
-quite secondarily with Things, it is, under the definition and on
-every ground, a "moral science"; yet it must not be confounded in the
-least with what is sometimes called the science of Morals, or Ethics.
-There is one word that marks and circumscribes the field of Ethics,
-and that word is _Ought_; there is one word also that marks and
-circumscribes the field of Economics, and that word is _Value_. Now,
-the idea of _obligation_, on which ethical science is founded, and the
-idea of _gainful exchange_, on which economical science is founded,
-are totally distinct ideas. The imperatives of ethical obligation rest
-upon the consciences of men, and Duty is to be done at all hazards;
-guilt is incurred if it be neglected; while pecuniary gains and
-losses, however large, do not, or at least ought not, weigh a feather
-against an intuition of Right and Wrong. Economics, on the other hand,
-does not aspire to place its feet upon this lofty ethical ground; no
-man is ever under any moral obligation to make a trade; he properly
-makes it or not, according to his present sense of its gainfulness to
-himself; and so economic science finds a solid and adequate footing
-upon the expedient and the useful. Ethics appeals only to an
-enlightened conscience, and certain conduct is approved because it is
-Right, and for no other reason; Economics appeals only to an
-enlightened self-interest, and exchanges are made because they are
-mutually Advantageous, and for no other reason; each of the two
-Sciences, therefore, has a basis and sphere of its own, and the
-grounds of the two are not only independent, but also incommensurable.
-
-We will now apply _seriatim_ to Political Economy the four fundamental
-conditions belonging to all recognized Sciences, and so determine for
-ourselves whether it be not a strict science, and thus worthy in its
-leading propositions of all acceptation.
-
-(a) Every science must have to begin with a definite Class of facts,
-which lie in an easily circumscribable field, and which are not likely
-to be confounded with other facts of a differing nature. Economy has
-such a class of facts, that lie in such a field, and that cut
-themselves off by sharp lines from all other things. _Valuables_ is
-its class of things. It has nothing to do with any other class of
-things. Its field is Value, or Sales, or Exchanges. This field is
-perfectly definite. Sales are never confounded with gifts, and are
-never confounded with thefts. They have a distinctive character of
-their own. They have always been in the world, will always be in the
-world in ever-multiplying volume, and no one ever mistakes their main
-features for anything else. Anything whatsoever that is salable, or is
-about to be made so, comes within the view of Economics, and
-scientifically it cares for nothing else. While it finds its field
-definite, it also finds it broad. It has no wish to encroach on other
-sciences, nor will it tolerate any encroachments on its own. Before
-anything is sold, or is being made ready to sell, it cares nothing
-what other science employs itself upon that thing; after the thing is
-sold, Economy loses its interest in it, and other sciences may take it
-up if they choose. Valuableness is the one quality that constitutes
-the Class of things with which the Science is conversant, and it
-claims complete jurisdiction over all things just so far forth as they
-have this one quality, and no farther. Now there _is_ in the actual
-world such a Class of things; its exterior boundaries have been
-exactly ascertained by a long series of Inductions and Deductions,
-tentative, corrective, and confirmatory; and accordingly, Political
-Economy has now in full possession the first grand condition of a
-Science.
-
-(b) This great class of facts, thus reached by logical Generalization
-and grasped and held by a mental Conception and fixed by an adequate
-verbal Definition, is remarkably open to all the logical processes of
-reasoning, by which alone sciences are constructed, and thus possesses
-in full measure the second grand condition of the Sciences. Not one
-logical resource is denied to the economists: all the tools of the
-scientific workshop are at their hands. Let us now catalogue these in
-their order.
-
-(1) _Induction._ This is the logical and universal process, by which
-the mind naturally passes up from a certain number of observed cases,
-in which a certain quality appears, to a Generalization, which is a
-conception of the mind followed by a statement in words to the effect,
-that _all possible cases_ of that kind will exhibit the quality
-already observed in _the few cases_. It has as its basis a confidence
-in the resemblances and uniformities of Nature; it proceeds upon the
-axiom that Nature throughout is consistent with herself; and this
-confidence has been ten thousand times justified in the issue, when it
-is found that Nature preordained the Sciences by causing grand
-analogies to run through each department of her works, including man
-and his works. The structure of the human mind corresponds with these
-objective resemblances; it seizes upon them, and delights in them, and
-naturally and joyfully infers and concludes that what has been
-observed of _a part_ may be safely affirmed of _the whole_ of that
-kind; accordingly, the world over, when certain things are found to be
-true in a considerable number of cases, the mind leaps over space and
-time to a whole class, and frames for itself a general rule or
-principle, which binds all the cases into one bundle, and thereafter
-confidently affirms what is known to be true of some to be probably
-true of all. This is inductive Generalization; and the strength and
-the joy of it is well expressed by Descartes: "_I have thought that I
-could take as a just generalization that which I very clearly and
-vividly conceived to be true._"
-
-Experience in Economics corresponds to Experiment in the Physical
-Sciences, and furnishes to Induction all the fuel it can ask for to
-feed its logical furnace and to forge the chains that bind the Cases
-to the Classes. Personal experience in buying and selling, local
-experience in buying and selling, and national experience in buying
-and selling, with all that belongs to these, the records of which are
-full to overflowing, afford to the inductive inquirer in Economics an
-inexhaustible supply of material. Instances abound. Particulars may be
-gathered up one by one on every hand and linked into the inductive
-chain. If any doubt be felt about the strength of any one of these
-chains, another one may at once be linked in terms drawn from another
-field of Experience with a view to test the strength of the first.
-Most fortunate from this point of view is the United States, because
-here there are States with substantive powers of control over most
-matters of trade within their borders, as well as a Nation with
-sovereign powers of control over some points of trade within the
-country as a whole. This feature has given birth to commercial
-experiments as well as commercial experience of all kinds; and
-Induction rejoices in all these abundant materials for generalization
-thus furnished free of cost to Science, though unfortunately not free
-of cost to the People.
-
-(2) _Deduction._ This is a logical process exactly the reverse of the
-first, in that it descends from a generalized statement reached by the
-inductive process to some particular, or subordinate class of
-particulars, ostensibly covered by the general maxim. Induction
-examines a number of particulars, and then makes a leap, it may be a
-long leap, over all intervening particulars, to its Generalization
-clamping them. The main use of Deduction is to make sure of any one of
-these overleaped particulars, which may come into importance, and thus
-confirm the generalization, or correct it. It is not strictly true,
-what is often alleged against deductive reasoning, that there is
-nothing _new_ in its result, that the Induction had already passed
-through that particular in rising to its Generalization, and therefore
-to descend to any particular link to examine that, is something
-useless. The exact truth is, that it _is_ useless to examine again
-deductively the very particulars that were carefully studied
-inductively, but on the other hand there is always much actually
-untraversed territory between these already examined particulars and
-the inductive generalization, and Deduction is often very useful in
-carrying us down to questionable points in this territory. Even Lord
-Bacon, who scorned the syllogism, admits this: "_Axioms duly and
-orderly formed from particulars easily discover the way to new
-particulars, and thus render sciences active._"
-
-We will illustrate this by a reference to Franklin's famous induction
-to prove the identity of lightning with electricity. Only one
-experiment, and that a very rude one, was needful in this case;
-although usually many experiments, or the careful observation of many
-particulars, are necessary in inductions; but the generalization
-having been gained, Deduction had a chance to try its hand; it had
-long been observed that electricity could be conducted from point to
-point, and if electricity and lightning be identical, then lightning
-can be so conducted; therefore, deduced Franklin, a pointed iron rod
-elevated above buildings will harmlessly conduct lightning from the
-clouds into the ground. Deduction gave mankind the lightning-rod, and
-so made one point of science "_active_," as Bacon phrased it; and it
-is noticeable, that Turgot's felicitous epigram turns on the deductive
-rather than the inductive side of Franklin's experiment: _Eripuit
-coelo fulmen sceptrumque tyrannis._
-
-Let us catch up another illustration from the science of Botany, to
-show how Deduction may strengthen and sharpen an inductive result. The
-botanists say, that apple-tree blossoms are always five-petaled,
-because blossoms from a large number of apple-trees in various
-localities have been observed to have just five petals to the blossom;
-so far, they affirm inductively, and indeed securely; but they have
-also reached by means of another induction a much broader law of
-plant-life, namely, that outside-growers, when they have petaled
-flowers at all, always have them five-fold; now apple-trees are
-outside-growers; and therefore, deductively also, and conclusively
-beyond shadow of question, apple-tree blossoms are five-petaled.
-
-Political Economy is just as open to Deduction as it is to Induction,
-and the two continually are reaching each other the hands of
-economical reasoning, not always indeed pursuing each a separate and
-distinct path to the end, as in the botanical instance just adduced;
-because in practice the two processes mingle constantly, and neither
-is carried out in full and due form, since premises used by the mind
-are often dropped in the statement, and shortened forms of expression
-take the place of long-drawn-out formulas. But all good reasoning in
-Economics, as in all other sciences, is analyzable into one or other
-of these two processes, both based alike on the uniformities of Nature
-and the structure of the human mind.
-
-Deduction has not quite the same scope and certainty in Economics as
-in the Physical Sciences, because any one _may_ act contrary to the
-vastly probable action of many individuals; still, it is a safe and
-potent process in economics, since it may descend securely from the
-larger masses to the smaller, even though perchance the individual
-escape, because of the simplicity and universality and certainty of
-the impulses that lead men to exchange. John Bascom gives the reason
-well, why both Induction and Deduction have so firm a grasp upon this
-science: "_Between one dollar and two dollars a man has no choice, he
-must take the greater; between one day and two days of labor he must
-take the less; between the present and the future he must take the
-present. This is not a sphere of caprice, nor scarcely even of
-liberty; the actions themselves present no alternative, and, if an
-alternative giving an opportunity for choice does arise, it arises
-from some partial or individual impulse, from some one of those
-transitory and foreign influences, which, while rippling the surface,
-neither belong to nor affect the current of the stream._"
-
-(3) _Introspection._ Everybody buys and sells, and almost everybody
-watches the action of his own mind enough to see what are his
-_motives_ in buying and selling, and soon comes to know also that the
-other party has corresponding motives. Even the child knows perfectly,
-that it takes two to make a bargain, that each party renders
-something to the other, that each is glad to part with something for
-the sake of receiving something from the other, and that this higher
-esteem put by each on what is taken from the other makes for each the
-gain of the trade. A very little introspection tells anybody, that
-were this higher esteem wanting in the minds of either of the two, the
-trade would not take place at all. Everybody within the pale of
-_compos mentis_ knows, that, were his own desire for the rendering of
-another to increase, he himself would offer more of his own rendering
-rather than forego the trade; and he rightly infers, that what is true
-of himself is true of all other men; and so, every seller rightly
-tries to display his wares in such a way as to increase the desire of
-buyers for them; knowing full well from his own experience in buying
-that, other things being equal, they will be willing to render him
-more for them in consequence.
-
-The phrase above, "rightly infers," is based upon the truth, that all
-men are remarkably alike in certain great departments of action; and
-that, in no department are they so nearly alike as in this of buying
-and selling. Introspection, therefore, an easy self-knowledge open to
-all persons alike, and a personal experience in these matters that
-everybody gains, give most trustworthy answers to Inductive inquiry
-along these lines. Trade is natural and gainful, as any person can
-see, who stops to ask himself why he has made, or is about to make, a
-given trade; and if natural and gainful to _him_, equally so for
-precisely the same reasons to the party of the other part; hence no
-law or encouragement is needed to induce any persons to enter upon
-traffic; and any law, or artificial obstacle, that hinders any two
-persons from trading, who would otherwise trade, not only interferes
-with an inalienable right that belongs to both, but also destroys an
-inevitable gain that would otherwise accrue to both. Political
-economy is very fortunate, accordingly, in being able to make its
-appeal to the common sense of all men, giving sound starting-points
-through self-knowledge possessed by all men, guiding to safe steps by
-means of Induction all who like to generalize and prove, and
-especially breaking up current fallacies by asking the potent
-question, "How would you like it yourself?"
-
-(4) _Feigned Cases._ There are two kinds of these, namely, those which
-might be realized in actual fact, and those which never can be so
-realized. The acute mind of the Greeks marked in their flexible
-language a decided difference between the class of suppositions that
-might possibly become facts, and another class of suppositions
-impossible to become facts, by developing a distinct form of expression
-for each. This distinction must always be borne in mind by those who
-use or note in economical discussions the expedient of Feigned Cases.
-Reasoning is always legitimate and often pregnant from suppositions,
-whenever these are such as might readily become facts of experience,
-because in that case the argument proceeds upon recognized and
-inductive resemblances; but otherwise, no inference at all can be drawn
-from them, because it is an universal truth in Nature and in Logic, _ex
-nihilo nihil fit_, out of nothing nothing can come. In plausible
-suppositions impossible to become facts is a nest of logical fallacies,
-that need to be watched. A good illustration may be found in the
-Monetary Conference at Paris in 1881. Delegates were there from all the
-nations of Europe, from the United States, and even the distant India.
-Some of these in their eagerness for a factitious ratio of value
-between gold and silver forgot the important distinction now in hand,
-and argued of the good results to flow from the realization of a
-supposition, _which in fact never could be realized_. Mr. Evarts voiced
-the French and American delegates in this declaration: "_Any ratio now
-or of late in use by any commercial nation, if adopted by an important
-group of states, could be maintained; but the adoption of a ratio of
-15-1/2 silver to 1 of gold would accomplish the principal object with
-less disturbance in the monetary systems to be affected by it than any
-other ratio._" The fallacy in this passage is in the words, "could be
-maintained," which are a supposition, and what is much worse, a
-supposition contrary to fact, from which all arguing is nugatory. Why
-it is contrary to fact will be seen at length in the following chapter
-on Money.
-
-On the other hand, a supposition that may clearly become a fact is a
-substantive thing, and logical inferences may be drawn from it, just
-as geometrical inferences may be drawn from a _supposed_ circle: the
-circle on the page is not a _perfect_ circle--no such circle was ever
-drawn--but _suppose_ it perfect, as it might possibly be, and argument
-becomes at once valid. Let us take another Monetary Conference at
-Paris in 1867 as an illustration: its judgment as voiced by Mr.
-Ruggles of New York was taken with logical propriety, when the great
-benefits of an international coinage of gold alone were argued and
-announced, because, while that was then a mere conjectural project, it
-was possible any day by mutual agreement among the nations to become a
-reality. An international coinage of gold is a simple question of
-equivalence of _weights_ in the coins of different countries: an
-equivalence of _values_ as between gold and silver coins for any great
-length of time is neither simple nor possible.
-
-(5) _Results measurable in numbers._ The four preceding logical
-processes of proof and construction Political Economy is glad to share
-with the other Moral Sciences, but this fifth and last one it has to
-itself alone, and this is its chief scientific advantage over them,
-and is consequently the main reason why it is already more advanced
-and more symmetrically developed than any of them. In common with them
-it has important subjective elements, such as Desires, Estimates, and
-Satisfactions; in marked advantage over them it has also objective
-elements, that can be weighed and measured and even hardened into
-statistics. Economics has an ever ready objective test, which mere
-mental and ethical and other moral processes never can have from their
-very nature. The _result_ of each and of all economic transactions may
-be measured by money, and put down in a ledger, and published to the
-world in the form of statistics. An economic blunder, whether in
-legislation or in private action, pretty soon proves itself to be such
-by the lessened gains of somebody, and these losses can be stated
-arithmetically; and similarly, an economic improvement evidences
-itself at once by increased gains coming to somebody; while it may
-take years and years to work out the results of an ethical mistake,
-and even then their amount can only be guessed at.
-
-Theories in metaphysics can only be tested by the _Reason_ of men, and
-reasonable men without apparent bias of motive take opposite views of
-Sensations and Intuitions and Volitions; while theories in economics,
-which can be even better tested by the _Reason_, have an additional
-and almost immediate and constantly recurring test through men's
-pockets and the tables of the Census. The people indeed sometimes
-deceive themselves, and are also too often deceived by others, in
-these matters of buying and selling; but it is none the less of the
-utmost consequence to this Science, that all the results of good and
-bad practice in Economics work themselves at last into a definite
-shape, into facts and figures that cannot lie. It is not, as in Ethics
-and Metaphysics, that tendencies and potencies only are ascertained,
-but everything speedily drifts into results measurable in numbers,
-which stand out like landmarks against the sky. It is just for this
-reason, as both the schools of the Roman lawyers admitted, namely,
-that we have in all cases the Return-Service as the outward expression
-and measure of the Desire and Effort of him who renders the service,
-and because it makes no difference which of two services exchanged be
-regarded as the return-service, that our Science is reared on the firm
-ground of objective realities, notwithstanding the strong subjective
-elements that have a constant part in it.
-
-(c) The third condition of a recognized Science is, that the logical
-processes appropriate to its class of facts have been already
-carefully applied to them and a certain number of "exact definitions
-and sound principles" have been already "educed from and applied to"
-them. We do not hesitate a moment to claim, that this condition also
-is fairly and fully met by Political Economy, and that this is a
-"Science" under the definition from every point of view, and
-particularly from this third point of view; and a few examples will
-now be given as a specimen merely of the logical work already achieved
-in Economics. First, Induction more or less busy for two thousand
-years has given at last an exact and acceptable definition of the
-Science, and impliedly an exact description of the class of facts with
-which it is conversant, namely, the Science of Sales, or what is
-exactly equivalent, the Science of Value; and Deduction at all points
-along this slow road has helped to correct and to broaden successive
-imperfect inductions, which an inquisitive and tentative and cautious
-spirit--the mainspring of Constructive Science--has instituted from
-time to time.
-
-Second, precisely the same processes often repeated have ascertained
-beyond question, that there are only three classes of Valuables and
-the exact differences between them, and that, consequently, only six
-cases of Value are possible to happen.
-
-Third, so many nations at different times in all ages have lowered the
-standard of their Money under a misapprehension of its nature and in a
-vain hope of profit, and a general scale of rising prices following
-each attempt of this kind having been several times observed and no
-instance to the contrary, Economists came by Induction to assert the
-proposition, that falling Moneys cause rising Prices; the proposition
-stood secure on inductive grounds alone; but so soon as a perfect
-definition of Money, namely, a Measure of Services, had at last been
-reached both inductively and deductively, it became at once a safe
-Deduction from the definition, that rising Prices must succeed a
-falling Measure. Thus assurance became doubly sure.
-
-Fourth, Introspection gives each buyer and seller such firm possession
-of _his own motive_ in buying and selling, that he naturally and
-inductively concludes on the ground that men are substantially alike,
-that the _motive is similar_ in the party of the other part; each
-further step of experience in traffic assures him of this beyond a
-doubt,--each wants to get and does get something from the other of
-more consequence to him than what he gives; every attempted deviation
-from rectitude in trade so far forth throws the trader out from
-opportunity to trade; opportunity to trade is nothing in the world but
-_a market_; a market is nothing in the world but men with products in
-their hands, desiring to buy other products with these; the more men
-anywhere with the more products in their hands of all sorts to buy
-with, the better market everywhere for other men (the more the better)
-with other products of all kinds to buy with; all the appropriate
-logical processes in action and reaction, all the commercial
-experience of all men everywhere, and all the true statistics of
-traffic ever gathered, do but assure the inductive assent to one of
-the best and broadest of all the Generalizations in Economics, namely
-this: _A market for products is products in market._
-
-(d) Are the definitions and principles already logically educed from
-and applied to the great class of Valuables orderly arranged in "_a
-body_"? This is the only inquiry that remains, in order to determine
-whether Political Economy is already a "Science" in the strictest
-sense of that term. It is admitted, that a jumble of even just
-definitions and principles do not constitute a science, but only these
-when placed in a just order and interdependence. A "body" implies an
-organic arrangement of parts. It has been well said of the human body,
-that all its parts are reciprocally means and ends; the same may be
-said of every living organic body, whether vegetable or animal; and
-the same may be said in the way of analogy of every developed and
-recognized Science. All the definitions and propositions and
-illustrations in any science should be so arranged, as to show the
-mutual relations and reciprocal dependence of all the parts, and as to
-display the whole in harmony and symmetry.
-
-It is as certain as anything in the future can be in science, that new
-principles will be discovered in Economics as Time and Inquiry go on,
-and that these will find their place little by little in a fuller and
-more rounded "body" than is at present possible; while it is also as
-certain as anything in the future of science can be, that the Outline
-of economics is already perfectly drawn, that the great class of
-Valuables will never be enlarged nor be better described, that the
-category of Commodities, Services, Credits, is completed for all time,
-and that the analysis of each act of trade into two Desires and two
-Efforts and two Estimates and two Renderings and two Satisfactions
-will never yield additional elements. Political Economy is already a
-body of exact definitions and sound principles educed from and
-applied to a single class of facts. This body will indeed be enlarged
-by a future and finer scientific construction, the arrangement and
-interdependence of its parts will be better exhibited, the form and
-filling up of the Science within the outline already determined is
-sure to become more compact, more robust, and more beautiful, as the
-decades and centuries go by; while, as in the human body throughout
-all the changes of its growth and mature life, that future body of
-economic science in all its stages towards perfection will be but the
-continuation and fuller development of the present "body" of Political
-Economy.
-
-FOOTNOTES:
-
-[1] Green's Short History of the English People, p. 591.
-
-[2] See on this general topic, Mommsen's Provinces of the Roman
-Empire, _passim._
-
-
-
-
-CHAPTER II.
-
-MATERIAL COMMODITIES.
-
-
-Valuables fall naturally and exactly into three classes, Commodities,
-Services, and Credits. The reasons are obvious at first glance, why
-articles falling in the first class occupied the thoughts and the
-efforts of men almost exclusively for the first thousand years of
-recorded history. Commodities appealed to the senses of men: they are
-visible, tangible, weighable. Some form of personal slavery existed
-everywhere, and largely withdrew attention from personal services
-bought and sold; and there was not apparently sufficient personal
-confidence between man and man in the earlier ages to allow much
-development of credits, whose ground is personal trust and whose
-sphere is future time. Commodities, on the other hand, fitted by the
-efforts of some men to satisfy the immediate wants of other men, all
-ready for delivery, to be exchanged against other commodities
-similarly fitted and at hand, took the field apparently in the
-earliest ages of recorded Time, gradually became very large in volume,
-opened new routes of travel and transportation, and served to connect
-in a rough and ready way neighboring tribes and even neighboring
-nations.
-
-_Commodities are the class of Valuables comprising material things,
-organic and inorganic, fitted by human efforts to satisfy human
-desires._ Cattle were probably among the first things to become
-valuable, that is, salable; and it is certain, that they became very
-early in many quarters of the world a sort of Money or standard of
-comparison among other things exchangeable, and indeed they continue
-to be such in some quarters to this day. Near the middle of the sixth
-book of the Iliad occur these lines:--
-
-    "Then did the son of Saturn take away
-    The judging mind of Glaucus, when he gave
-    His arms of gold away for arms of brass
-    Worn by Tydides Diomed,--_the worth
-    Of fivescore oxen for the worth of nine_."
-
-Gold and silver also became valuable in the ordinary way in very early
-times, and later became Money or a medium in exchanging other things;
-and much later other metals came into use as commodities and then too
-as money; for the Latin word for money, _pecunia_, derived from
-_pecus_, cattle, seems to imply some original equivalence in value
-between the bronze stamped with the image of cattle and the cattle
-themselves. Parcels of land subdued and improved by human hands were
-probably bought and sold in some portions of the world as early as
-anything was,--at any rate very early. Land-parcels are a commodity
-under the definition. Another passage from Homer, towards the end of
-the seventh book of the Iliad, displays some of the commodities in
-common use during the heroic age in Greece:--
-
-                  "But the long-haired Greeks
-    Bought for themselves their wines; some gave their brass,
-    And others shining steel; some bought with hides,
-    And some with steers, and some with slaves, and thus
-    Prepared an ample banquet."
-
-The earliest detailed record of a commercial transaction in
-commodities, is the purchase by Abraham of the field and cave in
-Hebron, more than 2000 years before Christ. It is narrated at length
-in Genesis xxiii. Long before this purchase, however, it is said of
-Abraham that he "went up out of Egypt very rich in cattle, in silver,
-and in gold." This formal sale to him in Hebron of the field and cave
-of Machpelah is in all its parts instructive to us, and full of signs
-of the drift of those times. It was "_in the audience of the sons of
-Heth, before all that went in at the gate of his city, that the field
-and the cave were made sure unto him for a possession. And Abraham
-weighed unto Ephron the silver which he had named in the audience of
-the sons of Heth, four hundred shekels of silver, current money with
-the merchant._" In the lack of written and recorded deeds to
-land-parcels, as we have them now, the sale of them was "_made sure_"
-before the faces of living men, who would tell the truth and pass on
-the word. The market-place in those days was "_at the gate of the
-city_," where the judges also used to hold their courts, the place
-most frequented of all, and sales were made "_before all that went
-in_" thither; "_in the audience of the sons of Heth_" was the silver
-weighed out, and the field made sure in exchange. Then there were
-"merchants" as a class; silver passed by weight rather than by tale,
-although it had already passed beyond a mere commodity and had become
-money, "_current money with the merchant_"; and even at this day the
-Bank of England takes in and pays out gold and silver by balance
-rather than by count, though they be in coined money: it is the more
-accurate method.
-
-The author of the book of Job, believed to be of great antiquity, and
-certainly true to nature and to fact in its essential parts, knew very
-well the modes in which the ancient mines were wrought, and the worth
-of the commodities extracted:--
-
-    "Truly there is a vein for silver,
-    And a place for gold, which men refine.
-    Iron is obtained from earth,
-    And stone is melted into copper.
-    Man putteth an end to darkness;
-    He searcheth to the lowest depths
-    For the stone of darkness and the shadow of death.
-    From the place where they dwell they open a shaft;
-    Forgotten by the feet,
-    They hang down, they swing away from men.
-    The earth, out of which cometh bread,
-    Is torn up underneath, as it were by fire.
-    Her stones are the place of sapphires,
-    And she hath clods of gold for man.
-    The path thereto no bird knoweth,
-    And the vulture's eye hath not seen it;
-    The fierce wild beast hath not trodden it;
-    The lion hath not passed over it.
-    Man layeth his hand upon the rock;
-    He upturneth mountains from their roots;
-    He cleaveth out streams in the rocks,
-    And his eye seeth every precious thing;
-    He bindeth up the streams, that they trickle not,
-    And bringeth hidden things to light."
-
-The prophet Ezekiel, who wrote in the sixth century before Christ,
-incidentally described in his chapter xxvii the commerce in
-commodities, that then centered in the city of Tyre on the eastern
-Mediterranean. "_All the ships of the sea with their mariners were in
-thee to traffic in thy merchandise: many islands were at hand to thee
-for trade: with silver, iron, tin, and lead, they traded in thy fairs:
-they brought thee for payment horns of ivory and ebony-wood._" Among
-the commodities besides these exchanged in that market, are mentioned
-by the prophet horses and mules and lambs and rams and goats, wine of
-Helbon and white wool, fine linen and embroidered work, and riding
-cloths and mantles of blue and chests of damask and thread, wheat and
-pastry and syrup and oil and balm, precious spices and cassia and
-sweet reed, and gold and carbuncles and corals and rubies. These old
-Phoenicians of Tyre colonized Carthage, and thus bore a vast trade in
-commodities to the West, going overland into the heart of Africa for
-dates and salt and gold-dust and slaves, and by sea through the
-Pillars of Hercules northward to the British Isles for the sake of the
-trade in tin.
-
-The amount of transactions in commodities, the first class of
-Valuables, has been constantly increasing, under natural impulses
-which we shall have shortly to describe, from the dawn of authentic
-History down to the present moment; and figures are baffled in
-expressing to our minds the sum of these transactions even in a single
-country, still more their aggregate in the commercial world. The
-foreign trade of every country is almost exclusively in commodities,
-and is only a small fraction of its domestic trade in the same; and
-so, when we remember that the foreign trade of the United States, for
-example, under a commercial system designed and adapted to curtail
-such trade, amounted in 1889 to about $1,600,000,000, and the foreign
-trade by Great Britain the same year to about 4,000,000,000, we gain a
-glimpse, we touch as it were the hem of the garment, of the gigantic
-traffic of the world in commodities alone.
-
-_The Production of Commodities is the getting them ready to sell and
-the selling them._
-
-1. We must look first at the REQUISITES of such production. They are
-three, _Natural Agents_, _Human Efforts_, _Reserved Capital_. The
-following lines of Whittier touch incidentally on these three
-requisites, and may serve us as a general introduction to them:--
-
-    "Speed on the ship!--But let her bear
-       No merchandise of sin,
-    No groaning cargo of despair
-       Her roomy hold within.
-
-    "No Lethean drug for Eastern lands,
-      No poison-draught for ours:
-    But honest fruits of toiling hands,
-      And Nature's sun and showers!"
-
-Natural Agents include not only "Nature's sun and showers," but also
-all the forces and fertilities and materials of free Nature, that men
-may and do avail themselves of in preparing commodities to exchange
-with the commodities of other men. Of higher rank in Production than
-these natural agencies are the Efforts of men in molding them so as to
-answer other men's Desires, of which efforts the "toiling hands" of
-the poet are a symbol. They include also the inventive brains and
-eloquent tongues and the skilful manipulations of every name. The
-poet's "ship" is an instance of capital, which is always a result of
-previous toil reserved to help on some future sales. These three
-elements, Nature, Labor, Capital, conspire in all production of
-commodities. Nature comes first with her free forces and materials;
-and then present toil aided by the results of past toil in the form of
-capital does all the rest in getting commodities ready to sell and
-selling them. Let us now note each of these three a little more
-closely.
-
-(a) Natural Agents. The most important point about these is, that they
-are the free gifts of God, and continue so throughout the
-complications and transformations wrought on them and through them by
-Labor and Capital, until the material commodity of whatever kind is
-finally sold, and so passes out of the purview of our Science. Many of
-the gifts of God, like the air we breathe and the light in which we
-recreate ourselves and the water of refreshment drunk from spring or
-brook, do not connect themselves in any way with commodities bought
-and sold, and nobody ever thinks of them as salable at all; but it has
-seemed and still seems to many, as if the natural fertility in a
-land-parcel, the water-fall along the course of river or stream, the
-timber-growth which the hand of man planted not, the deposit of gold
-or coal in the bowels of the earth, and other such-like cases in which
-natural gifts _do_ connect themselves with human services and then are
-sold, lifted the Value of the things sold above the point to which the
-mere human efforts, whether past or present, would raise it. In point
-of fact, this seeming is not a reality, as will fully appear in the
-sequel. God is a Giver, and never a Seller; and he has arranged it so
-in his great world of gifts, that, however much shrewd men may try to
-monopolize these gifts and then dole them out to other men for pay,
-they are always practically thwarted in the attempt. God himself never
-takes pay for anything, and has never authorized anybody to take pay
-in his behalf; and when this role of Seller of free gifts, which have
-cost him nothing and which he has not improved, is taken up by any
-one, he is shortly crowded off the stage in shame by other actors true
-to Nature.
-
-This is the place for a grand induction. When we study in detail the
-free gifts of God to this world and its inhabitants, we find they come
-and keep coming _in great classes_. This is one of the uniformities of
-Nature, on whose solid ground men tread and stride in safe inductive
-reasoning. Can a farmer get pay in the price of his grain for the
-original fertility of his field, which neither he nor his fathers nor
-his neighbors have bettered or made more available? Doubtless he would
-be _glad_ to do so, doubtless he _would_ do so, were it not for the
-primary fact, that such fertilities as his are in a _class_ of fields,
-that other men in more or less proximity to him raise grain on other
-fields, whose original fertility is equal to that in his field; and
-some of these other men in common competition with the rest as sellers
-will be willing to part with _their_ grain for a price which will be a
-fair equivalent for the onerous human services rendered in getting
-their grain ready to sell and selling it; and the free action of
-_these_ men as sellers will tend to fix a general market-rate for
-grain then and there, at which rate _all_ must sell whether they will
-or nill; and where now is the effect on price of God's free gift? It
-is still free.
-
-Here is a fine water-fall on the bounding river, the banks are low at
-this point, just the place for mill and factory, the weight of God's
-free water will turn the wheels, a hamlet will grow up around
-them--perhaps a city,--can the riparian owner charge a fancy price for
-site of dam and mill? He might under some circumstances; but the same
-river doubtless, above, below, rolling over similar geological strata,
-leaps and falls at other points also; there are other owners of
-mill-privileges within hail; besides, there are other streams and
-tributaries in the region round about; and water has a knack of
-dropping to the lower levels. God's gifts are broad in classes;
-competition naturally has free play; natural agents are an essential
-factor in commodities; so and more so are human efforts; but Values
-tend perpetually and powerfully under natural competition between men
-as sellers to proportion themselves to the onerous human efforts
-involved, and to eliminate completely from all influence on themselves
-the broad and bountiful gifts of Providence.
-
-What has been observed to be true in respect to two or three or more
-of the classes of God's free gifts _to_ men, or _in_ men, may almost
-certainly be inferred to be true of all such classes. Therefore,
-inductively, _such free gifts have no effect on Values to lift them,
-their influence being eliminated by human competition_. Of course, if
-there be unique cases of remarkable gifts, falling in no class,
-subject consequently to no competition, one cannot say confidently
-that the free element in conjunction with the onerous element may not
-make the return-service greater than it would be otherwise. It may,
-or it may not, make it greater. There is no living principle at work
-in such cases, that makes it certain, that the return-service will
-_not_ be greater. Still, unique cases, if they exist, are of little or
-no consequence in Economics. They are most remarkably few, at all
-events. Where come in the solitary gifts, that may later be connected
-with Valuables, on the round earth as God fashioned it? Gold, silver,
-diamonds, copper, coal, tin, amber, spice-shrubs, chinchona-trees, and
-all such things, have been scattered too widely and liberally for
-individuals to monopolize them, or even combinations of men unless
-they be assisted by law. Where even are the unique cases of God-given
-talent or genius in men themselves, such as may become connected with
-Valuables of the second class? Daniel Webster had his competitors in
-the Court-room and in the Senate, Ben Jonson did not let Shakspeare
-have it all his own way on the stage, and even "Milton's starry
-splendor" did not make Paradise Lost sell well.
-
-We must just note here in passing the supreme importance in an
-economical point of view of untrammelled competition in the sale of
-commodities. It is the divinely-appointed means, and the only possible
-means, of preventing wide-spread injustice through Monopoly. Nothing
-else in the world can be made effective to estop men from robbing
-their fellow-men through exchanges artificially restricted; from
-charging more in the market for their wares than a just compensation
-for their own efforts; from enriching themselves by impoverishing
-their neighbors; from worsening the quality of their wares offered for
-sale; and from relying upon the artificial restrictions put on their
-competitors, rather than on their own skill and enterprise and the
-goodness of their goods, for a market. The Common Law of England holds
-monopolies to be illegal, and the reasons given (11 Coke, 84) are,
-first, because the price of the commodity will be raised; second,
-because the quality of the commodity will not be so good and
-merchantable as it was before; and third, because they are apt to
-throw many working people out of employment. It is nothing less than a
-crime against Civilization, than a sin against the clear ordinance of
-God, than an artificial obstruction to individual and national
-Progress, to put up bars and barriers by law for the purpose of
-cutting off competition, whether domestic or foreign, either by
-putting disabilities in the path of any or through monopoly
-tariff-taxes, in the buying and selling of useful commodities
-anywhere.
-
-(b) Human Efforts. Every way unlike the free forces and materials of
-Nature, indispensable as these are in the production of commodities,
-is the second requisite in such productions, namely, the onerous
-efforts of men. Persons are very different from things, from powers,
-from lifeless materials. Persons act from motives only. Minds lie back
-of bodily exertions, impelling and guiding them. Such efforts as are
-needful to mold materials into commodities are only put forth in view
-of, and for the sake of, a remunerative return; and only rational
-beings, acting under motives whose goal is in the future, capable of
-foresight and of adapting means to ends, can put forth such efforts.
-No degree of training can make even the most intelligent animals
-capable in any degree of that kind of exertion, which we call _Labor_;
-and there is no improvement whatever in the methods of animals in
-reaching their instinctive ends,--the beaver builds his dam and the
-bee gathers and deposits the honey exactly as bees and beavers did
-ages ago.
-
-In the strictest sense, accordingly, there is no such thing as
-physical labor, because the mental must coöperate with the physical
-even in the lowest forms of human exertion; and in the same sense
-there can be no such thing as exclusively mental labor, for the bodily
-powers conspire more or less in the highest intellectual efforts that
-are ever sold. Nevertheless, both the phrases, physical labor and
-mental labor, are convenient and not harmful, whenever on the one side
-the bodily powers seem to be predominant in the effort, and on the
-other the intellectual.
-
-It is now to be noticed, that all that men can do, when they labor
-physically, is _to move something_. When a man works with his hands or
-his feet or his whole body, all that he does or can do, is to begin a
-series of motions or resistances to motion, for this good reason,
-human muscles in their very structure are capable only of starting
-motion and stopping motion. All the marvellous results of physical
-effort in all the world have flowed from so simple a matter as the
-contraction and expansion of muscle; and the world of materials is so
-cunningly constructed, that, when these are moved into right position
-by human hands, or by some form of capital itself the result of
-previous human handling, the free powers of Nature do all the rest,
-and valuable commodities are the good outcome. For one example, when
-the woodman fells a tree for sale, he brings a series of motions
-(_labor_) to bear upon the trunk, by means of his sharp axe
-(_capital_), and then the power of gravitation (_nature_) seizes the
-tree and brings it crashing to the earth. For a second illustration,
-wool and cotton have by nature a certain tenacity of fibre, and what
-is more to the point, a certain _kinkiness_ of fibre easily
-interlinking one with another indefinitely in length; men move these
-separate fibres in certain relations to each other by an instrument
-(_capital_) called a spindle, and the result is thread; then other men
-move these threads into relations with each other by means of an
-implement (_capital_) called a shuttle, and the outcome is a web of
-cloth; lastly, the tailor moves his shears through the cloth, and then
-his needles, and the issue is a coat, a commodity, the valuable for
-which all these processes were gone through with, and by the sale of
-which all the onerous factors therein are compensated.
-
-Now, since human muscles are soon wearied in action, and since motion
-is the only thing required of men in the production of commodities,
-they naturally look around for outside help in this matter; and the
-first help they lighted on for moving things was the domestic animals,
-the ox and ass and horse, doubtless domesticated in the very
-beginnings of society; and as these can be used in so many different
-places, and for such a variety of purposes, and are so cheaply reared,
-they are exceedingly useful as a motive power, and will probably never
-be superseded as such. Inanimate auxiliaries in moving things into
-right position for the production of commodities, such as the
-water-wheel and wind-mill, were undoubtedly brought into use much
-later; and much later still, steam and electricity and other more
-subtle and recondite natural agents. All of these helps, whether
-animate or inanimate, do but cause simple motions of the same kind as
-those caused by the human hand. The most ponderous engine merely
-reduplicates that which the arm of a child is capable of; while in
-point of delicacy and firmness of touch, perhaps no machinery can
-subdivide and apply this motion so skilfully as the human fingers can.
-It is said that some of the lace made wholly by hand is finer and more
-delicate than any yet woven by machinery, although the introduction of
-machinery into lace-making has cheapened lace products in general to a
-small fraction of their former cost.
-
-What we commonly call "_Power_," then, by whatever instrumentality
-furnished, is simple auxiliary motion, additional to that of physical
-human Labor. Commodities are produced in unlimited quantity and
-variety by such labor, assisted by the free forces of nature applied
-by means of animals and implements, which are capital. But such labor
-is irksome as well as wearisome, and is never expended except in view
-of a reward, which is secured only from the sale of the finished
-commodity.
-
-(c) Reserved Capital. We must examine the nature of Capital with care,
-and follow its varied forms without confusion, because it is the only
-other factor besides labor in the production of commodities, that has
-to be paid for out of their sale.
-
-Simplest cases are always the best in economical discussions. Let us
-take for illustration a recently observed case from the gold hills of
-North Carolina. All the methods are strongly primitive, but all the
-elements of production are present. A negro woman is the laborer, the
-bits of gold scattered in the soil are the free gift of nature, a
-bored log to divert the water from the mountain stream, and a tin pan
-in which to gather and wash the sand and gravel, are two crude forms
-of capital; free gravitation also brings the water through the log,
-and free gravity carries down the particles of gold to the bottom of
-the washing-pan, and many other agencies of free nature coöperate in
-this very simple case of production; and besides the log and the pan,
-there are doubtless some other forms of capital, at least the whittled
-plug to stop at need the flow of water through the log. The chief
-factor in these processes of production is still the laborer, the
-motions of her hands in stirring the sand and picking out the precious
-bits at the bottom of the pan are the chief motions, the labor is both
-physical and mental,--no animal could be trained to adopt means to
-ends like this negro woman.
-
-It is her capital that now engages our attention. _Any Valuable
-outside of man himself reserved to assist in the production of further
-valuables is Capital._ The idea of growth and increase inheres in the
-very word, which is derived from the Latin noun, _caput_, a head, a
-source, and gives intimation in its etymology of its scientific
-meaning. The word, _caput_, is often used in classical Latin for a sum
-of money put out at interest, and its derivative, _capitale_, is also
-used in the same sense, at least in mediæval Latin; and from this form
-of the word have come into English not only _Capital_, but also by
-corruption _Cattle_ and _Chattels_. Flocks and herds were at one time
-the principal riches of our Saxon ancestors, and also the principal
-means of _increasing_ their riches, and in process of time the same
-root-word came to be spelled differently as applied to animate or
-inanimate things of value; while the notion implied in the Latin
-_caput_, and in the English _source_, came along in all three of these
-words; and hence the careful definition of Capital above given.
-
-It makes no difference whether the colored woman bored her own log by
-means of an item of capital already existing, namely, an auger, or
-hired another person to bore it for her, or bought the log already
-perforated, it is an article of Capital, a valuable kept to increase
-future valuables; she might doubtless sell it for something to a
-new-comer wishing to operate other sand in the neighborhood, but she
-keeps it to help herself gather more gold for ultimate sale, she
-practises what we call in Economics _abstinence_ and must have her
-reward for this in the form of _profits_ from the ultimate sale of her
-commodity, gold, as well as a reward for her labor in the form of
-_wages_ from the same source. As one person furnishes both the labor
-and capital in this case, there is no actual division of the gross
-return into wages and profits, as there always must be when separate
-parties furnish the two essential factors, both of which must be
-remunerated by the sale of the commodity. What is thus true of the
-log, is equally true of the tin-pan, and even of the plug also, if it
-be capable of repeated use and cost something of labor and the help of
-a previous item of capital, namely, the jack-knife. Our negro woman of
-the South is a small capitalist as well as a rude laborer, and
-practises _abstinence_ as well as puts forth _exertion_, and
-consequently is entitled to receive _profits_ as well as _wages_ in
-the return she gets for her gold-dust when she sells it.
-
-We are now beginning to see what the nature of Capital is, and what
-the motives are for employing it. In the production of commodities
-Capital is always something that makes easier to the producers the
-getting ready to sell and the selling of future commodities. The
-capital always spares more or less of onerous and irksome human
-exertion. It always mediates between some free force of Nature and
-some otherwise more onerous effort of men. The sole motive to employ
-capital in any one or in all of its multitudinous forms from the
-simplest to the most complex is to throw off upon the ever-willing
-shoulders of Nature some part of the irksome effort that would
-otherwise come to the easily-wearied muscles of men. Nature is "good,"
-to use a commercial term, for all she can be made to carry of men's
-work, through implements devised and machinery contrived to apply, to
-commodities in every stage of their transformation and transportation
-till the last, the ever-present potencies of this physical world.
-These potencies cost nothing. The implements and machinery cost much
-in present labor and previously created capital. The ultimate sale of
-commodities must make return for all the forms of capital employed in
-their production, in the shape of Profits, the reward of
-_abstinence_; and for all the forms of direct labor employed in their
-production, in the shape of Wages, the reward of personal _effort_.
-
-The beaver gnaws down the tree with his teeth from generation to
-generation in precisely the same manner; but man is a being more nobly
-endowed than the beaver, and no sooner had he occasion to fell trees,
-than something of the nature of an axe suggested itself to his
-ingenuity. It is true, that his earliest attempts at axe-making were
-probably of the rudest sort, but just as soon as anything was devised,
-whether of flint or shell or metal, that rendered easier the felling
-of a tree, Capital made a beginning along that line of obstacles. Our
-chief interest in studying the implements of the successive so-called
-Ages of Stone and Bronze and Iron, is to witness the increasing
-degrees of ingenuity displayed by those pre-historic men. Among the
-more gifted races, progress in this direction was perhaps more rapid
-than we are wont to think it was, since Tubal-Cain, the first
-artificer of record, is said to have "_hammered all kinds of
-implements out of copper and iron_" (Gen. iv, 22). Lucretius, writing
-in the century before the Christian era, put down the following lines
-in vigorous Latin, as translated by Mason Good:--
-
-    "Man's earliest arms were fingers, teeth, and nails,
-    And stones, and fragments from the branching woods;
-    Then copper next; and last, as later traced,
-    The tyrant iron."
-
-We are at no loss, then, to explain the origin of Capital and its
-motives. Tools are invented and employed for no other reason than
-this, that, by means of their help, the human efforts are lessened
-relatively to the given satisfactions. Since it requires tools to make
-tools, the progress of this branch of capital must have been
-relatively slow at first; but, since every advance in mechanical
-contrivance makes still further advances easier, there is a natural
-tendency, which facts abundantly exemplify, to a more and more rapid
-progression in the number and perfection of all implements of
-production. The same motive that impelled to the first invention, has
-impelled to the whole series of inventions since, and will constantly
-impel to further inventions till the end of time. Every step of this
-progress gives birth to a larger and still larger proportion of
-satisfactions relatively to efforts; marks an increasing control on
-the part of man over the powers of Nature; and gives promise for the
-time to come of greater advantages still in both of these directions.
-The powers of Nature, such as those which make the grain grow, bring
-the tree down, turn the water-wheel, impel the locomotive, and send
-the message round the world, all stand ready to slave in the service
-of man; but in order to make their aid available for human purposes,
-there must be a plough, an axe, a wheel, an engine, an electric
-machine; and it is because capital brings gratuitous natural forces
-into service, and the more so as capital progresses, that the Value of
-those commodities produced by the aid of capital tends constantly to
-decline as compared with those commodities, in the production of which
-capital conspires less.
-
-It is already plain, that the class, Capital, is a smaller and a
-peculiar sub-class under the great class, Valuables; nothing can
-become Capital until it first become a Valuable, and then be
-_capitalized_ by a distinct act or intention on the part of the owner
-to reserve it in his own hands as an aid in further production, or
-transfer it to other hands to be so used, he meanwhile receiving
-profits as the reward of his abstinence; only a _transferable_
-valuable, accordingly, can become Capital in any case, that is to say,
-it must be either a Commodity or a Credit, since personal services,
-though they may be sold, cannot be put over into the hands of another
-to be used in production, and therefore cannot become Capital in any
-case; and the chief peculiarity of this sub-class, Capital, is, unlike
-the three great classes of Valuables, each of which is utterly
-distinct from the other two, so that a Commodity can never become a
-Credit or a personal Service either of the others, that Capital as a
-class has extremely flexible limits, and consequently certain
-Commodities and Credits may easily enough be Capital to-day, and fall
-back to-morrow into their respective classes of mere Valuables and the
-next day come out from the class Non-Capital into the class Capital
-again. The same commodities and credits may be capital at one time,
-and non-capital at another, though they must be valuable all the time,
-or cease to be commodities and credits. When it is said that a young
-man's talents and skill are his "capital," the word of course is used
-in a metaphorical sense, and the meaning is, that skill and talents
-are _like_ capital in some respects. Popular language is not
-scientific.
-
-Cicero wrote long ago: "Optimum et in privatis familiis et in
-republica vectigal est parsimonia." _Abstinence is the best means of
-revenue as well in private families as in the State._ The source of
-Capital in a distinct act of will saving or sparing from present use
-(_parsimonia_) a valuable commodity or credit, and the quick nature of
-Capital as adding to itself (_vectigal_) in profits, are both brought
-out in this Latin maxim, which is rather an expression of an old and
-ingrained Roman sentiment than anything original with Cicero. It is
-the very nature as well as the very name of "Capital" to increase
-itself by rapid increments. It is as well the Stream as the Source.
-For example, any sum of money soon doubles itself when put out at
-compound interest, because the original sum increases day and night
-until it be repaid. It is of the essence of every form of Capital _to
-make growth_, because its sole purpose as such is to become an aid to
-future and further production. A trowel in the hands of a mason, which
-is capital, pays for itself every day he works with it, and perhaps
-every hour of the day, in the increased production wrought by means of
-it. The wheel, which free water turns, though a costly implement,
-repays that cost a hundred fold in the additional bushels of wheat
-turned into flour through its aid as capital. So of all implements. So
-of all machinery. So of all means of transportation: ships, canals,
-railroads.
-
-There was a strange prejudice in ancient and mediæval times against
-this natural increase of capital out of its own bowels, as it were,
-owing probably to this dictum of Aristotle: "_For usury is most
-reasonably detested, as the increase of our fortune arises from the
-money itself, and not by employing it for the purpose for which it was
-intended._" In 1360, a French bishop, Nicole Oresme, repeats the error
-of Aristotle under the same rhetorical image: "_It is monstrous and
-contrary to Nature that a barren stock should give birth, that a thing
-sterile in its whole being should fructify and be multiplied from
-itself, and such a thing is money._" Even Shakspeare catches up the
-old figure: "_Is your gold and silver ewes and rams?_" Shylock
-answers: "_I cannot tell; I make it breed as fast._" In the light of
-the three requisites of Production, in the light of the purpose and
-wisdom of God in arranging the active forces of this world, the
-prejudice in question disappears, and intelligence rejoices in the
-ever-increasing use of Capital as the handmaid of Labor, in the quick
-and sure reward of him who practises abstinence, in the production of
-commodities constantly made easier and cheaper in all directions, in a
-scale of comforts for the masses of men assuredly rising, in a
-divinely appointed force lifting like Christianity itself upon the
-otherwise sagging condition of mankind.
-
-Capital assumes but two economical forms, namely, Circulating Capital
-and Fixed Capital. _Circulating Capital is all those capitalized
-products, whether commodities or credits, the returns for the sale or
-use of which are derived at once and once for all._ All circulating
-capital will be found in one or other of the following sub-forms: (1)
-raw materials; (2) wages paid out in view of an ultimate profit; (3)
-completed products on hand for sale; and (4) products bought and held
-for the sake of resale. The crucial test of circulating capital is the
-question, Are the returns to be secured by the single use or single
-transfer of that particular product? Tools, for example, in the hands
-of him who has manufactured them for sale is circulating capital.
-_Fixed Capital is all those capitalized products, which are purchased
-or held with a view of deriving an income from their delayed and
-repeated use._ All fixed capital will probably be found in one or
-other of the sub-forms following: (1) tools and machinery in use; (2)
-buildings used for productive purposes; (3) permanent improvements in
-land parcels; (4) investments in aid of locomotion and transportation;
-(5) products rented or retained for that purpose; and (6) the national
-money considered as a whole.
-
-2. We will next look at the essential CONDITIONS of the production of
-Commodities. These are also three, as are the Requisites, namely,
-_Association_, _Invention_, _Freedom_. More or less will men make and
-sell to one another commodities in any state of society, in which
-there is permitted any considerable degree of association of men with
-men locally or commercially, in which is encouraged in any way the
-universal spirit of invention or the desire to get hard things done
-easier, and in which some degree of liberty of action and security of
-property and equality of privileges is guaranteed; but it is very
-plain, that the production of commodities will increase in all
-directions and become the greatest in that age and country when and
-where are allowed the closest ties of human association both in place
-and in commerce, the freest scope and largest rewards of inventive
-genius, and the highest possible degree of liberty and security and
-equality of rights. Let us illustrate from a state of things in the
-southern half of the United States during the first half of the
-nineteenth century. For the most part the land owners lived on
-isolated plantations widely separate from one another, these
-plantations were cultivated by gangs of slaves, a system that tends to
-bring all manual labor into contempt, the poor whites scattered in
-hamlets felt themselves above the slaves and beneath the masters,
-intercourse between the three classes was little, opportunity to
-better essentially their condition was denied to all three alike,
-there were but few cities sprinkled over the vast territory and these
-relatively small, the only commodity produced on a large scale was raw
-cotton, the simple device for ginning this had been invented in the
-decade preceding by a college boy from Connecticut, the agricultural
-implements were of the rudest kind, even the coarse shoes for the
-slaves were bought at the North;--in short, the degree of association
-and invention and freedom was each so low, that the production of
-commodities was exceedingly small, even as compared with what that
-production became in one quarter of a century after the abolition of
-slavery.
-
-(a) Association. If we may continue for purpose of illustration our
-childhood trust in the story of De Foe, Robinson Crusoe came to lead a
-very tolerable life upon his desolate island by means of his own
-industry directed so as to satisfy his own wants by his own efforts.
-He did everything for himself, and had no opportunity to buy anything
-or sell anything. The whole course of such an isolated life could
-never develop the idea of Value, would require no such word as
-Commodities or suggest their production, and such a man while solitary
-upon his island could not possess Property in the true sense of that
-word. Association is the first main condition of Production, because
-of the natural obstacles interposed between the isolated man and the
-supply of his various wants. If any one man try to surmount a
-considerable number of these natural obstacles, he must miserably
-fail, because his powers are not adequate to the task; and hence it
-follows, that, in a state of isolation, _men's wants exceed their
-powers_; but now let the same man devote himself to overcome a single
-class of obstacles, for instance, those in the way of procuring
-suitable clothing, and his powers are adequate to this, he soon
-acquires skill in it, he learns to avail himself of the free help of
-Nature and the facilitating processes of art, he is able to realize
-large products along his line, and is now ready to offer his surplus
-in exchange with other men, who meanwhile have been giving themselves
-each to another class of obstacles, have concentrated efforts and
-skill upon them, have succeeded by the help of Nature and art in
-surmounting them, and are now ready to offer their surplus commodities
-in exchange for others; and, the exchanges beginning to be made in all
-directions, men find that they thus obtain vastly greater
-satisfactions for their various desires than they could possibly get
-by direct efforts: so that we may even say, that, in a state of
-society through association, _men's powers tend to overtake their
-wants_.
-
-Without association with his fellow-men, there is no creature so
-helpless, so unable to reach his true end, as is man; and therefore it
-is, that the impulse to association is one of the strongest of our
-natural impulses. Men come together, as it were by instinct, into
-society; and, thus associating themselves together, it is soon
-discovered, not only that there are various desires in the different
-members of the community, which are now readily met by coöperation and
-mutual exchange, but also that there are very different powers in the
-different individuals in relation to those obstacles which are to be
-surmounted. The tastes and aptitudes of different men are very
-diverse. There is a great diversity in natural gifts. One man has
-physical strength, another mechanical ingenuity, a third a
-philosophical turn, and a fourth a bent and genius for traffic. Now,
-then, Nature speaks in as loud a voice as she can utter, in favor of
-such a degree of association and exchange as shall allow a free
-development of these varying capacities, while they work upon the
-obstacles to the gratification of men's wants, which lie appropriately
-opposite to them.
-
-Men must come together either locally or commercially, must learn each
-other's wants, must compare with each other powers and tastes and
-opportunities, must come to have some confidence in each other, and
-then they will begin by rendering mutual services back and forth to
-experience the better satisfactions and the new strength that
-exchanges bring. Whatever improves the character of men, and thus
-leads to greater confidence among them, will enlarge their commerce,
-and knit closer and wider ties of association and production.
-Neighborhood associations and productions soon create a surplus to be
-exchanged for something else with other neighborhoods; parts of single
-nations however remote from each other find a relative diversity of
-advantage and an increasing profit in connecting themselves by the
-ties of trade; and the separate nations learn, though late, that they
-are only one great family for the grand ends of production and
-progress. Even within the single nation, there is a strong tendency
-for particular trades to localize themselves in one spot, as for
-instance, the manufacture of skin gloves has centered itself for the
-United States in Gloversville, N. Y.; and so in the great cities that
-are centres of distribution, for example, the wholesale grocers of St.
-Paul are on one street, the dry goods houses of Boston are in close
-proximity, and the booksellers of New York are tending towards each
-other in place.
-
-Now, this broad association as between persons and nations, instead of
-detracting at all from the individuality and power of each, is the
-very thing that brings out the individuality and intensifies the power
-of each; because it is only thus that full scope is given to the
-exercise and development of each peculiar power whether of the
-individual or the nation. Hence the strong tendency everywhere visible
-in the world of commerce towards Specialties: the old single trades
-and vocations and professions are constantly breaking themselves up
-into parts, and each man is taking up that for which he is naturally
-best fitted and has specially trained himself, and all to the great
-advantage of individuality and personal power and progress. Mr. Carey
-is certainly right in his principle (much insisted on in all his
-books), that the degree of individuality depends on the degree of
-association, each advancing hand in hand with the other; and he is as
-certainly wrong in lacking confidence in the natural forces at work
-tending to the highest degree of association and consequently to the
-highest degree of individuality. These forces are immensely strong.
-Men come together as it were by instinct, being conscious of
-individual feebleness; personal interest is soon seen to follow the
-bent of social attraction; a just sense of personal dignity and
-importance in being a substantive part in the ongoings of society
-enormously strengthens the impulse to association and individuality;
-the progress of each and all in achievement and elevation still
-further knits the ties of union; and lastly, a strong feeling of
-social justice, of what is _due_ to others as well as to one's
-self,--that every man has an inalienable right to his full
-_opportunity_ and all that that implies, to buy and sell and get gain,
-to life and liberty and the pursuit of happiness. When motives and
-powers and potencies such as these, proven to be universal by broad
-and constant inductions, fail as economical forces to secure
-association and individuality, then it will be time to look around
-with Mr. Carey for some inferior and factitious force.
-
-(b) Invention. This is the second main condition in the production of
-commodities; because production is processes, getting something ready
-to sell and selling it; and Nature stands ever ready with her free
-agencies to facilitate these processes, just so far as the inventive
-brain of man can contrive to unite the two. Invention is the marriage
-of a gratuitous force to an onerous process, and the fruit of that
-union is an easier way and multiplied utilities. There are some in
-every considerable community, and more in every community enlarged by
-the natural association but just now described, who have the knack of
-contrivance, who find their joy in finding a new power in Nature or
-some new application of an old power; were it not for unhindered
-association and free exchange, the individuality of these would be
-effectually repressed, and they would have to drudge for their daily
-bread; but the importance of inventors is well understood in every
-progressive community, and under advanced exchanges their livelihood
-is guaranteed by those who hope to profit by its results while their
-work is maturing; and Production rejoices and grows strong and throws
-out unnumbered hands to make instant use of the new power and the
-easier processes, in order to multiply commodities in number and
-variety.
-
-As an illustration of all this, the reader will be interested in a
-brief account of the series of Inventions made in Great Britain during
-the last third of the eighteenth century, in consequence of which the
-Cotton Industry was established in that country in such preëminence as
-has to this day baffled the attempts of all other countries even to
-approximate it.
-
-We catch our first glimpse of Cotton in the pages of Herodotus, who
-wrote more than 400 years B.C. in relation to India as follows:
-"_There are trees, which grow wild there, the fruit whereof is a wool
-exceeding in beauty and goodness that of sheep. The natives make their
-clothes of this tree-wool._" This passage is interesting, as showing
-that the first comparison of cotton with wool exhibited their
-resemblance in whiteness and in _kinkiness_, which latter quality
-enables them both to be spun into yarn; as showing also, that the
-Hindoos very early both spun and wove cotton, and then made it into
-clothes; and as showing lastly, the appropriateness of the original
-name given to cotton in Europe, namely, "tree-wool," a name by which
-the Germans still designate it (Baumwolle). If the extreme East
-furnishes the first notice of cotton, the extreme West follows it next
-in order. When the Spaniards discovered Central and Southern America
-in the first quarter of the sixteenth century, they reported that they
-found the Mexicans clothed in cotton cloth.
-
-But wool was the staple of England. Parliament and people were jealous
-of cotton, lest it might prove a rival to wool, and actually
-prohibited the introduction of printed calicoes (so called from
-Calicut in India whence they were exported). The taste, however, for
-calicoes increased in spite of the prohibition, which was afterwards
-intermitted for a revenue duty on plain cotton, which was then rudely
-printed on blocks in London, Manchester, and elsewhere; but the
-prohibition of Parliament against wearing printed calicoes was first
-repealed in 1736. Fifteen years later the United Kingdom imported only
-2,976,610 lbs. of raw cotton, and exported only £45,986 of cotton
-goods; in one century the import of cotton became 500 times larger
-than that, and the export of cottons 1300 times larger than that; and
-this prodigious result was due mainly to three or four inventions
-occurring within short times of each other, by means of which the free
-forces of nature took the place of the onerous efforts of men.
-
-John Hargreaves, a poor weaver in the neighborhood of Blackburn in
-Lancashire, was returning home from a long walk, in which he had been
-purchasing a further supply of yarn for his own loom. Spinning at that
-time only admitted of one thread spun at a time by one pair of hands,
-one of which turned the wheel and thus made the single spindle rapidly
-revolve, and the other hand pulled gently upon the "roving" attached
-to the spindle and thus drew it out to the requisite tenuity twisted
-into yarn. The "carding," then effected by rude instruments called
-hand-cards, by means of which the fibres of the cotton were
-disentangled and straightened and laid parallel with each other; and
-the "roving," a process by which the short fleecy rolls stripped off
-the hand-cards were applied to the spindle and made into thick threads
-only slightly twisted, were the two preparatory operations for the
-spinning. All these operations were slow and clumsy, and the
-consequent expensiveness of the yarn formed a great obstacle to the
-establishment of the cotton manufacture in England. The improvements
-made in the loom of that period by Kay, father and son, had shortly
-before doubled the power of each weaver, and the spinners could not
-keep up in furnishing material to the weavers.
-
-As Hargreaves entered his cottage from this excursion to get yarn to
-keep his loom agoing, his wife, Jenny, accidentally upset the spindle,
-which, as was her wont, she was diligently using. Her husband noticed
-that the spindle, which was now thrown into an upright position,
-continued to revolve just as when horizontal, and that the thread was
-still spinning in his wife's hands. The idea immediately occurred to
-him, that it might be possible to connect a considerable number of
-upright spindles with the revolutions of one wheel, and thus multiply
-the power of each spinster. "_He contrived a frame in one part of
-which he placed eight rovings in a row, and in another part a row of
-eight spindles. The rovings, when extended to the spindles, passed
-between two horizontal bars of wood, forming a clasp which opened and
-shut somewhat like a parallel ruler. When pressed together this clasp
-held the threads fast; a certain portion of roving being extended from
-the spindles to the wooden clasp, the clasp was closed, and was then
-drawn along the horizontal frame to a considerable distance from the
-spindles, by which the threads were lengthened out and reduced to the
-proper tenuity; this was done with the spinner's left hand, and his
-right hand at the same time turned a wheel which caused the spindles
-to revolve rapidly, and thus the roving was spun into yarn. By
-returning the clasp to its first situation and letting down a piercer
-wire the yarn was wound upon the spindle._"
-
-The powers of Hargreaves' machine soon became known among his ignorant
-neighbors, notwithstanding his strenuous efforts to keep his admirable
-invention a secret, and these neighbors naturally enough concluded
-that a contrivance, which enabled one spinster to do the work of
-eight, would throw many people out of employment. A mob broke into his
-house and destroyed his machine. Hargreaves retired in disgust to
-Nottingham, where by means of the friendly assistance of one other
-person he was enabled to take out a patent for his invention, which he
-called in compliment to his industrious wife the "_Spinning-Jenny_."
-This invention gave a new impulse to the cotton manufacture, but had
-it been unaccompanied by other improvements, no purely cotton goods
-could have been made in England; because the yarn spun by the new
-jenny, like that previously spun by hand, was not fine enough nor hard
-enough to be used as warp, and linen or woollen threads had
-consequently to be employed for that purpose.
-
-In the very year, however, in which John Hargreaves, the poor weaver,
-migrated to Nottingham, Richard Arkwright, a poor barber's assistant,
-took out a patent for his still more celebrated machine for spinning
-by rollers. In one respect Arkwright was much worse off than
-Hargreaves: the latter had a helpmate meet for him, the former had a
-wife who is said to have destroyed the models her husband had made and
-to have opposed him in every step of his career. But Arkwright was not
-deterred from his life pursuit by the poverty of his circumstances or
-the scandalous conduct of his wife. After many years of intense and
-opposed devotion to the possible application of a simple principle he
-had conceived in his mind, namely, that of spinning by means of
-rollers revolving at varying rates of rapidity, he succeeded in
-contriving and patenting his memorable machine, which, more than any
-other one invention, localized and concentrated in England the
-gigantic cotton-industry of the world. Arkwright's idea and
-achievement was to pass the coarse thread drawn out from the rovings
-over two pairs of rollers in succession, the first of which revolving
-slowly fined the thread down evenly and gradually, and then this
-thread was passed over a second pair of rollers turning with a high
-velocity and drawing out the line into any requisite tenuity. Thus a
-cotton thread was spun capable of being used as warp. Cotton cloth as
-such could now be manufactured in England.
-
-From the circumstance that the mill, at which Arkwright's machinery
-was first erected, was driven by water power, the machine received the
-inappropriate name of the "water-frame"; and the thread spun on these
-rollers was commonly called the "water-twist." The old mode of carding
-the cotton by hand now furnished the "rovings" too slowly to meet the
-wants of the new spinning-jenny and the new water-frame; and these
-great inventions would consequently have proven comparatively useless,
-had not a more efficient and rapid process of carding the cotton
-superseded just at the right time the old system of hand-carding.
-Lewis Paul introduced revolving cylinders for carding the raw cotton
-into rovings preparatory to spinning, in partial imitation perhaps of
-Arkwright's principle of spinning the rovings by the rotatory motion
-of rollers. Paul's machine consisted "_of a horizontal cylinder,
-covered in its whole circumference with parallel rows of cards with
-intervening spaces, and turned by a handle. Under the cylinder was a
-concave frame, lined internally with cards exactly fitting the lower
-half of the cylinder, so that when the handle was turned, the cards of
-the cylinder and of the concave frame worked against each other and
-carded the wool. The cardings were of course only of the length of the
-cylinder, but an ingenious apparatus was attached for making them into
-a perpetual carding. Each length was placed on a flat broad riband,
-which was extended between two short cylinders, and which wound upon
-one cylinder as it unwound from the other._"
-
-While the foregoing series of inventions placed an almost unlimited
-supply of cotton yarn at the disposal of the weaver, the machinery as
-yet introduced was still incapable of providing yarn fit for the
-finest grades of cotton cloth. The "water-frame" indeed spun abundant
-twist for warps, but it could not furnish the finest qualities of
-yarn, because these were too tenuous to bear safely the pull of the
-rollers while they wound themselves on the bobbin. Samuel Crompton, a
-young weaver living near Bolton, possessed the ingenuity needful to
-remove this difficulty. He succeeded in combining in one machine,
-which from its nature is happily called the "mule," the several
-excellences of Hargreaves' spinning-jenny and Arkwright's water-frame.
-Copying after the latter, the mule has a system of rollers to reduce
-the roving; copying after the former it has spindles without bobbins
-to give the twist; and the thread is stretched and spun at the same
-time by the spindles after the rollers have ceased to give out the
-rove. "_The distinguishing feature of the mule is that the spindles,
-instead of being stationary, as in both the other machines, are placed
-on a movable carriage which is wheeled out to the distance of
-fifty-four or fifty-six inches from the roller beam, in order to
-stretch and twist the thread, and wheeled in again to wind it on the
-spindles. In the jenny, the clasp which held the rovings was drawn
-back by the hand from the spindles; in the mule, on the contrary, the
-spindles recede from the clasp, or from the roller-beam which acts as
-a clasp. The rollers of the mule draw out the roving much less than
-those of the water-frame, and they act like the clasp of the jenny by
-stopping and holding fast the rove, after a certain quantity has been
-given out, whilst the spindles continue to recede for a short distance
-farther, so that the draught of the thread is in part made by the
-receding of the spindles. By this arrangement, comprising the
-advantages both of the roller and the spindles, the thread is
-stretched now gently and equably, and a much finer quality of yarn can
-therefore be produced._"
-
-The ingenuity of Hargreaves, Arkwright, and Crompton had been
-exercised to provide the weaver with yarn, and had now indeed provided
-him with more yarn than he could use; the spinster had beaten the
-weaver, just as the weaver had previously beaten the spinster; and the
-making of cotton cloth seemed likely to continue sluggish, because the
-yarn could not be woven any faster than a skilled workman could weave
-it with Kay's improved fly-shuttle. In the summer of 1784, a Kentish
-clergyman named Edmund Cartwright, being in conversation with some
-Manchester gentlemen, one of whom observed that, "as soon as
-Arkwright's patent expired so many mills would be erected and so much
-cotton spun that hands would never be found to weave it," replied,
-"Arkwright must then set his wits to work to invent a weaving-mill."
-Notwithstanding the unanimous opinion expressed by the Manchester
-gentlemen, that such a weaving-machine was wholly impracticable, the
-clergyman himself within three years had invented and brought into
-successful operation the "_power-loom_." Subsequent inventors improved
-the idea which Cartwright originated, and before 1834 there were not
-less than 100,000 power-looms at work in Great Britain alone.[3]
-
-Substantially the same machinery invented for carding and spinning and
-weaving cotton was very shortly and successfully applied to the
-carding and spinning and weaving of wool, because the wisdom of Nature
-imparted to them both the same sort of tenacity of fibre, the same
-capacity in that fibre to be spun into a thread of indefinite length
-by means of the little loops or kinks easily interlocking contiguous
-fibres into a single thread, which two obvious resemblances gave an
-identical name to the animal and vegetable products otherwise so
-different from each other.
-
-The spirit of Invention, one of the chief conditions in the production
-of material commodities, thus simply illustrated along the line of a
-single manufacture, may serve us for a sample of similar improvements
-taken and taking place in scores upon scores of other lines of effort
-and production. The principle is the same in all cases past and
-present and still to come, namely this, to throw the strain from the
-mind and muscles of men upon the forces and agencies of free Nature,
-with which the world around us is crowded in our behalf, and which are
-waiting to slave in the service of mankind without rest and without
-fatigue,--without money and without price.
-
-(c) Freedom. By far the most important of all the conditions, under
-which the production of material commodities goes broadly forward, is
-liberty of action on the part of the individual; because, wherever
-such liberty is conceded, association and invention and all other
-needful conditions follow right along by laws of natural sequence. By
-liberty of individual action is meant the practical right of every man
-to employ his own efforts for the satisfaction of his own wants in his
-own way, whether directly or through exchange. Each man's right of
-individual freedom is limited of course by every other man's right to
-equal freedom, which the first man is not at liberty to infringe; and
-also, in certain few and limited respects, by what is sometimes called
-the "general good," the judge of the application of which must be the
-government under which the man lives. With these limitations, which
-are few in number and never serious in degree when rightly applied,
-and which limit in common all other rights whatsoever, the right of
-every man to buy and sell and get gain is just as fully a right as the
-right of breathing. It stands on the same impregnable ground. It is a
-natural and self-evident and inalienable right, with which each man
-has been endowed by his Creator, to put forth efforts for his own
-well-being and for those dependent upon him, either directly or by
-means of efforts exchanged with other men equally free; and he is a
-slave in spirit and position, who tamely submits to have his own
-rights of buying and selling curtailed, or to stand by and see the
-rights of his fellow-citizens similarly curtailed, unless such act of
-interference and curtailment on the part of his Government be
-justified by a solid proof that some other public or private rights,
-which are at least as well based as his own, would be endangered by
-the exercise of his own.
-
-In what cases may a Government properly step in to regulate or
-prohibit the buying and selling of its citizens? Hundreds of
-inductions extending through hundreds of years have been carefully and
-logically conducted in order to reach a just and comprehensive answer
-to this question; and in all probability the cases have been
-inductively ascertained for all time, and they are these: _such buying
-and selling may be controlled and prohibited, as are proven to be
-contrary_ (1) _to the public Morals_, (2) _to the public Health_, (3)
-_to the public Revenue_. All other buying and selling may be safely
-assumed to be both profitable to the parties to it, and also useful to
-the Commonwealth in general; and any interference with it by public
-authority is a high-handed infringement of natural rights, a blow
-aimed at the life and source of property. These wrongful strokes at
-private rights, this restriction on the freedom of individuals to
-exchange products for their own welfare, is now mostly confined in
-civilized countries to the region of Taxation. Within this region the
-wrongs are still frightful. Judge Cooley, in his "Principles of
-Constitutional Law," states the matter as follows: "_Constitutionally
-a tax can have no other basis than the raising of revenue for public
-purposes; and whatever governmental action has not this basis is
-tyrannical and unlawful. A tax on imports, therefore, the purpose of
-which is not to raise a revenue, but to discourage and indirectly
-prohibit some particular import for the sake of some home
-manufacturer, may well be questioned as being merely colorable, and
-therefore not warranted by constitutional principle._"
-
-Formerly, governments interfered almost beyond belief with the freedom
-of their people in all industrial and commercial action; dictating
-what should and what should not be grown and manufactured, what should
-and what should not be exported and imported; decreeing by
-proclamation or enacting by statute, the number of apprentices each
-artisan might employ, and the years during which these must serve as
-such, and the conditions under which they might then work as
-journeymen; the materials to be used in woven fabrics, and even the
-widths and other minor features of such fabrics, were prescribed in
-the foremost of the European nations; in the reign of St. Louis of
-France, a "Book of Trades" was issued under royal authority and is
-still extant, which organizes minutely and subjects to cumbersome
-rules more than one hundred separate industries as then practised;
-England was the country of the great trading "Companies," and of all
-of these the same may be said as Adam Smith said of the Turkey Company
-formed in 1579, namely, it was "a strict and oppressive monopoly";
-among others there were the African Company established in 1530, the
-Russia Company beginning its operations in 1553, the East India
-Company chartered on the very last day of the seventeenth century and
-going out of existence in our own time, and the Hudson's Bay Company,
-chartered in 1670 and so having the sole control in trade of a region
-forty times larger than all England; while the colonial system
-prevailing for two centuries in all the countries of Western Europe
-regulated the commerce and controlled the manufactures in the colonies
-with a single eye to the benefits of the mother country, as those were
-conceived of under the wretched Mercantile system.
-
-Happily, since governments have become more enlightened than formerly,
-they are perceiving for the most part that they have not the least
-right to interfere in those ways or in any ways with the natural right
-of their people to make and grow freely all material commodities, and
-to buy and sell these freely in the best markets wherever these
-markets are to be found; and they are also perceiving, that by such
-interference incalculable losses of property and indefinite
-retardations of progress are caused to their people, as well as
-weakness to themselves as governments through a more difficult
-gathering of taxes and a harder maintenance of prestige and power.
-
-The only motive to a mutual exchange of services, whether in one or in
-all of their three kinds, that is to say, to a free production of
-commodities and services and credits, is always and everywhere the
-mutual benefit of the two parties exchanging. After all the processes
-have been gone through with and the exchanges are consummated, all the
-parties are richer than before, that is, they have more
-_satisfactions_, otherwise the processes and exchanges would instantly
-cease. Therefore, a universally free production benefits everybody,
-and harms nobody. Moreover, under a system of free production, every
-man is allowed under the stimulus of self-interest to work away at
-those obstacles to the gratification of human desires which he feels
-himself best able to overcome, to follow the bent of his own mind, and
-to avail himself of all those free helps in his peculiar work which
-Nature offers to him. Under these circumstances, obstacles give way
-in all directions; the amount of material products produced is vastly
-augmented, the number and variety and excellence of personal services
-proffered are indefinitely increased, and credits compelling the
-Future to pay tribute to production are multiplied; the diversified
-and rapidly increasing desires of all persons in such a community are
-readily met through profitable exchanges; while all peculiar
-facilities natural and acquired are taken immediate advantage of, the
-diversities of relative advantage in production become marked in all
-directions, and a new day of industrial and commercial prosperity is
-ushered in. Because under freedom all men are sure to dispose of their
-industrial efforts to the best advantage, they have the strongest
-possible motives to put them forth; since they can purchase with them
-what they will and when they will, and where they will. Thus freedom
-leads to extended association, and also to the invention of machinery
-and all labor-saving appliances.
-
-3. We are now in position to understand thoroughly the ultimate
-GROUNDS of the production of material commodities. We have seen, that
-these commodities have been multiplying in number and variety and
-excellence ever since the beginnings of history, that they are
-everywhere multiplying now at a rate hitherto unprecedented and
-undreamed of, and that improved and improving methods of
-transportation by land and sea are now carrying these back and forth
-to the ends of the earth. What is the _principle_, under which these
-things have been done, are now being done, and are certain to be done
-in the time to come?
-
-The physical and moral obstacles, that Nature has interposed to the
-gratification of the multitudinous and constantly increasing desires
-of men, are so great in all directions, that the powers of the
-individual man are utterly unable to surmount any considerable number
-of them; while at the same time, the physical and moral powers,
-adapted under sufficient motives to overcome these obstacles, are very
-diverse in the different individuals of mankind. Not only is there a
-surprising diversity in original gifts, but also the powers acquired
-by gradual concentration of personal effort upon one set of obstacles
-become exceedingly diverse, as does moreover familiarity in the use of
-the gratuitous forces of nature which lend their aid towards
-overcoming these particular obstacles. As the result of one or two or
-all of these, one man naturally comes to have a vast advantage over
-others in his particular branch of business, whatever that may be;
-each of these others by precisely the same means comes to have a
-legitimate advantage over the first in his own branch of effort,
-whatever that may be; and if, as always happens practically, the first
-has desires which the varied efforts of the others can satisfy, and
-they too desires which his efforts can satisfy, nothing more is
-necessary to profitable exchanges between them than this diversity of
-relative advantage at different points.
-
-It is solely because a given effort irksome in itself put forth for
-another person, in view of and for the sake of a return-service from
-him, realizes more of satisfaction to both parties than when put forth
-for one's self directly, that commercial exchanges ever take place
-among men. The sole ground of these, the principle underlying them
-everywhere, is DIVERSITY OF ADVANTAGE BETWEEN DIFFERENT MEN AND
-BETWEEN DIFFERENT NATIONS IN DIFFERENT RESPECTS. All exchanges
-whatsoever depend on diversity of relative advantage in the production
-of commodities or services or credits as between the persons
-exchanging; and this diversity of relative advantage exists by God's
-appointment primarily among individual men as such, and only
-secondarily on the ground of the varied soil and climate and position
-and natural gifts of different parts of the earth. Reserving these
-secondary considerations, which are quite secondary in importance
-also, to a later detailed discussion, it is very clear and of central
-consequence in our science that a diversity of relative advantage in
-different things displays itself as between the individuals of every
-community and country large and small. There is no hamlet in any land
-in which one man has not an advantage over his neighbors in the making
-of clothes, another in the making and setting of horse-shoes, a third
-in the building of houses, a fourth in the curing of diseases, and
-another in the keeping a school; while each of those neighbors has
-undoubtedly some advantage or other over each of these in some trade
-or means of livelihood. As a natural result of this diversity any two
-of these villagers may profitably exchange their respective efforts
-with each other, provided of course each has a desire for the product
-of the other, to the manifest lessening of the effort of each
-relatively to the satisfaction of each, and the more so as the
-relative superiority of each to the other in his own trade is the
-greater.
-
-This point will repay some pains in minute illustration. If the
-blacksmith can make and set horse-shoes only a trifle better than the
-tailor could do this if he tried, and the tailor can make coats only a
-little better than the blacksmith could make one if he chose, there
-will be but a slight benefit to each in their changing works with one
-another. For the sake of definiteness, let us say, that the tailor's
-capacity for making coats is 6, and his capacity in making and setting
-horse-shoes is 5; and also that the blacksmith's capacity for shoeing
-horses is 6, and his ability in making coats is 5. Each has a relative
-superiority to the other of 1 in his own trade; and if they exchange
-efforts, as they probably would under these circumstances, there is
-only an advantage of 2 to be divided between them.
-
-Now let us suppose (what might easily become a fact), that the tailor
-by exclusive and augmented attention to the conditions of his own
-craft carries up his capacity for making coats to 15, the blacksmith's
-efficiency in both the trades remaining the same as before. There will
-now be an increased motive to both the artisans for exchanging
-products with one another, and a larger gain to each than before as
-the result of such exchange. The diversity of relative advantage as
-between the two has now gone up from 2 to 11. The tailor can now make
-a coat much better and quicker than before; and though the blacksmith
-owing to his inertness can neither make nor set horse-shoes any better
-than before, still less make coats any better, he will after all by
-still trading with the tailor reap a part of the benefit of the
-latter's increased efficiency in making coats; the new coat is at once
-better and costs less than the previous one; the tailor is still less
-inclined than before to leave his new and greater advantage over the
-blacksmith to set himself to shoeing his own horse; even on the old
-terms the blacksmith can do that 1 better than he himself can, and
-rather than forego the trade he will naturally offer the blacksmith
-somewhat better terms than before, or in other words will feel
-impelled to share with the blacksmith a part of the proceeds and
-rewards of his own now superior skill and diligence. The trade began
-on the sole basis of a relative diversity of advantage as between the
-two mechanics, each in his own craft; this relative diversity, without
-which no exchange ever takes place between any two persons, has now
-gone up as between these two from 2 units of advantage to 11 units of
-advantage; how will these 11 units be divided in this case? Nobody can
-tell exactly how they will be divided. Two things about it, however,
-are _certain_ at least in their tendencies and potencies. The
-blacksmith is sure to get some part of the extra fruit of his
-neighbor's new push and spirit, while the tailor is sure to get as his
-own reward by much the larger part of the whole blessed 11.
-
-We must by no means omit to notice the logical inference from this
-instance, nor fail to make the proper inductive generalization from a
-sufficient number of similar instances. It is this: no man can make
-any essential improvement in any of the methods of producing material
-commodities, without at the same time benefiting other people as well
-as himself. Under natural law, which is no respecter of persons, he
-can by no possibility selfishly take to himself the entire fruits of
-his own growing skill and vigor. The only way in which he can gather
-in at all the fruits of these is to sell their proceeds in the open
-market. To broaden his own market for now better and more abundant
-goods he must offer them to everybody on somewhat better terms than
-formerly--and the better the terms the broader the market--and he can
-well afford to do this, because the goods now cost him less of irksome
-human effort. Every improvement in the production of commodities is
-precisely of that complexion. The issue of every invention, of every
-improved process of every kind, is, so far forth, a cheaper product.
-And this public gain follows, must follow, individual enterprise at
-single points, even when the great mass of exchangers remain at the
-old stage of sluggishness. Whatever increases at one point even, and
-_a fortiori_ at two points, the diversity of relative advantage as
-between any two exchangers, is of benefit to them both, and the
-greater this relative diversity becomes the greater the benefit to
-both.
-
-Now let us see how the matter stands, when tailor and blacksmith at
-the same time feel and obey the impulses to a more skilled and
-vigorous artisan life. Suppose the blacksmith too carries up his
-efficiency in his own trade to 15, just as the tailor has done, the
-potency of each in the trick of the other remaining as before at 5;
-under these circumstances when the two come to trade with each other,
-each has a relative superiority over the other of 10, and there is an
-advantage of 20 points to be divided between the two; the trade is now
-ten times more profitable to each than it was at the outset, when
-there was only an aggregate of 2 units for the division between two
-parties; and accordingly the motive to an exchange and the gain of an
-exchange as between tailor and blacksmith are ten times greater than
-they were before. Therefore we lay down the principle, as inductively
-ascertained and as universally applicable to all exchanges, that the
-greater the relative superiority at different points as between the
-parties exchanging, the more beneficial and profitable do the
-exchanges become to all the participators in them. If this principle
-be just, and we may well flatter ourselves that it will be found to be
-just, it follows, that every man who has anything to buy or sell, is
-directly interested in the highest success of his fellow-exchangers,
-that every trade finds its own advantage in the success of all other
-trades, and that all discoveries and inventions by which Nature is
-made to pay tribute to art is, restrictions apart, so much clear gain
-to the world at large. In the light of sound and broad principles,
-what David Hume called the "Jealousy of Trade" is simply silly.
-
-The mainspring that impels all buyers and sellers to quicken their
-movements and to improve their methods and thus and otherwise to
-cheapen their costs of production, is the natural press of
-_competition_. Somebody else is offering this product, or will offer
-it, for less than we are now selling it for, and we must contrive
-some way by shortened times or cheaper processes or a quicker zeal not
-to be beaten in this market-race, is the silent argument ever making
-itself felt on the mind and hand of the producer. Such natural action
-always increases the general diversity of relative advantage as among
-buyers and sellers.
-
-But, on the other hand, whatever lessens or threatens to lessen this
-natural and most beneficial stress of competition among producers of
-similar commodities at home or abroad, necessarily lessens the motive
-on the part of these producers to excellence of quality in their goods
-and to cheapness of their cost, because it makes less the diversity of
-relative advantage as between these producers and those producers of
-other commodities against which the first exchange. The units of
-advantage that would otherwise be divided between the exchangers are
-diminished; the motives to trade and the rewards of trade are thus
-lessened to each pair of parties subject to such diminution of
-competition, and consequently to the community, or nation, or family
-of nations, as a whole; and accordingly this is the precise place for
-us to look into the nature and effects of _Monopoly_, so called, and
-to perceive once for all, that Monopoly is the enemy of mankind.
-
-Monopoly is a word derived from two Greek words, which mean when
-combined _selling alone_, that is, the privilege of selling one's
-commodity free from the competition to which it is naturally subject
-by other sellers than the privileged one. Monopoly is thus artificial
-restraint imposed on some buyers and sellers for the supposed benefit
-of other buyers and sellers. It is wholly unnatural. It is usually
-enjoyed under the forms of law. Its beneficiaries commonly cajole or
-extort from Government by hook or by crook the exclusive privilege of
-selling certain commodities in a designated market. Their motive is
-purely selfish: it is simply and solely to get for themselves a
-return-service artificially enhanced by selling commodities in a
-legally restricted market. The effect in the first instance usually
-corresponds to their expectations. The public are at their mercy so
-far as the designated commodities are concerned.
-
-The general story of monopolies is a dreary stretch of record of human
-greed and wrong on the one hand, and of wide-spread poverty and
-suffering and slowly-gathering resistance on the other. We will look
-at only two instances at present in the long account, premising that,
-the motives of greed and grab are the same in all instances, and the
-results of wrong and hate on the part of those oppressed by them are
-the same also in all instances. Let Macaulay (I, 40) tell us something
-of the first instance selected for illustration. "_But at length the
-Queen took upon herself to grant patents of monopoly by scores. There
-was scarcely a family in the realm which did not feel itself aggrieved
-by the oppression and extortion which this abuse naturally caused.
-Iron, oil, vinegar, coal, saltpetre, lead, starch, yarn, skins,
-leather, glass, could be bought only at exorbitant prices. The House
-of Commons met in an angry mood. It was in vain that a courtly
-minority blamed the Speaker for suffering the acts of the Queen's
-Highness to be called in question. The language of the discontented
-party was high and menacing, and was echoed by the voice of the whole
-nation. The coach of the chief Minister of the Crown was surrounded by
-an indignant populace, who cursed the monopolies, and exclaimed that
-the prerogative should not be suffered to touch the old liberties of
-England. There seemed for a moment to be some danger that the long and
-glorious reign of Elisabeth would have a shameful and disastrous end.
-She, however, with admirable judgment and temper, declined the
-contest, put herself at the head of the reforming party, redressed
-the grievance, thanked the Commons in touching and dignified language
-for their tender care of the general weal, brought back to herself the
-hearts of the people, and left to her successors a memorable example
-of the way in which it behooves a ruler to deal with public movements
-which he has not the means of resisting._"
-
-Perhaps some one of my readers may suggest, that these are the words
-of a Whig-Liberal, and may thus exaggerate the cause of the people as
-against the monopolists. Well, then, let us hear the words of a high
-Tory-Loyalist, the historian Hume (IV, 335, 350), in relation to the
-same monopolies. "_The active reign of Elizabeth had enabled many
-persons to distinguish themselves in civil and military employments;
-and the Queen, who was not able from her revenue to give them any
-rewards proportioned to their services, had made use of an expedient
-which had been employed by her predecessors, but which had never been
-carried to such an extreme as under her administration. She granted
-her servants and courtiers patents for monopolies; and those patents
-they sold to others, who were thereby enabled to raise commodities to
-what price they pleased, and who put invincible restraints upon all
-commerce, industry, and emulation in the arts. It is astonishing to
-consider the number and the importance of those commodities which were
-thus assigned over to patentees. Currants, salt, iron, powder, cards,
-calf-skins, felts, pouldavies, ox-skin-bones, train oil, lists of
-cloth, potashes, anise-seeds, vinegar, seacoals, steel, aquavitæ,
-brushes, pots, bottles, saltpetre, lead, accidences, oil, calamine
-stone, oil of blubber, glasses, paper, starch, tin, sulphur, new
-drapery, dried pilchards, transportation of iron ordnance, of beer, of
-horn, of leather, importation of Spanish wool, of Irish yarn; these
-are but a part of the commodities which had been appropriated to
-monopolists. These monopolists were so exorbitant in their demands,
-that in some places they raised the price of salt from sixteen pence a
-bushel to fourteen or fifteen shillings. Such high profits naturally
-begat intruders upon their commerce; and in order to secure themselves
-against encroachments, the patentees were armed with high and
-arbitrary powers from the Council, by which they were enabled to
-oppress the people at pleasure, and to exact money from such as they
-thought proper to accuse of interfering with their patent. The
-patentees of saltpetre, having the power of entering into every house,
-and of committing what havoc they pleased in stables, cellars, or
-wherever they expected saltpetre might be gathered, commonly extorted
-money from those who desired to free themselves from this damage or
-trouble. And while all domestic intercourse was restrained, lest any
-scope should remain for industry, almost every species of foreign
-commerce was confined to exclusive Companies, who bought and sold at
-any price that they themselves thought proper to offer or exact._"
-
-"_The Government of England during that age, however different in
-other particulars, bore in this respect some resemblance to that of
-Turkey at present: the Sovereign possessed every power, except that of
-imposing taxes; and in both countries, this limitation, unsupported by
-other privileges, appears rather prejudicial to the people. In Turkey,
-it obliges the Sultan to permit the extortion of the pashas and
-governors of provinces, from whom he afterwards squeezes presents and
-takes forfeitures: in England, it engaged the Queen to erect
-monopolies, and grant patents for exclusive trade; an invention so
-pernicious, that had she gone on during a tract of years at her own
-rate, England, the seat of riches, and arts, and commerce, would have
-contained at present as little industry as Morocco or the coast of
-Barbary._"
-
-But, some one will say, Hume and Macaulay are historians, writing
-long after these events took place, and may likely have been too
-favorable in their judgment to freedom of trade domestic and foreign.
-It is indeed true, that both of them were firmly convinced that
-freedom of trade is an inalienable right as well as an unspeakable
-blessing to all men everywhere. So, then, let us go back to
-contemporaries. Let us hear the eye and ear witnesses of the
-grievances complained of in 1601. Robert Cecil was then prime minister
-of Queen Elizabeth. He and his father had had more to do in granting
-the monopolies than any other persons in the realm except the Queen.
-Said he from his place in the Commons on the 25th of November: "_I
-say, therefore, there shall be a proclamation general throughout the
-realm, to notify Her Majesty's resolution in this behalf. And because
-you may eat your meat more savory than you have done, every man shall
-have salt as good and cheap as he can buy it or make, freely without
-danger of that patent which shall be presently revoked. The same
-benefit shall they have which have cold stomachs, both for aqua vitæ
-and aqua composita and the like. And they that have weak stomachs, for
-their satisfaction, shall have vinegar and alegar, and the like, set
-at liberty. Train oil shall go the same way; oil of blubber shall
-march in equal rank; brushes and bottles endure the like judgment.
-Those that desire to go sprucely in their ruffs, may at less charge
-than accustomed obtain their wish; for the patent for starch, which
-hath so much been prosecuted, shall now be repealed. The patents for
-calf-skins and felts, for leather, for cards, for glass, shall also be
-suspended, and left to the law._"
-
-Five days later one hundred and forty members of the House were
-formally received by Elizabeth in person, the Speaker having been
-instructed to convey their thanks to her majesty; and, after the
-Speaker's address, he with the rest knelt down, and the Queen gave her
-answer as follows: "_Mr. Speaker, you give me thanks, but I doubt me,
-I have more cause to thank you all, than you me: for had I not
-received a knowledge from you, I might have fallen into the lap of an
-error, only for lack of true information. Since I was queen, yet never
-did I put my pen to any grant, but that upon pretext and semblance
-made unto me that it was both good and beneficial to the subjects in
-general, though a private profit to some of my ancient servants who
-had deserved well; but the contrary being found by experience, I am
-exceeding beholding to such subjects as would move the same at first.
-I have ever used to set the last judgment-day before mine eyes, and so
-to rule as I shall be judged to answer before a higher judge. To whose
-judgment-seat I do appeal, that never thought was cherished in my
-heart that tended not to my people's good. And now if my kingly bounty
-hath been abused, and my grants turned to the hurt of my people,
-contrary to my will and meaning; or if any in authority under me have
-neglected or prevented what I have committed to them, I hope God will
-not lay their culps and offences to my charge. Though you have had,
-and may have, many princes more mighty and wise, sitting in this seat,
-yet you never had, or shall have, any that will be more careful and
-loving._"[4]
-
-These were the last words of Elizabeth to the Commons of England. She
-died in a little more than a year. In a little less than a year before
-the death of her successor, the famous Act of Parliament of 1624
-declares, that all monopolies, grants, letters patent for the sole
-buying, selling, and making of goods and manufactures, shall be
-thereafter wholly null and void. Though this Act, and many others, was
-violated more or less in the next reign, it effectually secured in the
-long run the freedom of industry in England; and in the opinion of
-excellent authorities, has done more to excite the spirit of invention
-and industry, and to accelerate the progress of commerce in that
-country, than any other law on the statute book.
-
-Our second instance of Monopolies shall be drawn from the state of
-things in the United States in this year of Grace, 1890. The
-monopolies of to-day are secured by means of an instrument called a
-Tariff, which, later on in these pages, will be fully discussed in its
-history, inmost nature, and invariable effects. Here it will suffice
-to say, that a tariff is nothing in the world but a combination of
-Taxes, which taxes the people of the country, on which the tariff is
-imposed, are obliged to pay in one form or another. The only word ever
-uttered by a tariff, the only word a tariff from its own nature can
-utter, is, _Thou shalt pay_! The ostensible reason for levying these
-taxes is the constitutional one of getting money into the national
-Treasury,--"_to pay the debts and provide for the common defence and
-general welfare of the United States_"; but the real purpose of laying
-these tariff-taxes at present is only secondarily and remotely the
-ostensible and constitutional one; because, on the authority of
-Professor Taussig of Harvard University, there is not a single one of
-over 4000 items of taxes in this tariff, that is designed primarily to
-get money into the treasury from the pockets of the people, but every
-one of them is designed more or less and more rather than less to
-raise the price of domestic goods to our own people artificially by
-keeping out of the country by means of these taxes on them the foreign
-goods, which would otherwise come into a profit. In other words, there
-is no purely revenue-tax in our immense tariff at present, but every
-item in the enormous list is a so-called and mis-called
-"protective"-tax.
-
-By this shutting off from domestic goods the natural competition of
-corresponding foreign goods by means of such tariff-taxes, a monopoly
-is created at the instance and for the sole benefit of certain classes
-of privileged home-producers. They can sell alone (monopoly) just so
-far as other sellers are kept out by these heavy taxes. The goal of
-all their striving is to get an artificially-enhanced price for their
-own products at the cost of their countrymen by means of a market
-restricted to themselves through obstacles excluding foreign sellers.
-The end proposed by these shrewd manipulators is realized in fact.
-Domestic prices are lifted on so-called "protected" goods. This is the
-first effect of the monopoly. It has often been alleged, and with
-great vehemence by the late Horace Greely, that competition among the
-domestic producers of such wares will lower their price again to the
-natural point; but if this is so, what _motive_ have the individual
-producers to work so assiduously in elections and lobbyings to get on
-and keep on these tariff-taxes? Again, Mr. Greely, and all others of
-like association, forgets the admirable generalization of Robert
-Stephenson,--"_Where combination is possible, competition is
-impossible._" Combination among producers to keep up prices is always
-possible in a market restricted by law. This has been proven on a
-large scale in the United States during each of the past thirty years:
-combinations among coal operators to keep up the prices of "protected"
-coal by restricting the annual output of their collieries;
-combinations among carpet and other woollen manufacturers to maintain
-high prices of their fabrics by restricting their workmen to certain
-hours per day or to certain months per year; have been among the
-commonest of industrial events in all this interval. Within a very few
-years past there has come into almost universal vogue among these
-monopolists a new kind of combination called "_Trusts_,"--again
-abusing a good word by making it cover an abominable purpose,--which
-are probably illegal at Common Law, which only become possible under
-monstrously unjust tariff laws, and which work wide-spread wrong among
-the masses of the people.
-
-A second effect of this monopoly (as of all monopolies) is to worsen
-the quality of the goods sold in an artificially restricted market.
-The historian Gibbon noticed this fact more than a century ago, and
-said: "_The spirit of monopolists is narrow, lazy and oppressive.
-Their work is more costly and less productive than that of independent
-artists; and the new improvements so eagerly grasped by the
-competition of freedom, are admitted by them with slow and sullen
-reluctance._" Alfred Lapoint, United States consul in Peru, warned the
-State Department at Washington in 1883 of this poor quality of our
-manufactures, which were then trying to find a South American market.
-He wrote: "_It is my duty to indicate that great carelessness prevails
-with our manufacturers; for instance, I was called upon to purchase in
-the United States a steam pump and boiler, which I ordered from one of
-the most famed manufacturers, and when it arrived, not alone was the
-boiler inadequate for the pump, but actually after two months' work
-the upper tube sheet split in three parts, a proof of its bad quality
-and construction._" As men are, a natural competition among buyers and
-sellers is just as needful to keep up the quality of goods as to keep
-down their price. Good quality always costs more of effort and skill
-and capital than bad quality: why should producers continue to furnish
-good quality to a market from which a free competition in good
-qualities is excluded by law? Every tendency of human nature, as well
-as every relevant fact in history, attests, that poor wares at high
-rates invariably attends upon tariff-monopolies. Shoddy takes the
-place of wool. Cheaper crowds out better material. Skilled workmanship
-is displaced by unskilled. Processes of manufacture are hastened in
-time, and left incomplete to the damage of the goods in order to save
-capital. Monopoly is always and everywhere the foe of excellence.
-
-A third effect of tariff-monopoly is to prevent the sale abroad of
-domestic goods to the same extent and amount as foreign wares are kept
-out by these monopoly-taxes. This vital and fundamental result is
-almost always overlooked. If a man or a nation refuse to _buy_ of a
-proffered customer, they cannot by any possibility _sell_ to him;
-because buying and selling are reciprocal and synchronous; because it
-takes two to make a bargain; because material commodities, for the
-most part, ultimately, exchange against each other; and because the
-only motive a foreigner ever has to bring his goods _hither_, is to
-take in exchange for them our domestic goods at a profit, and carry
-these _hence_. To forbid entrance to foreign goods is to forbid exit
-to domestic goods. Monopoly-tariff-taxes, therefore, so far forth,
-destroy the market for home products, without creating or tending to
-create, any other market for them. Such taxes, accordingly, cause a
-dead loss all around,--to the foreign producer who wants to buy our
-products with his own, to the home producer who wants to sell his own
-products against those, and even to the government also as a
-tax-collector, which can get no revenue on foreign goods excluded by
-monopoly-taxes.
-
-There is a final and deeper point of view, from which all such
-monopolies are wholly condemnable. _They lessen of necessity,--from
-their own nature and inexorable operation_,--THE DIVERSITY OF RELATIVE
-ADVANTAGE AS BETWEEN EXCHANGERS, on which diversity, as we have now
-seen, the whole fact and gain of exchanges depend. Taxes on raw
-materials, for example, whether actually paid on them or used to
-enhance the price of other corresponding materials as in the
-tariff-taxes, increase the costs of all products into which such taxed
-materials enter, and so restrict the market of the home-producer by
-lessening his relative advantage as compared with the relative
-advantage of the foreigner over him. He cannot sell so well, perhaps
-cannot sell at all, his cost-enhanced products. Monopoly-taxes on
-industrial processes of any kind, on the means of transportation, have
-similar effects on the cost of products; and of course, similar
-effects in lessening Diversity, in restricting markets, and in
-destroying the life of Trade.
-
-Before quitting this subject, it may be well for us briefly to
-classify Monopolies.
-
-(a) Patent Rights. In the great parliamentary Statute of 21 James I,
-which declared the exclusive privileges to use any and to sell any
-merchandise to be contrary to the ancient and fundamental laws of the
-realm, and all grants and dispensations for such monopolies to be of
-none effect, two exceptions had been made; the first, in favor of
-Patents for fourteen years to the true and first inventors of new
-manufactures within the realm; and the second, in favor of the grants
-by Act of Parliament to any Company for the enlargement of foreign
-Trade, of which the East India Company chartered on the last day of
-the last year of the sixteenth century became the most famous and the
-longest-lived. Open letters or letters _patent_, as they were called,
-giving to inventors exclusive authority to vend for a limited time any
-chattel or article of commerce, of which a _model_ could be made
-showing the point and application of what was claimed to be _new_; and
-Copyrights, which grant an exclusive property also for a limited time
-to authors and discoverers of something new and useful, of which a
-model cannot be made, or, as it is phrased in the Constitution of the
-United States, "_the exclusive right to their respective writings and
-discoveries_"; are a part of the results among all English-speaking
-peoples of the two exceptions in this famous and beneficent Act of
-Parliament.
-
-In the United States a patent lasts for 17 years, and is not reissued
-except by a special act of Congress; a copyright lasts for 28 years,
-and may be renewed by the author, his widow, or children, for 14 years
-longer. In the constitution of the new German Empire of 1871, this
-protection of intellectual property (_der Schutz des geistigen
-Eigenthums_) is expressly included in the matters which are to be
-dealt with by the _Reichstag_ or imperial parliament.
-
-Now while patents and copyrights are a monopoly under the definition,
-they are quite distinct in their purpose and spirit from the
-monopolies already described. On the whole, Society does well in
-trying to protect, by law, inventors and thinkers in the sole use and
-benefit of their respective products for a brief and specified time.
-There are large difficulties in the way of reaching this end
-practically, as is proven by the endless and expensive lawsuits in
-such cases, but the postulate on which it is attempted is sound,
-namely, that otherwise citizens would have less motive to think and to
-invent; since in that case only the public-spirited and the rich could
-or would devote themselves to an important branch of the public
-progress. A patent or copyright is merely a return service which
-Society renders for a service received. It violates no man's right of
-property, as an ordinary monopoly does, but on the other hand is a
-provision to protect for a time a new right of property created by the
-thought and efforts of a deserving class of men. The phrase,
-"intellectual property," used above in translating from the German, is
-not well chosen, since we have amply learned that anything is property
-that can be bought and sold, that simple rights of many kinds are
-constantly on sale in the market, and consequently that patents and
-copyrights are at once proper and property because they are a
-technical return-service for other services ready to be rendered to
-the community.
-
-(b) Revenue Rights. Once at a court ball, Napoleon the First noticed a
-lady very richly dressed and wearing splendid diamonds, and on asking
-for her name, ascertained that she was the wife of a tobacco
-manufacturer of Paris; whereupon it occurred immediately to the quick
-mind of the French ruler, that the State might just as well have those
-great profits as an individual; and the sale of tobacco in all its
-forms became accordingly a State monopoly in the interest of taxation,
-and so it has continued to this day, and yields now about 400,000,000
-francs a year. Other nations have adopted to some small extent this
-mode of indirect taxation of their people. By legally cutting off the
-competition of all private dealers in the taxed article, and by
-preventing to the utmost of their power its being smuggled into the
-country, Governments are enabled to sell the article at a price
-enhanced artificially by the monopoly; but all that the people are
-made to pay _extra_ under the monopoly, saving the costs of
-maintaining it, goes directly into the treasury of the State; and, so
-far forth, becomes an unobjectionable mode of taxation. Under all
-forms of taxation, the aim should clearly be, that the Treasury
-receive all that the People are made to pay, except the cost of an
-economical collection.
-
-(c) Tariff Monopolies. The United States has never undertaken, like
-France and Germany, to vend directly and exclusively an article taxed
-by themselves for the sole purpose of revenue; but unfortunately they
-have undertaken and still maintain (1890) monopolies a thousand times
-more unjust and objectionable than any such revenue-monopoly can be;
-they have laid distinct tariff-taxes upon thousands of foreign
-articles, not with the design of getting revenue from them, but with
-an avowed and realized design of _preventing_ revenue by means of
-these taxes, since they have made the taxes so high and onerous as to
-be in many cases absolutely prohibitory of the entry of the goods, and
-in all cases more or less prohibitory of such entry. Revenue can only
-be gotten on goods that come in, while the very intent and result of
-these taxes is to shut the foreign goods out on which they are levied,
-so as to give certain domestic producers (who have themselves secured
-this legislation) the monopoly of the home market in these goods.
-
-This is the very core of public wrong-doing. This is the worst form of
-monopoly that ever existed in a civilized country. Queen Elizabeth's
-monopolies, which so roused the ire of the Parliament of 1601, were
-nothing in enormity as compared with these tariff-taxes. Civilization
-long ago sloughed off such direct grants of personal privilege as were
-forbidden forever by the Act of 1624, and accordingly there is no need
-of mentioning these in the present classification. Tariff-taxes for
-other ends than pure revenue are the worst monopolies in existence,
-because (1) they compel the people to pay under ostensible taxes many
-times more than the Treasury gets from them in actual revenue; (2)
-they are wholly deceptive in their terms, and their operation is
-clothed in disguises difficult to strip off; (3) they are always put
-on at the instance and under the pressure of the man (or men) who
-expects thereby to raise the price of his own wares at the expense of
-his countrymen; (4) they create under legal forms however
-unconstitutional privileged classes in the community; (5) their first
-effect is invariably to make the rich richer and the poor poorer; (6)
-their ultimate effect is to impoverish the privileged classes
-themselves by taking away from them the natural spur of competition
-and self-dependence, in consequence of which their own goods become
-poor, and their zeal flags, and they come to lean still more heavily
-on monopoly-supports; (7) they destroy the market for domestic goods
-to precisely the same extent as they cut off the market for foreign
-goods, and (8) their whole retinue of evils is wrapped up in the great
-fact, that the _Diversity of Relative Advantage_ is thereby diminished
-both as among domestic producers of commodities and as between foreign
-and domestic producers.
-
-The expression, "natural monopoly," is sometimes used of those, who,
-under freedom, and using to the utmost their natural gifts and
-acquired skill, have distanced all local competitors, and may be said
-to control the market in their own interest, furnishing the best goods
-at the cheapest rates. This is in no proper sense of the term a
-"monopoly." Production has no complaint to make of any such
-pre-eminence in excellence and opportunity. It harms nobody and
-benefits everybody. Exchange rejoices over every man and woman and
-child, who so puts his head and heart and hand into his own peculiar
-product as to outstrip all others in that one line in point of ease
-and excellence, and so be able to offer a service at once better and
-cheaper than any one else can offer it then and there; and when all
-men and women and children, so far as they are employed commercially,
-come to possess a "natural monopoly" each in his own specialty, then
-Exchanges become as profitable and progressive as possible then and
-there, because the ever-blessed diversity of relative advantage has
-its utmost limit.
-
-4. We come now to consider the natural LIMITS, if any such there be,
-to the Production of material commodities. This point has been much
-discussed. For example, Dr. Chalmers, a Scotch clergyman of great
-intelligence, profoundly moved by the condition of the poor in
-Glasgow, published in 1822 an interesting but not over-sound treatise
-entitled "Political Economy," in which the proposition is maintained,
-that the universal market is strictly limited, and therefore that,
-were it not for the unproductive consumption of the rich and
-luxurious, and the equally unproductive consumption of national wars,
-there would soon be a general glut of material commodities, and
-consequently Production would have to cease for the lack of a vent for
-its products. Pretty soon we shall be able to detect the enormous
-fallacy in this proposition. On the other hand, in 1803, Jean-Baptiste
-Say, a very competent French economist, in chapter xv of his
-well-known treatise, fully developed this very important proposition,
-if true, namely, _that production may go on indefinitely in all
-directions without ever a fear of reaching a general glut of
-products_.
-
-What is a market? What is a limited market? What is an illimitable
-market? A market, as we have already seen in substance, is nothing in
-the world but certain _persons_ somewhere with return-services in
-their hands desirous to part with these in order to get, that is, to
-buy, some other services offered in exchange. Each set of services is
-equally a market in relation to the other set. _A market is always
-persons having something in their hands to sell._ Buyers and sellers
-are equally a market in relation to each other. Whenever anybody goes
-forth to buy, he must of course take with him something with which to
-pay for what he wants to buy, that is to say, he must become a seller
-the very instant he becomes a buyer; and whenever anybody wants to
-sell something, he must of course want something already in the hands
-of somebody else, in which to take his pay, that is, he becomes a
-buyer the moment he becomes a seller. This helps us to see perfectly
-what a market is. Defined in the terms of persons, _a market is two
-men, each glad to get the product of the other, and to render in
-return his own product_; defined in the terms of things, _a market for
-products is products in market_.
-
-Now, what can limit the universal market for material products?
-Clearly, it can only be limited either in the element of _Desires_ or
-in the element of _Return-Services_. But the desires of all men, even
-of one man, which the efforts of other men may satisfy, have never yet
-come to a stand-still. Who ever heard of even one man, who was in
-possession of all the products of all kinds, that he wanted? Even if
-there were one such man somewhere, there are millions upon millions of
-other men, whose desires for products such as the efforts of other men
-can furnish are unlimited in number and infinite in degree. It is not
-possible, therefore, that there should be a lack of human desires
-anywhere, that could put any bound to the production of commodities or
-hinder in the least its ever-swelling march.
-
-If only two things can limit the universal market, and if there never
-has been and never can be any lack on the part of some men of Desires
-which the efforts of other men can satisfy through exchange, can there
-ever be any lack in the second element of a market, namely, in
-Return-services? It is not meant to be asserted, that there are not
-definite limitations at any one time or place, or in the whole world
-at any given period, in the capacities of men then and there to
-produce material commodities, with their knowledge of things and
-powers of invention; but what _is_ meant to be asserted is this, that
-wherever Production is most busy and universal in response to the
-desires of some men somewhere, _there_ will be the greatest plenty of
-return-services, with which to pay for the services of these "some
-men somewhere" offered in response to the desires of the first set of
-producers. Therefore, no general glut of products is possible to
-occur. The more and the more _kinds_ of commodities produced anywhere,
-the better market _that_ for the more and the more kinds of
-commodities produced somewhere else. The nearer Industry may seem to
-be about to come to the goal of a limit, the farther off from that
-goal it is in reality. The aggregate of human industrial powers has
-indeed a potential limit at any one moment, but the knowledge of
-things and the power of invention and the means of transportation are
-enlarging every moment of time; so that, that potential limit never
-can become an actual limitation. Human industry will go on enlarging
-and diversifying itself so long as the world shall stand.
-
-Let us put this vastly important argument in other and briefer words:
-the Desires of men which the Efforts of other men can satisfy through
-exchange are unlimited in number and indefinite in degree; and
-therefore, mutual industrial efforts can continue to be put forth in
-exchange, until these unlimited and indefinite desires of all men are
-all met,--a goal which clearly never can be reached.
-
-This proposition demolishes at a stroke the fallacy, that pervades Dr.
-Chalmers' book but just now alluded to; and, what is more to the
-present point, demolishes equally fallacies current and prevalent in
-the United States at this hour. What our national industries need and
-all they need, what they always needed and all they ever will need, is
-a quick market for their products; products in market is the only
-market for products; but the United States for 30 years past has been
-putting vast obstacles in the shape of formidable taxation in the way
-of the presence of products from abroad in our domestic market, and
-consequently and inexorably the market for domestic products has been
-lost in foreign countries, to the immense and irreparable damage of
-domestic producers as well as to the foreign producers themselves.
-
-No general glut of exchangeable products is possible to take place in
-this world under natural liberty and just law, because under these the
-diversity of relative advantage and consequently the profitableness of
-commercial exchanges is all the time widening everywhere, tending to
-bring the whole earth into a commercial and blessed union.
-
-On the other hand, while a general glut of products is impossible to
-occur under a decent freedom, a partial glut in respect to certain
-commodities in certain places is very common. Through want of
-foresight as to a prospective demand, or miscalculation as to its
-probable amount, particular services are sometimes offered in too
-great abundance or of a kind not now adapted to the chosen market, and
-in respect to these the market may truly be said to be glutted. This
-frequently happens with editions of books; more copies are printed
-than can be sold at paying prices. Also, when the fashion changes,
-which is after all less capricious than is commonly supposed, the
-goods that were fashionable but are so no longer, are very apt to be
-somewhere in excess of the demand for them. Nothing can then hinder a
-partial or total loss in their value in the hands of their last
-holders. Precautions, however, may well be taken to avoid losses of
-this character, through the cultivation of foresight, and by studying
-as accurately as possible the nature of human desires and the not
-altogether irregular changes that have been observed to take place in
-them. This constitutes the art of mercantile sagacity; and the most
-successful producers in all the departments of exchange are those who
-best develop this attainable sagacity, who adapt their particular
-services closest to the existing and to the coming demands; who, to
-excellence in the substance of their products, add taste and
-attractiveness to their form; and who, as the result of this, tend
-rather to lead the fashions of the many than to follow in their wake.
-It cannot be wrong to repeat here in substance, what has indeed been
-said already in another connection, that Production as a general rule
-is no dead level of monotonous exertion,--no going forth and coming
-back on precisely the same track,--since its sphere is Life with all
-its wants and Man with all his desires; since there is scope and verge
-enough for the development of ingenious minds in almost all of its
-departments; and since its ultimate goal is beyond the ken of man.
-
-5. We must now study with considerable pains the ultimate facts and
-the essential functions of LANDS in connection with the Production of
-material commodities. This has always been the most vexed question in
-our Science; but it is approaching, even if it has not already
-reached, a satisfactory and final solution. The present writer
-believes that his own studies and researches have thrown some original
-and important light upon the perplexing problem of the Value of lands
-and of their produce. His present readers are surely entitled to his
-clearest possible presentation of all the facts and principles of this
-radical question.
-
-The French "physiocrats" of a hundred years ago, founders of the first
-School in Political Economy, excellent men for the most part as well
-as good economists in general, thought, that lands were property in a
-peculiar and eminent sense, that they were the ultimate source of all
-values but their own, and that consequently lands should bear the
-weight of the national taxes. English economists, constituting with
-their followers in other countries the second School in our Science,
-while not going to the length of the physiocrats, still maintained
-that the value of lands and of the produce of lands were distinct in
-important respects from all other values whatever. In our own time and
-country, Henry George, though belonging for the most part to the third
-economic School, is a great stickler for a single tax on lands in lieu
-of all other taxes. We must, then, concentrate all the lights we can
-gather on these points of dispute and difficulty.
-
-(a) _The presumption in science is always against the existence of a
-few outlying cases, whenever the induction has been long and carefully
-conducted by many persons, and the generalization appears on all other
-grounds to be sound and comprehensive._ All induction proceeds upon
-the premise, that Nature is _uniform_ in those essential resemblances
-that constitute a _class_ of things in science. Nature has so often
-justified confidence in her essential resemblances even under the
-greatest differences in external circumstance and apparent diversity,
-that the presumption becomes immensely strong in her favor, whenever a
-generalization patiently gathered from many particulars seems to cover
-the whole ground concerned except a few obstinate-looking items, that
-have not yet been closely studied. Two to one these items also will
-presently fall into their predestined place. We have already seen
-abundant grounds for believing, that Values arise from human services
-rendered and received: is it at all likely, considering the nature of
-scientific generalization and the history of all the more advanced
-sciences, that in Political Economy, lands and their produce should be
-found to constitute an outlying exception to the law of all other
-valuable things?
-
-(b) There is one vital distinction to be made at the outset and held
-to throughout the discussion, namely, that, between all lands as a
-_physical thing_, which God made and gave to all men in common
-without any effort of their own, and some lands now as a _valuable
-thing_, in all probability made such through the action of human
-desires and human efforts brought to bear upon what _was_ merely
-physical but what has now _become_ valuable. The failure to
-distinguish between _lands_ as such and _valuable lands_ as such, has
-always wrought confusion and mischief in the land problem. The two
-things are utterly different and incommensurable. There are vast
-stretches of lands on the surface of the earth, to which no _value_
-ever attached or ever will attach. They are lands, and that is all.
-Political Economy has nothing to say of them, and nothing to do with
-them. Because they are never bought or sold, because they never give
-birth to "produce," they lie wholly outside the field of Value. Then
-there are immense areas of lands now valuable, that were once as
-valueless as the first class. With these Political Economy has a great
-deal to do, and also with the way in which they passed from valueless
-to valuable. Then there is a third class of lands, that have not yet
-been studied as they ought and till recently have not been studied at
-all, namely, those known to have been valuable at one time, but which
-have now lost their value either wholly or in large measure. There are
-such lands as these in every State of our Union, and in every
-civilized country beneath the sun; and Political Economy has already
-learned something, and is destined to learn much more, about the
-processes by which lands pass from out the first great class into the
-second, and from the second into the third. Valueless, Valuable,
-Unvalued,--these three words describe to the economist all the lands
-of the world.
-
-(c) If we may trust the simple record in Genesis, the whole earth was
-given of God to the whole race, under the direction that they
-"_replenish and subdue it_." All the lands were then certainly
-valueless, although some of them were doubtless possessed of Utility,
-that is, a capacity to gratify human desires through a direct
-appropriation, which is a very different thing from Value, which last
-is the rendering and receiving of equivalents as between two persons.
-It seems very plain, that under this word, "Subdue," and under the
-human services implied in that, came in the first idea of ownership in
-land. When a family or tribe commenced the work of subjugation upon a
-piece of land, when they enclosed it, settled on it, tilled it, in any
-way whatever improved it by their own toil, then _could_ first the
-idea of ownership dawn upon their minds, then first began that land to
-be capable of value, since now that family might reasonably say to
-another, If you want this field, you must give us an equivalent for
-what we have expended on it to improve it. If the transfer took place,
-what was it that was sold? What was it that was paid for by the party
-of the second part? It could not be the inherent quality of the soil,
-it could not be anything that the first family had gratuitously
-entered upon, because similar free land with all its inherent
-qualities lay open to occupation on every hand, and the second family
-would surely say, For as much effort as you have put upon your land to
-better it, we can make other free land as good as yours, consequently
-we can give you no more at the most than a fair equivalent for your
-efforts already expended. If the parcel were sold, therefore, the
-_value_ of it must have been determined, not by the _gratuitous_
-elements involved but the _onerous_ elements involved. The physical
-thing, land, which cost nothing, has now become the valuable thing,
-land, through a series of human efforts expended of such kind as call
-out human desires for the results reached, and justify the rendering
-of return-services for them; and that which the buyer pays for is
-never the free _old_ but always the onerous _new_; new utilities,
-that cost something, have been added to and intermixed with old
-utilities, that cost nothing; and solely in consequence of this
-expenditure of efforts on the part of some men, answering to the
-desires and calling out the efforts of other men, do parcels of land
-pass out from the first great class into the second great class. So
-far as it can be gathered from the nature of the case, and from the
-known steps of past experience, this is the simple and rational
-process by which valueless lands become valuable, and _less_ valuable
-become _more_ valuable lands.
-
-(d) This line of proof, strong in itself, is strengthened by observing
-how land-parcels gradually and practically pass out from the second
-into the third class of lands,--from the Valuable into the Unvalued.
-As it is only human Efforts wisely bestowed upon valueless lands or in
-some connection with them, that ever make these valuable, so it is,
-that these Efforts intermitted for a time, or less wisely bestowed, or
-reckoned less in harmony with the present and prospective desires of
-other men, invariably cause a loss of value in valuable lands; and, if
-such neglect or unwisdom of effort continue long enough, nothing is
-more certain, than that lands so treated will lose their value
-altogether, nobody will give anything for them, they will drop out
-from the second class into the third by the same path (only in inverse
-order), by which they crept at first from valueless to valuable. Under
-the writer's own observation in different parts of New England, whole
-tiers of farms once valuable and productive have lost that character
-either wholly or for the most part, taxes can no longer be collected
-from them, nobody will really give anything for them in exchange, they
-are abandoned of their former owners, they are left to lie waste or to
-grow up into forest again. It follows from all this beyond a doubt,
-and the logical issue is one of vast consequence to mankind, that
-Value is no attribute of matter, no inherent quality of lands as such
-wherever situated, but it comes and goes, it is a relation of mutual
-purchase between human services rendered and received.
-
-(e) Land-parcels becoming valuable in the way but just now indicated,
-and so long as they continue valuable, that is, salable, are
-technically _Commodities_, according to our triple division of all
-Valuables. They belong in this grand division, that we are specially
-studying in this chapter, for the same reason as a horse does or a
-steam-engine does. Men did not originally make the land as a congeries
-of matter, neither do men make horses, nor do they make the iron ore
-out of which most parts of the steam-engine is made; but men do modify
-bits of the land as God made it, they subdue it, they improve it in
-manifold ways, they make it _desirable_ in the eyes of other men, and
-thus or otherwise they come into possession of it, gain for themselves
-a right to sell it, prepare it to be sold and sell it, on the same
-principle as men raise and break and train horses and prepare them to
-be sold and sell them, and just as men by many processes transform the
-iron ore into a steam-engine and sell that. Ricardo, in his famous
-doctrine of Rent, says a good deal about "the original and
-indestructible powers of the soil"; but as a matter of fact, _there
-are no such powers_, since the elements and properties that constitute
-land are all the time changing under chemical and other action; and
-even if there were such powers, it would still be impossible to
-separate what God did for the land from what men have done in order to
-fit it to be sold; and what men have ever been authorized to take pay
-from other men for what God did in the creation of the world? The
-simple truth is, that Value is never of God's creation but only of
-men's exertion. There never was any land anywhere fit for cultivation
-and sale without more or less expenditure of human labor and reserved
-capital upon it; and the "powers" of the land, whatever they are,
-instead of being "indestructible," are in a constant process of
-wearing out, and require a constant application of labor and capital
-to keep up their fertility. Valuable pieces of land, accordingly, like
-all other commodities, derive their _utility_ partly from the free
-contribution of Nature, and partly from the onerous contribution of
-men; but, on the other hand, they derive their _value_, whether the
-value be then increasing or diminishing, wholly from human desires and
-corresponding efforts.
-
-(f) It is but a step from this impregnable position to another,
-namely, that Henry George is wholly wrong in his view, that there is
-Value in lands as God made them and gave them to men in common; and
-consequently, wholly wrong in his doctrine, that a single tax on land
-values would be just and equal to land owners, and might well be made
-to take the place of all other taxes on all other persons. He says:
-"_If we are all here by the equal permission of the Creator, we are
-all here with an equal title to the enjoyments of his bounty._" What
-bounty? If he means the original utility which God put into all lands
-in common, and which certain men have done nothing to better, there is
-nobody to dispute his proposition. But he does not mean that, because
-there is nothing of any significance that could come out of that. What
-he means is, that it is God and not man who makes lands valuable. He
-makes no distinction between Utility and Value in lands. He lumps the
-two together in one, and calls the aggregate the Creator's "bounty."
-He goes on to say: "_There is on earth no power which can rightfully
-make a grant of exclusive ownership in land._" Well! Is there any
-power on earth which can rightfully deny to any man or family the
-proprietorship of his own exclusive _efforts_, nobody's else rights
-being infringed thereby? Or can deny to him or them the _results_ of
-such efforts, however embodied? When valueless lands are made valuable
-by human efforts expended to that end, does not the "value" belong to
-those who made it? When valuable lands have been made more valuable
-than they were by the efforts and foresight of their owners, the
-rights of others untouched, does not the "increment" belong to those
-who have created it? The truth is, if Henry George's powers of radical
-analysis had been at all equal to his remarkable power of rhetorical
-presentation, the world would never have been treated to his popular
-and imposing land-fallacies. Prudhon's "Property is theft," and
-George's "Single tax on land," rest on the same basis of socialism.
-
-(g) All valuable land-parcels are material Commodities, made to be
-such by onerous human efforts of some sort expended upon or in some
-connection with the free Utilities furnished by Nature; the utilities
-are one thing in origin and function, and the values are a very
-different thing both in origin and function; and the present point is,
-that nearly all valuable lands everywhere are Capital also, that is to
-say, products reserved to aid in a further and future production.
-Capital is a relatively small class under the immensely large class
-Values. Capital is by no means coincident with Commodities, since vast
-lines of the latter are consumed with no reference to a further
-production by means of their use. But capital is always either
-commodities or claims, and valuable bits of land are always
-commodities and nearly always capital; because all tillage and pasture
-lands, all forests grown for wood and timber, and lands of all sorts
-rented or held for resale at a higher price, are capital under the
-definition, are "_products reserved as an aid to further production_."
-The peculiarity of all farming lands is this, they are themselves
-commodities, in whose creation God's free gifts and men's onerous
-labors have conspired; and they are held in reserve by their owners as
-capital, for the sake of producing by their means with the help of
-more of God's free gifts further valuable commodities, such as grain,
-and fruit and timber. Farms in their highest reach of previous culture
-still need for crops the sun and the rain. Indeed the sun is the most
-useful and powerful force in the world. Oh! how it warms and lifts and
-quickens! Give it and the rain and the dew but a fair chance on lands
-properly prepared for them, and endless fields blossom like the rose
-and are white to the harvest!
-
-Agriculture always has been and always will be the vocation of the
-masses of mankind. Under a fair freedom, and a decent law, and a
-reasonable industry, Agriculture is always profitable; because it is
-natural, that is, designed by God for the welfare of mankind; because
-it lies at the basis of all other industries,--most of the food of
-mankind, most of the raw material of all manufactures, most of the
-subject-matter of all national and international commerce,--come out
-of the farms of the world; because it has been ordered so in the
-nature of things, that, under a tolerable freedom, a given amount of
-agricultural products tends constantly to buy, that is, to pay for,
-more and more of almost all kinds of manufactured products, for a
-reason to be explained shortly, thus tending strongly to uplift the
-farming masses in a scale of comforts; and because there is no other
-main line of human activities so constantly and so prodigiously and so
-gratuitously assisted by Natural Agents as is Agriculture. As Milton
-has profoundly expressed it in the "Hymn to the Nativity," the Sun is
-indeed to Mother Earth "_her lusty paramour_." But at this very time
-of writing a wail is coming up in ever deepening tones from Italy and
-France and Germany and Russia and especially the United States, that
-a colossal blunder in legislation common to all these countries now,
-say rather a colossal crime of the powerful few against the humble
-many, in the shape of tariff-monopolies, neutralizes in large part
-these natural advantages of agriculture, makes farming unprofitable
-and farmers unable to pay their taxes, diverts young men in increasing
-numbers from the farms to the towns, plasters the lands over with
-mortgages, shuts out from their natural markets the products of the
-land, thus depressing their price, and shuts off from farmers by
-outrageous taxes their natural supplies, thus augmenting their price.
-Farmers in all these countries are revolving between the upper and the
-nether millstones. Count Giusso, ex-Mayor of Naples, and now a deputy
-from that city, has just made a speech in the Italian Parliament,
-which sets forth in strong terms the great depression in Agriculture,
-and the critical condition of the public finances, brought about by
-the new policy of protectionism there. He says: "_The Utopian idea of
-creating an industrial Italy on the ruins of an agricultural Italy,
-has been a colossal error big with disastrous results. We have
-preferred the shop to the land; we have preferred the coal we do not
-possess to our Italian sun; we have preferred the motive force of
-steam to the most powerful motive force in the universe, the sun; and
-we are naturally suffering the sad consequences._" Exports increased
-in Italy in 1888 by $24,000,000, and imports by $42,000,000; and the
-Count quotes the cry coming up from one end of the Peninsula to the
-other: "_Give us the means of selling our products, and we will pay
-the taxes._" England is the only considerable country in the world,
-whose customs-revenue increased in the fiscal year 1888-89 over the
-year before; this English increase was over 5 _per centum_, which
-means an increase both in imports and exports, whose movements are
-almost absolutely free so far as England is concerned; while in all
-the countries mentioned above, which are under a different system in
-that respect, there was a _deficit_ of revenue from tariff-taxes as
-compared with the year before, and a _decrease_ in both exports and
-imports.
-
-(h) If nearly all bits of valuable lands be capital, as we have just
-seen strong grounds for believing, then it follows of course, _that
-the Rent of leased lands whether for buildings or harvests is the same
-in nature with the Interest on money loaned, and is the measure of the
-service rendered by the owners to the actual users of the Capital_.
-This proposition, seen in its radical proofs and in its logical
-corollaries, takes the very life out of Henry George's land-theories,
-and out of the popular remedies thereto annexed. The writer firmly
-believes also, that this proposition in the grounds of it and in the
-inferences from it might have been used by Mr. Gladstone and his
-followers with telling effect in the animated discussions of the Irish
-land-question in the British Parliament during the decade 1880-90. In
-the debates on the Irish Land Bill passed in 1881, the representatives
-of the land-owners in Ireland held to their right to take all the rent
-they could extort by the help of the law; on the other hand the
-representatives of the Irish rent-payers held to their right as
-cultivators and maintainers to withhold rent in large part or
-altogether; and Mr. Gladstone, as representative of the nation, while
-insisting on the right of the owners to certain rents, insisted
-equally on the right of the cultivators to certain important
-privileges in the soil. Our present proposition with those that spring
-out of it, though it was not used by Gladstone, as it might well have
-been to smooth his pathway through the roughness of that legislation,
-yet justifies at one and the same time the discontent of the Irish
-rent-payer, the claim of the Irish land-holder to an assured rent of
-some sort, and the fundamental principle of the Irish Land Bill of
-1881. That bill gives a certain modified ownership and control to the
-actual cultivators and maintainers of the soil. That is right.
-
-The principle of land-values herewith enunciated, their uprise and
-increase and frequent decay also in all land-parcels, justifies
-completely the concessions to tenants in that bill; while the old and
-still commonly accepted English principles of land, and the false yet
-famous doctrine of Rent promulgated by Ricardo at the beginning of the
-century, are wholly against Gladstone and his concessions in that
-bill. Let us now see whither simple analysis and logical processes
-will quickly bring us in this whole matter. Valuable land was once
-valueless, and always remained so, until, by virtue of human efforts
-expended upon it or in some direct connection with it, coupled with
-the desires of certain other men for that land or its produce,
-accompanied with a readiness on the part of these men to render some
-equivalent for it or its use, first imparted value to that particular
-patch; moreover, it has been found in practice ten thousand times,
-just as one would expect, knowing the origin of value in general,
-that, unless human efforts are further and constantly expended on or
-in connection with that piece, and unless desires of other men
-continue to turn towards it in the way of exchange, its value will
-silently and inevitably escape from it; therefore, whoever has come
-into possession of that valuable piece of land by purchase or
-inheritance, and foregoes the use of it in favor of another as a
-tenant, is morally and commercially entitled to the stipulated return
-for that use, _which is rent_; but also, if that other, aside from the
-current use which is always a wearing-out process, contributes in any
-way to the continuance and increase of the value and fertility of the
-land, then and so far he gains rights in the land and becomes a sort
-of joint owner of it, since what he has done in the way of maintenance
-and improvement is inextricably mingled with what the other owners or
-users have done, and is of the same nature with that; and, therefore,
-the modified ownership of certain tenants recognized in Gladstone's
-bill is in strict accordance with ultimate justice, as it is also in
-strict accord with right, that the legal owner should continue to
-receive a return in the shape of rent for all the fertility and
-opportunity actually contributed by him, and no more. The discontent
-of the Irish peasantry has largely come from an instinct or
-intelligence more unerring than the economics of the land-owners,
-namely, that they are called on to pay rent for what they themselves
-have _contributed_ in addition to the rent for what they have
-_received_. The true origin of value in land, and the only way in
-which value in land is kept up, seems to have penetrated deeper into
-the minds of Irish tenants than into the minds of many British
-statesmen.
-
-(i) If the bulk of all valuable land-parcels be capital, as it is,
-then one might expect beforehand to find _a law of diminishing
-returns_ from such lands, agricultural labor and skill remaining the
-same; because, all capital is tools made such by the expenditure of
-human efforts on changeable material, and then by the practice of
-_abstinence_, and tools from their very nature are always wearing out.
-Increase of efforts in connection with any form of capital unimproved
-by new inventions and uninvigorated by fresh skill, though they may
-indeed increase the aggregate return, cannot, for the reason just
-given, _secure an increase proportioned to the increase of the
-efforts_. The English writers generally, and Mr. Ricardo in
-particular, justly lay much stress on this proposition, although they
-have not taken lands to be capital, and have proven the law of
-diminishing returns in a different way from ours, and consequently
-have not set the propositions of land in their best and most ultimate
-relations. Their method of proving the law, however, is short and
-conclusive: If by doubling the efforts upon a piece of land, double
-the produce could be secured, and by quadrupling it, quadruple, and so
-on, there would be no reason why any man should ever cultivate more
-than a square acre, or even a square rod. He has a strong motive to
-confine his culture to a small space, just so long as the amount of
-produce is in the ratio of the efforts expended, because there is less
-locomotion of tools and fertilizers and crops. The fact that he
-extends his culture from one acre to another, and then to distant
-acres, notwithstanding the inconvenience and expense of
-transportation, is an irrefragable proof of the proposition in
-question. Increase of agricultural efforts and expenditures on a given
-space of land will secure a larger amount of produce, but as a general
-law, _the increased amount will not be proportioned to the increased
-expenditure_.
-
-It is through this law of diminishing returns, that the Creator has
-secured the gradual occupation, by men, of almost the whole earth.
-There is a strong and natural tendency to leave the old acres to
-advance upon new, the old countries to emigrate to new, whenever the
-returns begin to bear a more unfavorable ratio to the labors bestowed.
-The farmer will advance from the first to the second acre as soon as
-he thinks that more produce can be obtained from it by a given amount
-of efforts than can be gotten by a like expenditure of additional
-efforts upon the first acre, allowance being made for the increased
-inconvenience; and so, cultivation has gradually extended itself and
-men have become dispersed over the whole earth. Other principles
-leading to dispersion have undoubtedly co-operated, but this is the
-fundamental one, operative at all times, changing the course of
-population, and consequently of empire.
-
-(j) It follows from the points already made, _that all permanent
-improvements in agriculture retard the operation of the law of
-diminishing returns_. The recent introduction of the silo, for
-example, upon the long-used and wearing-out farms of New England
-promises, if the public law would quit throwing in obstacles, to help
-restore the fertility of many of them. The discovery of new and more
-available fertilizers, the invention of better agricultural
-implements, the light thrown by chemistry upon agriculture, the
-consequent adoption of better methods of culture and rotation of
-crops, the more perfect adaptation to the various soils of the kinds
-of produce sought to be raised from them,--all these and similar
-improvements tend to increase the ratio of produce to the labor, and
-to disguise the law just established. The lands that are now under
-cultivation may be made, under more skilful modes of culture to yield
-indefinitely more than at present, and the vast still uncultivated
-lands of the world may come to render an incalculable quantity of food
-to the world's population; but yet, as improvements are naturally less
-continuous in this than in most other departments of production, as
-invention has much less play, as there is less opportunity for the
-division and co-operation of laborers, _as nothing can materially
-shorten the time during which the fruits of the earth must ripen_, it
-is certain that possible improvements will never override the law of
-diminishing returns; and, consequently, _that the value of
-agricultural produce tends constantly to rise relatively to
-manufactured products generally_.
-
-(k) The last point to be made under the general topic we are now
-discussing, is, _that the best tenure of lands in the interest of the
-production of material commodities is the fee simple in the hands of
-the actual cultivators_. This is the old Teutonic holding; but special
-circumstances in the British Islands have gradually changed these
-small holdings once cultivated by the hands of their free owners into
-large estates, the parts of which are leased out at will or for a term
-of years to tenants or "farmers" as they are there called, who, in
-turn, being small capitalists, as the land-owners are large
-capitalists, furnish the stock and hire the laborers and thus become
-the actual cultivators, and even often sublet parts of their own
-leased holdings to tenants of the next degree below, who can furnish
-less stock and can hire fewer laborers. The word "farmer" as used in
-the United States has a quite different meaning from that it bears in
-Great Britain; it means here a man cultivating his own fields with his
-own funds in his own way, and it means there a man cultivating
-another's fields with his own funds in a way and on terms made a
-matter of contract between the two; and these two modes of culture are
-so distinct that they are not likely to lie alongside of each other to
-any great extent for a very long time in the same country. Since her
-great Revolution, and under the action of the law requiring the equal
-partition of every man's landed estate among all his children, France
-has had for the most part the small holding tilled by the owner's own
-hands, instead of the great estates of the old _régime_, the average
-being about 14 acres to each owner, and nearly one fourth of the
-entire population being proprietors of land either in town or country;
-in the United States the plough is guided almost wholly by the man who
-owns the soil he tills; while in Great Britain the original peasant
-proprietor has almost entirely disappeared. Each system has its
-advocates and arguments.
-
-The question at bottom is, whether capital in the form of tillable
-land is more _effective_ when held in large masses and loaned out to
-men, who possess small capitals in another form than land, and are
-willing to apply these for a return upon that land, or when held in
-small masses and used as capital by the owners themselves, who also
-own some capital in another form than land and are willing to apply
-this to their own profit upon their land. We hold, that the latter
-method is better than the former, both for the maintenance and
-improvement of the land itself as capital and also for the current
-production of commodities from it, because, (1) when one owns the farm
-he works, from the very nature of permanent ownership he takes a
-greater interest in it, perhaps he has inherited it from his fathers,
-perhaps he has bought it and paid for it at the hardest, at any rate
-it is his own, and as all men work from _motives_ and the energy of
-the work is proportioned to the constant press of the motives, then
-must the owner of the capital, whose abstinence _makes_ it capital, be
-under the strongest possible motive at once to improve his capital and
-also to make the current produce from it as great as possible, since
-the capital itself and all it yields is his own; moreover, (2)
-ownership improves the moral _character_ of the cultivators, it tends
-to make them industrious, thrifty, frugal, independent, hopeful of the
-future, anxious to give their children better privileges than they
-themselves had, and it would seem as if the masses of men are educated
-by nothing so much, at least by nothing more, as and than by the
-_ownership_ of land, wherever such tenure is possible and easy to the
-masses; and (3) the outward testimony is abundant from many lands,
-that the peasant proprietor _is_ a happier and more virtuous man, a
-more productive and progressive one, than the mere tenant and
-farm-laborer, while there is much perhaps less conclusive testimony
-that leased lands are inferior in point of improvements and
-productiveness to the same lands when cultivated by their owners and
-to contiguous or at least similar lands still so cultivated.
-
-It is a cognate point yet worthy of separate mention, that a general
-division of lands into farms only moderately large and approximately
-equal is most favorable to the largest aggregate production. Such a
-division takes place of itself wherever the lands are held in fee
-simple, and the cost of land-transfers is slight, and there are no
-such obstacles as slavery or primogeniture, as has happened
-practically in New England and in the Middle and Western States, and
-as is now happening of its own accord more or less at the South. The
-Greek writer, Aristotle, quoted some centuries before Christ from "the
-African," probably some Carthaginian writer on agriculture, the now
-familiar saying, "_the best manure for the land is the foot of the
-owner_." This homely word long attributed to Dr. Franklin, who stole
-it for his "Poor Richard's Almanack" more than a century ago, is based
-on the sound principle, that personal supervision to be most effective
-must be limited in its sphere, and that the best agricultural skill
-becomes weak when it attempts to exhibit itself on too broad a
-surface. Because a man can cultivate 100 acres better than any of his
-neighbors, it does not prove that he will cultivate 50 acres
-additional to them better than a neighbor of inferior skill, who is
-the owner of these 50 and no more. When the freeholds are small and
-nearly equal a wide competition among the farmers comes naturally into
-play, success is seen to depend upon personal efforts of intelligence
-and will, and interest and hope become the motives to the most
-productive cultivation. There is a high pleasure in possession and in
-self-guided exertion, and an impulse is broadly felt over the whole
-region to get as much as possible out of the land and at the same time
-to keep good and ever improve its condition. To protect and advance
-his own interests, to attend upon the seasons, to watch and wait, to
-foresee and plan and labor,--all this develops the farmer, and gives
-him energy and independence; and wherever there is a broad basis of
-such independent yeomanry to lean back upon, when heavy taxes are to
-be raised and strong blows of battle are to be struck, the national
-safety and position are assured.
-
-6. We come now in the last place to consider the _Costs of Production_
-of material commodities of all sorts. Valuable patches of land, all
-prepared for Production in its several kinds, are the most important
-Commodities in the world, and the largest also in volume of Value.
-What did it cost "_to subdue_" the present tillable lands of this
-country? How much did it cost to get ready for grazing the broad
-pastures? To make accessible the forests that yield the timber? To
-open up the mines also and bring them into "touch" with the
-population? These questions are of great consequence, not that the
-actual past cost of any class of these more permanent "commodities" in
-the commercial world will be any safe guide to their present value,
-since cheaper and cheaper means of subduing the rugged forms of Nature
-are all the while coming into play, and all things that did cost more
-once tend pitilessly to fall to what similar things cost now; and
-since also it is never "efforts" alone that determine the value of
-anything, but efforts in conjunction with the "desires" of other men.
-Still, the _amount_ of efforts expended at any given time upon these
-more stable commodities to make them productive, that is, their cost
-of production, is always gauged in general by an _estimate_ of what
-the "desires" for them will be when completed; and this makes their
-cost of production a sort of loose measure of their value at the time.
-The main reason, however, why the cost of production of these primal
-commodities, namely, valuable land-patches, whatever may be expected
-to be produced from them afterwards, is so important, is, that as a
-general rule, the less the cost of any commodity meeting a universal
-want _the wider and surer is its market_. The larger the circle of the
-buyers of anything the more certain its sale; because, the world over,
-the men of small incomes are manifold larger in number than the men of
-large incomes. Society is like a pyramid: the lowest course of masonry
-is the longest and widest,--has the most stones or bricks in it,--and
-ever fewer towards the top.
-
-If we reckon valuable lands as the _primary_ commodities, then the
-_secondary_ commodities will be of two classes, namely, (1) the
-_produce_ of these valuable lands, whether animal or vegetable or
-mineral, such as cattle and cereals and coal; and (2) vendible
-material products obtained by human efforts from non-valuable land and
-sea, such as furs and fish. This division of material commodities into
-primary and secondary, and the distinction among secondary commodities
-according as their source is costly and costless, has never before
-been drawn in Political Economy; and it is fully believed, that the
-thoughtful reader and student will pretty soon perceive its advantages
-in helping clear up one of the most confused and perplexing sections
-of our Science, namely, that which relates to the causes and measures
-of _Rent_. We are now to inquire into the elements of the _cost of
-production_ of each of these three classes of commodities; and we may
-find ourselves surprised at the simplicity and certainty of these
-elements.
-
-_1._ We will now look into the Cost of Production of valuable
-land-patches themselves, the first and most important class of
-commodities. Here, as everywhere else in Valuables, we discover
-certain free gifts of Nature, without whose presence indeed the value
-could never come into being, but which are not _constituents_ of the
-value, because they are gratuitous, given of God, and because the
-natural competition among buyers and sellers inevitably flings out
-from all effect on value of the otherwise possible action of these
-free and bountiful gifts, as have been already fully illustrated in
-chapter first. No piece of land ever yet had one particle of Value
-until human efforts of some sort had been expended on it or in some
-connection with it, for two excellent reasons, first, no man would
-ever even _think_ of saying to another in reference to such a piece of
-land "Give me something for it and I will pass it over to you," and
-second, even if he did think of such an absurdity the other would
-reply "Why should I give you anything for something to which you have
-not the least claim, especially as I can take for nothing just such
-pieces all around here?" It must be remembered, not only that God gave
-the whole earth to all mankind without distinction, but also that his
-bountiful hand scattered all peculiar kinds of patches in great number
-upon each of the Continents. There is a plenty of Utility (gratuitous)
-in land-parcels just as God made them, but no possibility of Value
-(onerous) till other hands than His have touched and benefited them.
-
-What, then, are the onerous elements that enter into the value of
-land-parcels and constitute their Cost of Production? There are only
-two such elements, namely, _Cost of Labor and Cost of Capital_. To
-find out exactly what "Labor" is, and what there is in it entitling
-and assuring its reward in "Wages," will be the task and perhaps also
-the pleasure of the next chapter; but it will suffice for the present
-discussion to say, that Labor is human exertion put forth for the sake
-of a commercial return. Lands can by no possibility be brought out of
-a state of nature into a state of value without the expenditure of
-Labor; and the actual or estimated cost of this labor, accordingly, is
-the first constituent of the Cost of Production of valuable lands
-considered as Commodities. Labor, however, can not apply itself to
-free lands in order to make them valuable without the co-operation of
-another onerous element, namely, Capital, in some of its many forms.
-For example, if forest lands are to be made tillable, the trees must
-first be cut down, and this will require besides the muscular exertion
-of the laborer something in the way of an axe, which is capital, the
-result of previous labor reserved to assist in further production: if
-native prairie is to be subdued to a valuable commodity, something of
-the nature of a plough must be employed in the process, and horses or
-a steam engine to propel it, and a plough and horses are capital, and
-still require fresh labor to make them useful in production. But
-capital always costs something; and, therefore, the cost of the
-Capital enters in as a second constituent into the cost of production
-of Land-Commodities. But these two costs are all. We shall search in
-vain for any other onerous element in the cost of producing
-commodities. There are two variables only in the Cost of Production,
-which itself is the sum of the two subordinate costs.
-
-(a) And now let us analyze first the Cost of Labor in this connection,
-and then second the Cost of Capital, and we shall soon reach radical
-and unchangeable ground, and find in the sum of these two an aggregate
-Cost of Production, and also all of the variables that can ever enter
-into such Cost. It is plain to reason, that only by Labor non-valuable
-land-pieces ever did or ever can become valuable. Captain John Smith
-understood this in 1607 at Jamestown as well as anybody understands it
-now: there were 48 gentlemen, and only 12 tillers of the soil, among
-the 105 colonists, who originally landed there: "_nothing is to be
-expected hence_," he wrote of the new country, _but by_ "_labor_:" new
-supplies of laborers, aided by a wise allotment of land-parcels to
-each colonist, secured after five years of struggle the lasting
-fortunes of Virginia: "_men fell to building houses and planting
-corn_": the very streets of Jamestown were sown with tobacco; and in
-fifteen years the colony numbered 5000 souls.
-
-Now the cost of Labor is analyzable into three variables only, namely,
-(1) the _efficiency_ of the labor; (2) the _rate_ of nominal wages
-paid; (3) the cost to the employer of _that valuable_, in which the
-wages are paid. Let us see: what an employer wants _is to get things
-done_; consequently, if an employer hire two men to work for him at
-the same rate of wages, and if one be twice as efficient a laborer as
-the other, the _cost_ of the labor of the first is only one half the
-cost of the labor of the second: therefore, a _high rate of wages_
-does not mean _a high cost of labor_ whenever and wherever the
-laborers are very efficient. As a rule, it is found, that the cost of
-labor in reference to a given product is _the least_ in those
-countries, like the United States and Great Britain, in which the
-rates of nominal wages are _the highest_; because, it is found also,
-that a high _efficiency_ of laborers accompanies both as a cause and
-as an effect high rates of wages.
-
-Secondly, there are striking differences in the rates of nominal wages
-paid for a day's work in the same general employment in different
-parts of the same country, and especially in different countries. The
-agricultural laborer in the west of England, say in Wiltshire, gets
-about 10_s._ per week, while in the north of England, say
-Nottinghamshire, laborers at the same general work get about 16_s._
-per week. Walker in his Wages-Question gathers from the best
-authorities many such statements as these: "On the Grand Trunk Railway
-in Canada the French-Canadian laborers received 3_s._ 6_d._ a day,
-while the Englishmen received from 5_s._ to 6_s._ a day, but it was
-found that the English did the greatest amount of work for the
-money." "In the quarry at Bonnieres, in which Frenchmen, Irishmen, and
-Englishmen were employed side by side, the Frenchmen received 3, the
-Irishmen 4, and the Englishmen 6, francs a day; and at those different
-rates the Englishman was found to be the most advantageous workman of
-the three." "The statistics of the iron industry in France show, that
-on the average 42 men are employed to do the same work in smelting pig
-iron as is done by 25 men on the Tees." "In India, although the cost
-of daily labor ranges from 4-1/2_d._ to 6_d._ a day, mile for mile,
-the cost of railway work is about the same as in England." Thus it is
-plain, that a _high rate of wages_ does not import a _high cost of
-labor_, but rather the reverse. A vast mass of current fallacies are
-disposed of in a moment by this truth seen in its grounds. The United
-States have shown in the past the highest rates of nominal wages in
-the world, and at the same time have shown the lowest costs of labor
-to the employers, because as a rule the laborers here have been more
-efficient than elsewhere. England has the highest rates of wages and
-the lowest costs of labor in Europe for the same reason. The degree of
-_efficiency_ shown by different laborers is the second variable in a
-cost of labor.
-
-Thirdly, if that valuable, whether money or other, in which wages are
-paid, varies in cost to the employer, then the cost of the labor paid
-for by that valuable, efficiency of the laborers, and nominal rate of
-pay remaining the same, will of course be varied thereby. We shall
-learn hereafter in the chapter under that title, that the value of
-"Money" is by no means invariable even in one country, just as we have
-already learned the variable nature of all other values; and, too,
-wages are not always paid in money, though they are commonly reckoned
-in the terms of money; and accordingly, the third and last variable
-in a cost of labor is the cost to the employer of that valuable,
-whatever it be, in which the wages are paid. Assuming, as we may, that
-given wages are paid in money, then any country that has for any
-reason a more abundant money than another may clearly pay higher rates
-of nominal wages than that other without making its costs of labor any
-higher than in that. The United States, for example, has usually had a
-very abundant money (not always of the best kind), which of course has
-tended to make higher the current prices of all commodities, and this
-has enabled capitalist-employers to pay higher nominal rates of wages,
-without at all enhancing relatively the costs of labor, and also
-without really benefiting the laborers.
-
-(b) We will now analyze second the Cost of Capital in this connection,
-as the only other element of cost in the Cost of Production of
-Commodities in general, and particularly now in the cost of making
-worthless land-pieces valuable so as to be used in further production.
-Here too we find three variables, no one of which can be safely
-neglected any more than the other three in the reckoning that has for
-its object a prospective cost of production. These are, first, _the
-current rate per centum_; second, _the time for which the capital is
-advanced_; and third, _the liability of that form of capital to slow
-or rapid wearing out_. For instance, under the first variable, the
-rate per centum of capital, if the rate at Amsterdam be 3 and that at
-New York be 7, if the cost of labor be equal in the two cities, if the
-time of advance be one year, and if there be no liability of the
-capital to wear out; then any commodity made at Amsterdam with an
-outlay of $100 may be sold at a profit for $103, while a similar
-commodity made at New York with the same outlay cannot be sold for
-less than $107. All other things being equal, a _low rate per centum_
-of capital in any country gives that country an advantage in the
-markets of the world for selling its commodities over other countries
-offering similar commodities where the rate is higher, because its
-cost of their production is less. Of course also such a country can
-subjugate its wild lands and make them valuable at less cost than the
-other countries.
-
-To illustrate the operation of the second variable, the time for which
-the capital is advanced, let the same suppositions be continued,
-except that the _time of advance_ at New York be extended to four
-years. Then the commodity may be sold at and from Amsterdam, as
-before, at $103, but the corresponding commodity at and from New York
-for not less than $131, so far as mere cost of production determines
-the prices. This point is also well shown up in the case of wine,
-which, to reach its perfection, requires to be kept a number of years,
-for, if it be genuine and ripe, its cost of production has been by so
-much enhanced by its delay in reaching the market. If the time of
-advance be long, and the rate _per centum_ high at the same time, the
-cost of capital from the two causes combined multiplies the cost of
-the product; and consequently, only countries in which the _rates_ are
-low can successfully engage in enterprises requiring a large capital
-to be invested for _long periods_ before returns are realized. One
-million of Dutch capital at 3% a year, expecting to realize returns
-only after 20 years, may be remunerated by products selling for
-$1,806,111; but American capital under like circumstances, except that
-the rate here is 7%, must have a return of $3,869,685, or lose by the
-operation.
-
-To illustrate the action of the third and last variable, we must
-observe, that all forms of capital wear out, but some forms much
-faster than others, and that this makes a difference in the
-sinking-funds that must be reserved out of the gross profits of the
-capital in order to replace the principal whole. This difference will
-at once affect the cost of capital, and so of production, and so
-indirectly the ultimate value of the product. Suppose there are two
-commodities, which we will call A and B, produced in two different
-establishments, in each of which is invested a capital of $11,000, in
-one of which is used a machine that costs $1000 and is wholly worn out
-by one year's use, and in the other a machine costing the same sum,
-which will last, however, for ten years. Suppose further, that the
-rate _per centum_ of profit be 10, and the time consumed in completing
-each of the two products be one year. Now there is a marked difference
-in the Cost of Capital in the two establishments, and this difference
-will indirectly but immediately appear in the Value of the respective
-products. For, to A must be charged not only $1100, the interest on
-the whole capital at the current rate, but also another $1000,
-wherewith to replace the machine already worn out by a single year's
-use. A, accordingly, cannot be sold without loss for less than $2100.
-B, however, will cost less and can be sold for less at the usual
-profit. Because, to it must be charged, as before, $1100, current rate
-of profit on the capital invested, and only $100 (really less than
-that for an obvious reason) to replace the durable machine after ten
-years' use. The capitalist, therefore, can sell B for $1200, and make
-something over the current rate of profit.
-
-Since the cost of capital invariably resolves itself into these three
-variables, every capitalist in order to become successful as such must
-give strict attention to all three of these points. To any one who
-projects the making of valueless into valuable land, or valuable into
-more valuable land, by the expenditure of capital upon them for that
-purpose, it becomes a matter of prime importance for him to inquire
-how long a time the whole process will take, how much he must allow
-_per annum_ for the cost of all the implements employed, and
-especially how complete in action and duration are these costly
-implements. The _durability of machinery_, whatever the name it bear
-and whatsoever the work it do, is at once the most significant and the
-most neglected point in the actual and prospective Production of our
-time and country; and no condemnation can be too severe upon a policy
-of public law, such as now prevails, whose whole tendency and actual
-effect is to worsen the quality and lessen the durability of all
-commercial implements whatsoever, from the needle to the locomotive.
-The same abominable public policy increases the cost and decreases the
-durability of all agricultural implements, like the axe and the
-plough, designed and adapted to transform valueless and non-productive
-into valuable and food-producing lands.
-
-_2._ Now, having fully seen the elements of the cost of reducing land
-itself from a natural into a valuable and productive form, what next
-are the elements of the cost of production of those material
-commodities produced for sale _by the aid_ of these subdued and now
-productive lands? Commodities so produced constitute the second class
-in the law of their Cost of Production. And a vastly important class
-it is. The food of the world, so far as that food is purchased as the
-product, whether animal or vegetable, of valuable lands; the fuel of
-the world, so far as that fuel is bought from owned and accessible
-forests and mines; the clothing of the world, so far as the fabrics
-come from the cultivated cotton and flax and wool and skins offered
-for sale; the shelter of the world, so far as the wood and brick and
-stones and lime are drawn from valuable lands and quarries; and the
-warehouses and the temples and the theatres of the world, built, as
-they are, out of the products of costly and rentful lands: these all,
-and many more like these, constitute a class of commodities immense in
-their volume, whose cost of production has in it an element peculiar
-and additional to that of the first class already analyzed, and to
-that of the third class also soon to be considered.
-
-This peculiar and additional element in the cost of production of
-these things, class second of commodities, is called RENT.
-Interminable have been and still are, especially in the British
-Islands, the definitions and discussions upon Rent: they have boxed
-the compass of economical nomenclature: they have run up and down the
-entire gamut of possible expression on such a theme. David Ricardo,
-the Anglo-Jewish Banker, formerly announced, near the beginning of
-this century, that "_Rent is that portion of the produce of the earth,
-which is paid to the landlord for the use of the original and
-indestructible powers of the soil._" Two objections lie with fatal
-weight against this definition and all that is involved in it: first,
-there _are_ no "indestructible powers of the soil," either "original"
-or acquired, since the universal verdict of all agriculture has been
-and still is, that the "powers" of all soils are continually wearing
-out, and need to be constantly renovated by fertilizers and
-manipulations of all sorts; and second, even if there were such
-"original and indestructible powers," it would be impossible to
-separate them from the additional "powers" acquired by means of the
-capital expended to bring that land from the state of nature to its
-present state, and the landlord has had nothing to do with any
-"powers" of the land except those conferred by his own labor and
-capital upon it, and can by no possibility put himself into a position
-where he can _enforce_ any claim of his own for a return from any
-"original powers" of any land-parcel whatever. The simple truth is,
-and it illumines the whole subject of agriculture and its products,
-that the value of land-parcels and also the value of the transient use
-of them, or _Rent_, hang wholly on the onerous human efforts involved
-in them, and not at all on original and gratuitous utilities. Science
-has only to unfold the plan of God and its actual and beneficent
-workings. "_In the sweat of thy face shalt thou eat bread._" All that
-God furnishes to men in order to get a living and in order even to get
-rich is Opportunity. The opportunity is ample. The call to a
-partnership in Effort as between God and men is loud and constant. The
-world with all its powers, free lands with all their utilities, the
-change of seasons, the blessed sun and the blessed dew and rain, the
-constant disintegration of rocks beneath the soil and the gradual
-clothing with lichens and moss and verdure of the rocks above in
-preparation for a new soil, and the wonderful chemistry of the vast
-laboratory of Nature, all work night and day without fee or reward in
-the service of mankind. But men themselves must not intermit their
-labor. All values are of _their_ creation and maintenance. If they
-cease or relax their labor upon land-pieces so only made valuable and
-rentful, then will the value and the rent begin to slip away
-inexorably, and no prayers and no regrets will avail to call them
-back.
-
-Now, then, since commodities of the second class in the cost of their
-production must respond not only to the _current_ cost of Labor and
-Capital in bringing them to market, but also something additional in
-the way of Rent to the _past_ cost of the implement, the land-parcel,
-without whose contributing agency present results could not be gained;
-_Rent is the Rendering for the present use of a Valuable made such by
-past Labor and Capital._ Land-parcels leased for agriculture; mines
-and the access to them leased for the production of metals and
-minerals; and forests whose growth has been permitted by the past
-_abstinence_ of their owners; all properly yield a rent; because these
-forms of capital, whose existence is due to past labor and capital,
-are present contributors to products, whose sale must compensate not
-only present labor and the use of current capital, but also the use of
-these more permanent forms of capital long ago created.
-
-A competent authority estimated in 1881, that the land-parcels of the
-United Kingdom of Great Britain were worth £3,000,000,000; and there
-were at the same time 6,000,000 of inhabited houses, excluding
-factories and business premises and tenements renting for £20 and
-under. Most of these lands and houses are rented by their owners to
-the actual occupiers on the just principle explained above, inasmuch
-as the lease-system is the prevailing one in that country. According
-to the Census of 1880, there were 4,008,907 so-called farms in the
-United States in that year. Most of these are held in fee simple, and
-are tilled by their owners; but just so far as land-patches and
-forests and mines are leased in this country, their products must
-provide in their price of sale for current rents, as well as current
-costs of present production. This is just as it should be, and just as
-it must be, if Capital is to take this form of assisting the processes
-of future production.
-
-But this form of Capital, as well as all other forms of the same, is
-perpetually wearing out, that is to say, is gradually losing its power
-to contribute as at first to the present and future processes of
-production. This loss is in the very nature of things,--in the very
-nature of all Capital. The great Father never intended that His
-children should cease from work. He has ordered all things so, that
-they cannot cease from work, and continue to live in any comfort and
-progress. Value, as we have already thoroughly learned, is not a
-quality that can be put into anything _to stay there_: it is a
-recurring relation of mutual services between man and man; and each of
-these services of the three kinds involves recurring Efforts. Capital
-is a form of Value; and, consequently, it cannot possibly take on a
-shape not subject to the _law of diminishing returns_. This is
-deductive proof. And precisely the same result is reached by
-Induction. Men have noticed and recorded the fact at all times, and
-have made provision for it in their pecuniary calculations, that tools
-and machinery need to be repaired and then replaced, that the current
-interest on moneyed capital tends to decline from generation to
-generation in all progressive countries, and also that lands and other
-forms of real estate so lose their productive and rental power unless
-cared for in renovation that men migrate and emigrate in consequence.
-
-How much Rent shall the tenant pay to the landlord for the present use
-of the latter's old lands? Or in other words, how much shall be added
-to the going price of the product on account of the diminishing return
-due for the use of the old landed capital? This is a hard question to
-answer: probably the hardest question that is ever asked in practical
-Economics. Mr. Gladstone wrestled with it as complicated with a larger
-political question in passing the Irish Land Bill of 1881. Another
-honest athlete, Mr. Parnell, wrestled with it upon the same
-parliamentary arena. Scores of able and practical statesmen in Great
-Britain, and elsewhere, have struggled to reach a practical answer to
-this question; and scores of able and theoretical economists in all
-countries have striven to reach a theoretical answer to it. Most of
-these answers have been inharmonious, and many of them contradictory,
-with each other. The Land Bill of 1881 created a parliamentary
-Commission, whose duty and authority it was, to visit the Irish
-counties in person, to gain information in detail, to take sworn
-testimony of all the parties concerned, and then to lift or lower
-rents according to their discretion. The discontent of the Irish
-tenants in general was considerably mollified by the action of this
-Commission; while the debates and wrangles of the parliamentary
-session of 1889, and the persistent agitations for Home Rule (an
-agitation at once political and economical), show that the results of
-the work of that Commission were not wholly satisfactory.
-
-(a) It is easy enough to see why the solution of this general problem
-is so extremely difficult. The new is mixed in with the old. The
-result of the old labor and capital is a productive piece of land; the
-current labor and capital is expended upon the same piece to make it
-more productive; the same sort of thing is done now that was done
-then, and the results of the two are now thoroughly intermixed; there
-were original free utilities in soil and growths and deposits, but
-these had and have no value and can never yield rent; the old labor
-and capital improved the soil by clearing and drainage and
-fertilizers, and made the growths and deposits more valuable and
-accessible, so that even the old onerous was more or less transformed
-into the original gratuitous; and now the new onerous, the fresh
-cultivation and fertilization and betterments generally, in soils and
-roads and buildings, are inextricably commingled with former
-betterments of the same general kind and with the original free gifts
-of Nature. No wonder the Commission of 1881 found difficulty in
-determining what was what and which was which! No wonder that Irish
-tenants on long leases quarrel with their landlords about the
-betterments, how much is new, how much is old! It is clear, that when
-the lease is ended, the landlord ought to compensate the tenant for
-all that portion of the latter's betterments, which is not already
-worn out; it is equally clear, that the tenant ought to be willing to
-pay a fair rent for the use of the unexpended betterments of the
-landlord and his predecessors; while there is room and verge enough
-for endless disputes between them as to the respective amounts of
-these, and consequently as to the amounts of rent and of its
-remissions.
-
-These difficulties and intricacies do not belong to the _principles_
-of the Science of buying and selling, which are in the main clear and
-certain in their action, but are incidents of determining in certain
-cases _what that is_, which is bought and sold. Parties in interest in
-all kinds of buying and selling are sometimes compelled to go to the
-courts in order to have the Law decide what their respective rights
-are as buyers and sellers; but this is no fault of Political Economy
-as a science, or of trading as an art; two men in all cases make their
-own bargain, according to their own estimate of the respective
-rendering and receiving of each; if the uncertainties of language, the
-misconception on the part of one or both of the terms agreed upon, and
-the misapprehension of some of the circumstances of the case, breed
-confusion and litigation, all this cannot be justly charged to the
-science of Political Economy.
-
-Nevertheless, it is into these incidental intricacies and
-uncertainties, that Henry George's now famous theory of landed rents
-and the taxation of them, strikes its roots. Instead of building his
-structure upon firm and open ground, so that thoughtful men can see
-that his basis is solid and scientific, Mr. George dashes at once into
-a thicket and lays his foundations with quickness and assurance where
-all is dark and doubtful, or at best where all is rather incidental
-than fundamental and demonstrable, and pretty soon displays a
-superstructure that appears attractive both without and within,
-through whose airy halls he knows how to conduct to their delight the
-credulous and discontented, and on whose walls hang plausible pictures
-calculated to invite and hold the attention of the masses. Let the
-perfect integrity and rhetorical ability of Mr. George be freely
-conceded; let it be freely conceded also, that he teaches in his books
-and lectures a great deal of vastly important industrial truth in a
-popular way so as to accomplish great good, such, for example, as the
-imperative need of greater simplicity in taxation, and the
-indisputable right of the people to their liberty in buying and
-selling; yet it must at the same time be owned, that he has never yet
-found out exactly what _Value_ is in general, consequently what are
-the causes of value in lands, and what are the nature and grounds of
-Rent. Something more of patient and radical analysis at the outset,
-and of logical and scientific unfolding afterwards, would have made
-Henry George one of the chief benefactors of his age.
-
-(b) It is also very easy to see, that the current price of produce,
-that is, what is gotten in return for the sale of what is gotten out
-of the land-parcels, must have a dominant influence upon what can be
-paid as rent for the use of the parcels. Unless the return from the
-produce be sufficient to reward at current rates the present labor and
-capital employed upon the parcel, the parcel will not continue to be
-cultivated at all, otherwise men would act without a motive for
-action, which they never do; unless, therefore, the price of produce
-be more than high enough to repay current wages and profits, there
-will be nothing left for Rent; and, consequently, the amount of the
-rent that can continue to be paid for lands will be _the difference
-between the going price of what is produced from them and the current
-expenses of cultivating them_. Here, as everywhere else within the
-domain of Exchange, Competition exerts its beneficent action. If one
-dealer, or ten, endeavors to put a price upon the produce more than
-enough to pay current wages and profits with a fair margin for the
-diminishing rate of rent, there are a plenty of others, dealers in the
-same grade of produce, who will be content with a fair return for
-present and past expenditure of labor and capital; and the action of
-these will effectually debar the others from exorbitant rates. The
-price of produce, accordingly, under free competition, is the divinely
-appointed regulator of landed rents. It regulates also, though more
-indirectly, the current rates of wages and profits in agriculture.
-
-Very different from this is Ricardo's doctrine of Rent. He makes
-everything turn on the Cost of Production of the Produce, which is
-Effort, ignoring the ever-varying demands for the produce, which is
-Desire. His doctrine, too famous and too long received for us to pass
-by in this connection, though now superannuated, was for substance,
-this: there are some lands in every country whose produce just repays
-the expenses of cultivation, and consequently yields no margin for
-rent; and the cost of production on these rentless and poorest lands
-under cultivation, will determine the price of the produce; and as
-there can be but one price in the same market, the produce raised on
-more fertile land will be sold for the same price, and this price,
-besides paying the cost of cultivation, will yield a rent rising
-higher according as the land is more fertile; so that the rent paid on
-any land is always a measure of the excess of productiveness of that
-land over the least productive land under paying cultivation; and
-therefore, an increased demand for food in consequence of increased
-population, and the higher price resulting, will force cultivation
-down upon still poorer soils, or compel a higher culture for less
-remunerative returns on the old soils, according to the law of
-diminishing returns, which in either case will raise the rents on all
-the soils above that grade that just repays the expenses of
-cultivation; so that it is the sole interest of landlords, as such,
-that population should be dense and food high, their interest being
-directly antagonistic to that of the other classes of the community.
-
-(c) Finally, in this connection, it is easy enough to see, what were
-the motives on the part of the landlords, and what were the results on
-the part of the masses, of Great Britain, in putting on and keeping on
-the infamous Corn Laws, so-called, which were repealed forever in
-1846. The Corn Laws forbade the importation of foreign cereals under
-heavy pecuniary penalties. The simple purpose of the landlords then
-governing England was to raise the price of their grain by shutting
-off Competition of foreigners by means of these prohibitory
-tariff-taxes. It was Protectionism pure and simple. It was designed to
-raise the price of bread to the masses of their countrymen, and often
-did raise it to the point of their starvation. But we have just seen,
-that the higher the price of the produce, the wider the margin for
-Rent for the lands that produce it. The Corn Laws of England enriched
-the landlords at the expense of all other classes and to the
-starvation of many of the poor. As has been well said, this was the
-most successful of all the many expedients that have been tried, "_to
-fertilize the rich man's land by the sweat of the poor man's brow_."
-The words of Daniel O'Connell, spoken Sept. 28, 1843, in his
-parliamentary fight against the high-tariff Corn Laws, were surfeited
-with truth and righteousness: "_But what is the meaning of
-'Protection'? It means an additional sixpence for each loaf; that is
-the Irish of it. If the landlord had not the protection, the loaf
-would sell for a shilling, but if he has protection, it will sell for
-one and sixpence. Protection is the English for sixpence; and what is
-more, it is the English for an extorted sixpence. The real meaning of
-'Protection,' therefore, is robbery,--robbery of the poor by the
-rich._"
-
-At the present moment and for twenty-five years past, the public laws
-of the United States ostensibly relating to Taxes, have had an immense
-influence upon the value and rents of the agricultural lands of the
-country to depress them; because these laws have put up nearly or
-wholly impassable barriers to the coming in of those foreign goods,
-against which the farmers would naturally and profitably and
-inevitably have sold their surplus agricultural produce; by destroying
-the foreign market for farm products, these laws do in effect destroy
-a large part of the value of the farms of the country, and of what
-would otherwise be the rentals of a part of them; the Constitution of
-the country expressly forbids any taxation whatever of Exports, but
-these laws have precisely the same effect on the value of farm
-products if they were themselves forbidden to be exported, because
-those goods for which these would be otherwise exchanged for a profit
-are forbidden to be imported. _A market for products is products in
-market._ Thus these wretched laws lower the price of farm products,
-and consequently the value of farms and of their rents, and impoverish
-the farmers who are nearly one-half of the entire population of the
-country.
-
-While these paragraphs are being written, comes the intelligence of
-the formation of the "North American Salt Company," whose purpose is
-in their own language "_to unify and systematize the salt interests of
-the United States and Canada_," and to this end "_arrangements have
-been completed for the purchase and control of nearly all the existing
-salt properties of the North American continent_." As this is a fair
-instance out of some thousands, in which a tariff-tax has the designed
-effect to lift or lower values which deeply concern the people, let
-us look at it for a moment. On the average of the past twenty-five
-years the tariff-tax on salt has in general doubled the cost of that
-necessary of life to the whole people of the United States. When
-Canada had no such tax, American makers of it sold salt sometimes to
-the Canadians 40% less than they would sell it to their own
-countrymen. On the basis of this United States tariff-tax (it would
-never have been dreamed of without it) this new company comes forward
-with a scheme of international monopoly to control in their own
-interest the price of a prime necessity of life. They propose to issue
-stock and bonds to the amount of $15,000,000, with which to buy up
-"the existing salt properties"; and they frankly avow in the
-prospectus from which we are quoting, that profits of $2,000,000 a
-year on their capital are justified by the present outlook. Whence are
-these immense profits to come? Out of the pockets of the masses of the
-American people bound hand and foot in the meshes of a legal monopoly,
-which they themselves allow themselves to be ensnared in! In a similar
-but more outrageous way, are bound up at the present moment in the
-secret so-called "Trusts" about forty more of the necessaries of life;
-each one of which, unless it be the "Standard Oil Trust," has its
-footing in a so-called "protective" tariff-tax, and would collapse
-instantly on the repeal of that!
-
-It was necessary in order to complete our study of the second class of
-material commodities, namely, those produced from valuable and rentful
-lands, to glance in passing at the frequently disturbing effect on
-these, aside from their cost of production, of sinister laws plausibly
-imposed upon an unsuspicious people in the interest and at the
-instance of a privileged few.
-
-_3._ It only remains in this chapter, devoted to the discussion of
-material Commodities in their three economic classes, to conclude
-with a glance at the third class, namely, those material valuables
-that are obtained from free and unowned sources, such as masts cut in
-the wilds of America on both oceans two and three hundred years ago,
-and fish caught on the Banks of Newfoundland, and furs gathered to
-such profit in the north by the Hudson's Bay Company, and salt
-evaporated in the tropics by a free sun from old ocean's brine.
-
-These, and all such things as these, have a cost of production
-determined only by the cost of present labor and capital, and
-consequently a grade of value determined only by present Demand and
-Supply, unentangled for the most part by questions of rent and prior
-claim and taxation and nationality. All these things, accordingly, are
-relatively cheap, except as the element of Scarcity, and on that
-account of strong Desire, may sometimes come in to enhance the value.
-No man can tell the time exactly when French fishermen from the coasts
-of Brittany ventured over to the Banks of Newfoundland in their frail
-barks for the abundant cod in those waters, and went back home again
-at the close of the season freighted with plenty of a free and cheap
-food for their families and countrymen; or when it was that rude men
-calling themselves English followed these in their western track for
-the same general purposes, to become thereby hardy seamen on deeper
-seas, such as those who gained long afterwards the naval victories of
-Nelson; and we have all read in the fascinating pages of Irving the
-ventures and adventures of John Jacob Astor, the attraction of free
-furs in the Northwest of America, the hazards and the history incident
-to obtaining them, and the immense profits gained by their sale in the
-markets of the old world.
-
-FOOTNOTES:
-
-[3] Baines' History of the Cotton Manufacture, as condensed and quoted
-in Walpole's History of England, Vol. I.
-
-[4] Charles Knight's History of England, III. 292 _et seq._
-
-
-
-
-CHAPTER III.
-
-PERSONAL SERVICES.
-
-
-There are three kinds of things only ever bought and sold in this good
-world of ours. In the preceding chapter we have conned carefully the
-first kind, material commodities, in their three subdivisions of
-land-parcels and products of such parcels and products of free land
-and sea. In the present chapter we come to study the second kind of
-valuable things, personal services, which we shall also find
-subdivisible into three classes. We have treated of Commodities first,
-because their value in its grounds and changes is more easily
-understood than that of the other two kinds, while in point of _time_
-Services might well enough have been considered first, since it is
-these that manipulate into value the originally rude forms of Nature.
-The main difference between the two is this: in Commodities the
-attention is naturally drawn to tangible _things_ offered for sale,
-such as lands and wheat and fish; while in Services the attention is
-strongly drawn to _persons_ offering them for sale, such as the common
-laborer and the skilled artisan and the professional artist. This
-distinction, though obvious and useful as between commodities and
-services, is not after all radical; because Economics is a science of
-Persons from beginning to end; inasmuch as the services precede and
-are merged in the commodities, and inasmuch as the Desires (personal)
-of some men for the renderings of other men antedate and underlie all
-exchanges whatsoever.
-
-Personal Services are technically named _Labor_ in the science of
-Political Economy. This nomenclature is old and familiar, and will
-probably always persist on that account, but it is not of itself of
-the happiest, and it gives birth to some ambiguities and many
-fallacies. Let us look at these for a moment, before we pass to the
-definition and discussion of what is commonly called Labor, but what
-is better described by the term, Personal Services.
-
-Contrast will help us a little here. Commodities can always be
-measured by some _Standard_ outside of themselves: for example,
-land-parcels are measured into acres and fractions thereof by a
-surveyor's compass and chain; metals and cereals are weighed into
-centners and parts thereof by scales of some sort; and sugar is not
-only weighed at the custom-house, but tested as to other qualities by
-the polariscope. Now land, wheat, sugar, and all other commodities,
-have an existence separate from the standards that measure them, and
-whether they are bought or not they continue for a time essentially
-the same. They exist _per se_. They were indeed brought into existence
-on purpose to be sold, and if they cannot be sold, similar things
-additional will not then and there be brought into the market, but
-these things themselves are there separate from the seller and
-separate from the buyer. Not so with personal services. They do not
-exist _per se_. They are not separate from the seller, and they cannot
-come into existence without a buyer. _Skill_ is something the artisan
-cannot part with, nor can he sell the service to which the skill gives
-rise till the buyer be present with the return-service in his hands.
-The Laborer of any class cannot put his "service" on exhibition, and
-then wait for a buyer, as the commercial drummer sells goods by
-sample. The doctor, for example, must have his _patient_ before he can
-show his skill. The buying and selling of personal services,
-accordingly, is more intimate and ultimate than the buying and selling
-of commodities: it brings people more closely together: it depends
-much more on traits of _character_ and on acquired _skill_.
-
-Right here we may see clearly the main objection to the term, "Labor,"
-as commonly used, and the bad fallacy to which it gives birth. "Labor"
-is indeed in form and origin an _abstract_ term as much as "service"
-is, with this difference, that the word "service" radically implies
-the person serving and another person served at the same instant; but
-the term "Labor" has long been taking on itself in the mouths of men a
-_concrete_ meaning, as if it might be something separate from the
-laborers, as in the common phrase "Labor and Capital," which has
-already done a world of mischief and is likely to do a good deal more,
-because it seems to imply, that the two are alike in independent
-self-existence, and that they stand over against each other on equal
-terms for a fair bargain or for a free fight. This is not the case, as
-we shall see more fully later; since capital is something separable
-from the capitalist, always a commodity or a claim, always
-transferable, always valuable or else it will not be "Capital." Some
-of the German economists, and particularly John Conrad of Halle, have
-avoided this difficulty by a clean nomenclature. They say
-"_Labor-givers_" and "_Labor-takers_," instead of Laborers and
-Capitalists, and especially instead of "Labor and Capital," thus
-emphasizing the personal element in both terms, and also leaving
-themselves free to define and use the term "Capital" as distinct from
-any particular capitalist, while the term "Labor" cannot be defined
-and used as distinct from any given laborer. This precise point,
-though probably new, is of very considerable consequence in the true
-doctrine of Wages.
-
-We are compelled by the exigencies of the English language and the
-still stronger fetters of economical custom to continue to use the
-terms "Labor" and "Laborers" in their technical sense, and in
-connection with the scientific terms "Capital" and "Capitalist"; but
-we shall always use each of these words in the same meaning, and free
-them as far as possible from the fungous accretions that have fastened
-upon them in the course of time.
-
-_Personal effort of any kind put forth for another in view of a
-return-service and for the sake of it is labor._
-
-_Laborers are persons rendering their peculiar services to other
-persons for a commercial reward._
-
-_The valuable received by a laborer for his service rendered is
-Wages._
-
-These definitions exclude from our circle of view all Efforts of
-anybody put forth for other than commercial reasons; and they include
-all Efforts of everybody, from the President to the scrub, put forth
-under the inducement of a return-service or Wages. No good end seems
-to be reached by trying to distinguish, as Francis Walker does in his
-"Wages-Question," between the "Wages-class" and the "Salary-class,"
-because there appears to be no scientific or other economical
-difference between Wages and Salary. Each is a return-service for
-another service rendered, and that is all there is to it. The whole
-class of Laborers, accordingly, in any civilized and progressive
-country, is immensely large and becoming constantly larger. Excluding,
-of course, from this class all persons in so far as they render
-so-called moral services to others, which are in their very nature
-_free_, such as those that spring from duty and courtesy and
-benevolence, and these happily are also an immense and fast-augmenting
-class, though our Science has nothing to do with them directly, the
-number of those persons in every community and in every rank of every
-community, who sell personal services of some sort in distinction
-from commodities and credits, is pretty nearly as large as the _per
-capita_ population of adults and competents within that circuit. It
-must be borne in mind, that the same persons whose primary business it
-may be to sell commodities or credits, often sell services also in
-some subordinate or incidental way; and also, that the same persons,
-who are dispensing on the one hand their gifts and moral renderings
-freely, are frequently of the busiest in selling on the other hand
-their personal services for pay. In other words, the sellers of
-Services cannot be discriminated _as to their persons_ from other
-sellers, or even from downright _givers_; but the _action_ itself, and
-the law of it, is quite distinct in the three cases of selling, and
-utterly diverse in the one case of giving.
-
-Now, can we sub-classify within this vast class of service-sellers, so
-as to help us understand better the class as a whole, and so
-especially as to help us understand better the Law of Wages within the
-entire class? We have just criticised Walker in a friendly spirit for
-attempting to draw lines of demarcation within this wide field: can we
-draw any useful ones ourselves less open to criticism than his, and
-such as rest back upon fair differences in nature and form? Walker
-makes his distinctions turn on certain peculiarities in the
-return-services: can we make ours turn better and clearer on certain
-peculiarities in the services themselves? We can at least try. Hard
-and fast lines cannot be drawn here, we admit. The exterior lines
-around Commodities and around Services and around Credits are each
-sharp and firm; and so is the deep-fixed circle that includes all
-three of these alike as Valuables; but _within_ the smaller circles
-the lines of needful division are somewhat more shadowy, though we
-leave with confidence to competent Economists the triple lines but
-just now drawn within the sphere of material Commodities.
-
-A rude classification among "Laborers," then, yet one useful and
-indeed indispensable, may be made into (1) Common Laborers, (2)
-Skilled Laborers, and (3) Professional Laborers.
-
-Common Laborers are those, whose services may be acceptably rendered
-by an ordinarily competent person after a little patient practice and
-instruction, without anything corresponding to an _apprenticeship_ as
-a preliminary to their selling their service. Farm hands, teamsters,
-porters, waiters, miners, 'longshoremen, railroad laborers, and many
-more belong to this first class. Owing to the ease with which this
-class can be recruited at any time from growing boys and emigrating
-foreigners and from those who may have essayed the class above and
-fallen back, the Supply here is kept constantly large relatively to
-the Demand for such services, and consequently Wages are always the
-lowest and steadiest in this lowest class of Laborers.
-
-Skilled Laborers are those, who have had to pass through something
-equivalent to an apprenticeship in order to be able to offer their
-services for sale. These, as a class, present some considerable points
-of difference from common laborers. Their numbers are fewer, for the
-reason, that relatively few parents can afford to give their children
-the time and money needful for them to learn a trade, or to become
-skilful in any art requiring prolonged education; as a result of this
-lessened press of competition among themselves, and because being
-intelligent and consequently mobile they are able to insist better on
-their claims and distribute themselves to points where their services
-are in more demand; and because they are likely to be subject to a
-stronger Demand than common laborers, on account of the close
-connection of their services with special accumulations of Capital;
-the Wages of skilled laborers will infallibly rule higher than those
-of common laborers. Artisans in general constitute this second class
-of laborers.
-
-Professional Laborers are those, who have received a technical
-education,--something more than an apprenticeship,--expressly to fit
-them to render difficult and delicate services to their fellow-men for
-pay, and who possess besides the requisite character and talents and
-genius to enable them to succeed. Clergymen, physicians, lawyers,
-literary men, artists, actors, and many more, render professional
-services loosely so-called. The obstacles at the entrance of this path
-occasioned by the lack (1) of appropriate natural gifts, or (2) of the
-requisite industry and character, or (3) of the means of suitable
-education and training, practically exclude so many persons, that the
-competition in the higher walks of professional life is not such as to
-prevent a very large remuneration for services rendered. The demand
-for these is often peculiarly intense, as well as the supply
-peculiarly limited. When great interests of property, of reputation,
-of life, are at stake, it is felt that the best men to secure these
-must be had at almost any price. Fees and rewards for services of
-great delicacy, of great difficulty, of great danger, are paid by
-individuals and corporations and nations without grudging.
-Comparatively few men reach the highest points of excellence in their
-respective professions, and they have in consequence a natural
-monopoly in these fields of effort, and receive for their labor a very
-high rate of Wages. For example, Daniel Webster often took a fee of
-$1000 for a single plea in court; Paganini, a like sum for an hour's
-playing on a violin; and Jenny Lind, at least as much for an evening's
-singing in a concert, because there was in each case a strong demand
-for a peculiar service and only one person in the world who could
-render that service in the circumstances to the same perfection. But
-the objections which lie with such force against artificial
-monopolies, cannot be urged at all against a natural monopoly; for, if
-the road to excellence be open to all, and no artificial obstructions
-thrown in the way of any, there is no blame but rather praise for him
-who distances all competitors, and asks and receives for services of
-peculiar excellence a large remuneration. Exchange rejoices in all
-diversities of advantage that are the birth of freedom, but reprobates
-with all her force advantage that is gained by artificial
-restrictions, because artificial restrictions always infringe on
-somebody's right to render services for a return; and the right to
-render services for a return is the fundamental conception in the
-Right of Property.
-
-Is it open for us, to gain a somewhat deeper and clearer sense of
-_what that is exactly_ that is rendered in these three classes of
-personal Services, before we pass to the considerations which
-determine in all cases their Value? It is plain, that what common
-Laborers sell for the most part, if not exclusively, is _muscular
-exertion_ of some kind, guided by the mind as trained in habit, and
-aided by appropriate implements, all designed to meet the desire and
-so call forth the return-service of the purchaser; it is equally
-plain, that skilled Laborers with scarcely any more exceptions than
-before sell the same sort of physical exertions, or motions, this time
-guided by mental action of a higher grade and wider scope, and aided
-also by more elaborate tools working towards the desires and
-consequent returns of a set of buyers more scrupulous and exacting
-than the first set; and it is plain enough, that some of the highest
-professional services, for instance the surgeon's, though not by any
-means the mass of such services, are essentially of the same kind as
-the two former, namely, muscular motions, guided by the most intimate
-and exact knowledge of things, and aided too by instruments the most
-scientific and expensive. In many of the professional services the
-physical element sinks to a minimum, while the intellectual and moral
-factors come to the front and take up the chief attention; it will be
-found, however, that the physical factor is always present in some
-degree, as, for example, in the counsel's plea before the court, and
-in the physician's visit on his patient; and in almost all cases, if
-not in all, some implement or other plays its part in the process of
-professional service before it ends, as Cicero used a pitch-pipe or
-tuning-fork to gauge his voice in his great pleas for Roman clients.
-
-Precisely what is rendered, then, in all cases of Personal Services in
-each of their three loose kinds, is _muscular motion conjoined with
-mental effort and both these assisted by habit and by some form of
-what we call Capital_. The Services are therefore _Personal_ in the
-highest sense. The Mind and Body of the Laborer conspire to render
-them. The most sagacious animal can never be trained to render one of
-them. They are wholly _human_. Nevertheless the muscular part in the
-rendering--motion and resistance to motion--is just what tools and
-machinery can be made to take the place of in large measure but never
-in whole measure, because tools may not be taught _to think_. It may
-seem sometimes as if machinery were about to take the place of human
-hands in some classes of Production; but it will be found in the
-ultimate issue, as it has been found in every stage of the process,
-that human hands and human minds in action are absolutely essential at
-every point of the Exchanges among men. Men are so made and Society is
-so organized, that they need increasingly for their comfort and
-progress the personal services of their fellow-men, and can render
-their own in exchange for these; and consequently, there never can
-fail (under freedom) a MARKET for Personal Services of the three
-kinds.
-
-Having now seen as closely as possible what that is which is rendered
-in personal services, let us pass to the principles which determine
-their remuneration. That is, we will now inquire carefully into the
-Value of personal services. We have learned already, that Demand and
-Supply in their action and reaction upon each other determine in all
-cases the value of Commodities for the time being; and we shall find
-it to be equally the dictate of all reason, and the outcome of all
-experience, that Demand and Supply decide too in all cases on the
-value of all Services and all Credits then and there. Shall we look
-first at the considerations that issue in the Demand for personal
-services, and then at those other considerations that limit the Supply
-of them?
-
-1. Demand is never the mere desire for anything, but desire coupled
-with the ability to pay for it at rates satisfactory to the present
-holder. The Demand for Services, therefore, is made by the prospective
-purchasers of them; and the purchasers, of course, are those who
-desire them and are willing to pay for them at current rates. It will
-be easiest and surest for us to study the Demand for Services in each
-of the three classes of them in succession.
-
-(1) The Demand for Common Laborers has several points of difference
-from that for Skilled, and from that for Professional, Laborers. It is
-scarcely ever intense. It is mostly disconnected from large
-accumulations of Capital. The desire is usually for immediate
-gratification, without any other end in view. It is frequently for
-such a service, as, if a renderer may not be conveniently and cheaply
-found, one is inclined to do for himself. For instances: if the barber
-be not accessible and reasonable and tolerably skilful, a man will
-certainly shave himself, provided he have not yet attained the
-independence and the luxury of wearing a full beard; and the ordinary
-housewife, if the cleanly and tractable domestic does not come into
-sight, will do her own work with casual assistance. It is this
-important fact, that common services among men and women in common
-life may in many cases be dispensed with altogether, and in many other
-cases substitutes be found for them, in connection with the other
-important fact, that common laborers learn their art quickly and
-easily, and consequently are present everywhere in large numbers, that
-makes the Wages of such laborers uniformly low. The Demand is moderate
-and the Supply is large.
-
-(2) The Demand for Skilled Laborers is steadier and stronger than for
-Common, because in general the desire for these is not for immediate
-gratification, but for an ultimate satisfaction to arise from the
-commercial coöperation of these laborers with their employers, who are
-capitalists, in connection with accumulations of capital, the end in
-view being the production of commodities for sale at a profit. Here
-comes in a new motive on the part of capitalists to buy the personal
-services of laborers. The motive is simple and intelligible and
-commendable, but its nature and operation is popularly and grossly
-misapprehended.
-
-Capital is the result of Abstinence from the present use of a Valuable
-in gratification, for the sake of a future increase of it through
-Production. But Abstinence is always irksome in itself. It must have
-its prospective reward in an increase, a profit, or it will never
-transform itself from a mere valuable into a capitalized product. Now,
-the owner of the valuable, having transformed it into capital from
-this motive, is under a commercial necessity to hire laborers, in
-order by their help to make his capital yield a profit. Capital lying
-idle decreases in _value_ even, to say nothing of its yielding no
-increase to itself; and the motive of the capital-owner, accordingly,
-is strong and constant to buy the services of laborers, to marry
-these services with his own capitalized products, and thus to produce
-commodities for sale, whose value shall be greater than the present
-value of the capital and the services combined. Here we reach in the
-minds and motives of a large class of men an ultimate Demand for
-laborers, and specially for skilled laborers, which is as true and
-constant to its legitimate end of Profit as the needle is true and
-constant to the pole.
-
-At this point it is very evident, that, if the fair expectation of the
-capitalists be realized in a steady profit, and the larger the circle
-of capitalists and the more of capitalized products to each the better
-for all concerned, the Demand for laborers will become steady, and
-will be likely to steadily increase, because there will then be a
-constant motive on the part of all capitalists as such to put back a
-part or all of their yearly profits into capitalized products, and
-thus the Demand for laborers will become more intense, and the rates
-of Wages so far forth must be enhanced. The steady Demand for the
-services of the laborers hinges upon the steady Profits of the
-capitalists, and there is no antagonism between the interests of these
-two classes of buyers and sellers, but rather a complete identity of
-interest between them.
-
-We are looking now solely at what constitutes the Demand for laborers
-of the second class. As always, so here, there is Desire first and
-then a ready Return-service. The Desire of employers of this class is
-for a Profit on their capital, and the return-service for the laborers
-is present as a part of these capitalized products. This part of the
-capital we call Wages-Portion. It is already in hand or provided to be
-in hand when the wages fall due. Of course it is expected, that the
-current wages will ultimately come out of the current joint-production
-of the laborers upon the capitalized products set apart for that
-purpose by the capitalist. But if the profits fail to the capitalists
-at the end of that industrial-cycle, whether it be two months or
-twenty-four, then Desire will fail or be weakened to hire laborers for
-the next cycle, and the return-services or Wages-Portion with which to
-pay them for another cycle will be lessened of necessity. Both
-elements in Demand are curtailed by the falling-off of Profits. There
-is at the same instant less desire to buy services and less ability to
-pay for them. It is of the very nature of capitalized products to wear
-out in the process of production; if there be not net profits at the
-end of the cycle for the capitalists, it shall go hard but there will
-be less wages for the laborers during the next cycle. This is not a
-matter of sentiment or of philanthropy, but of eternal law, which God
-has ordained and the devices of men cannot frustrate. Capitalists and
-laborers are joint partners in the same concern. Under industrial and
-commercial freedom their interests are identical. Both are buyers and
-sellers to each other at the same instant; and, as always when both
-parties are alike benefited and satisfied with a trade, both will
-cheerfully and profitably continue the connection. The Demand of each
-class for the product of the other will continue unabated. Profits and
-wages reciprocally beget each other.
-
-But still it is not altogether true, what has sometimes been stated by
-economists, that capitalists are under the same sort of pressure to
-buy their services as the laborers are to sell them. Capital is a
-Valuable already created by the mutual desires and efforts of two
-persons, and is now the exclusive property of one of them, and has
-also been set apart by him through an act of will to be thereafter an
-aid to some future production under the motive of a new value to
-accrue thereby. The capital has now become secondary to and separated
-from the person who owns it. He very seldom understands the real
-nature and operation of it. He commonly imparts to it in his
-imagination a more substantive and persistent existence than it
-actually possesses. He is frequently more or less stuck up as towards
-his neighbors and employees in consequence of his possession of it.
-The very fact that he has capitalized it for future operations shows
-that he is independent of it as a means of present livelihood. The
-personal services of the laborers, on the other hand, stand in very
-different relations to _them_. Their personal services may indeed be
-_valuable_, but they cannot be _capitalized_. As laborers they have
-nothing else to sell. Unless they sell their services now, these have
-no existence even, still less can they have any value. It is only by a
-mischievous figure of speech, that the skill of laborers is sometimes
-spoken of as their "Capital." Therefore, the laborers are under a
-certain remote yet inherent disadvantage as sellers of their personal
-services, when compared with the capitalists as buyers of them. This
-disadvantage, however, though apparent in the nature of things, and
-under certain circumstances disastrous to the laborers, may disappear
-practically under another and natural state of things; and it is every
-way to be desired by both classes alike that it should disappear in
-practice.
-
-Whenever there is a broad and constant and profitable market for all
-the commodities the capitalists and the laborers can jointly
-produce,--that is to say, whenever profits are steady and remunerative
-and wages are high and growing in their purchasing-power,--the Demand
-for skilled laborers must always be such as puts the laborers on a
-footing of equality as over against the capitalists, because under
-such circumstances the purchasers of services are many and eager, two
-bosses will be likely to be bidding for one skilled laborer, and then
-wages are always growing in dollars and each dollar growing in
-effective purchasing-power.
-
-It is of the last importance in this connection to notice, that
-everything in Profits and Wages turns in the last resort upon the
-breadth and freedom of MARKETS. It is out of the return-service
-received from the _sale_ of the commodities produced jointly by the
-capitalists and laborers, that both wages and profits must ultimately
-be paid. There is no other possible source of them. When the Market
-fails, everything fails that leads up to a market. Particularly fails
-the Demand for laborers for the next industrial cycle, and of course
-drops also the prospective wages for that cycle. The public folly and
-universal loss of shutting off foreign markets for our own commodities
-by lofty tariff-barriers, as has been conspicuously done by the United
-States for thirty years past, follows of course from this radical
-truth; and the Wages of laborers, instead of being lifted by
-tariff-taxes, as has been so often falsely and wickedly asserted, are
-inevitably _depressed_ by them, because they effectually forbid to
-capitalists and laborers their best and freely chosen _markets_ for
-the sale of their joint products.
-
-Another vastly important matter, constantly affecting the Demand for
-laborers of the second class, is the Competency or otherwise of the
-practical managers of the Capital invested in industrial enterprises.
-Capital cannot manage itself. It is of itself wholly inert. It is
-always either a Commodity or a Credit. Conscious of their inability to
-handle wisely their own bits of Capital, or else taught it through a
-bitter experience, by far the larger number of individual owners of it
-loan it to others to manage; they invest it in some industrial
-corporation, in a bank or a mill or a railroad. Some one person, or at
-least a small body of persons, must practically manage now all
-specific accumulations of capital. It is they in their capacity of
-manipulating-capitalists, who constitute in large measure the Demand
-for laborers. But such managers, who are at once skilful and
-long-headed and honest, do not grow upon a chance bush. They are rare.
-Most of them in this country at least have been those, who started in
-a small way in the control of their own earned or small-inherited
-properties, and rose through practice and knowledge and conscience to
-the ability to handle profitably to all concerned large masses of
-Capital. In the hands of such men, given a tolerable chance by public
-law and private circumstances, both Profits and Wages are sure to come
-in satisfactorily. They are Captains of Industry. They are an honor to
-human nature. They are a blessing to the whole community. They have no
-need and no will to ask to be bolstered up in their business by unjust
-taxes enforced upon a whole people.
-
-Such men sometimes have sons or _protégés_, who possess similar
-capacities and similar integrity, and these by experience become able
-to carry on the business to similar successful issues. This is happy,
-but it is unusual. More commonly, in the second, and pretty certainly
-in the third, generation, the line of royal succession fails. There
-comes in a lieutenant rather than a captain of Industry. Likely enough
-he mistakes the nature of capital, and thinks that it will go along of
-itself without that eternal vigilance that is the one price of its
-maintenance and increase; likely enough he lacks the touch and rule of
-men, and his laborers become demoralized and refractory; more likely
-still he thinks he sees other operators around him getting quicker
-rich by speculating in enterprises outside the legitimate business,
-and takes some of his own and of what is not his own and throws it out
-of its proper channels; and, as the result of one or all of these,
-things soon go wrong, profits and wages fall off, poor work is done
-and finds slow sale, and Demand for laborers (which is their
-life-blood) slackens or goes out in that establishment. No wonder the
-Paper-makers in their annual gathering at Saratoga of 1889, resolved
-as the main outcome of their meeting, that they would bring up their
-sons (or somebody's sons) to succeed them in their business by a
-thorough practical training in the paper-mill itself, beginning early
-and continuing long. Industrial higher education in this or some other
-form is the secondary hope of manufacturing business in the United
-States, the primary hope being in a decent commercial liberty to buy
-their supplies and to sell their products in the best markets wherever
-these are to be found.
-
-There is one other important item that bears directly upon the Demand
-for laborers of the second class, and consequently upon their Wages,
-namely, the constant introduction of more and better Machinery. At
-first blush it would seem, and it has often been stated so, that the
-use of machinery takes just so much work from human hands, reduces by
-so much the Demand for laborers, and tends to lessen by so much their
-wages. All this is the opposite of the truth; but before we explain
-_why_ it is the opposite of the truth, let us attend carefully to the
-truth itself, as stated in 1889 by the highest living authority on
-these special points, Sir Edwin Chadwick, the octogenarian pioneer in
-sanitary and economic reforms. Fifty-six years ago Chadwick joined
-with his colleagues of the English Factory Inspection Board in
-recommending reduced hours of labor and other improvements which have
-now become general in England. In a paper recently read before the
-Political Economy Club, he calls attention to the greatly increased
-production which follows improved machinery and shortened hours.
-
-He says: "_Spinning machines which formerly turned 8000 in a minute,
-now turn 11,000; and in Lancashire not more than half the hands are
-now employed to produce the same amount with new machinery as were
-employed on the machinery of 1833. As an example of the extent of
-the reduction of hands by these improvements, it may be mentioned that
-one large family of cotton spinners in Manchester, which 40 years
-ago employed 11,000 hands, could not now muster one half that
-number._ YET THE MILL POPULATION HAS INCREASED, AS WELL AS THE GENERAL
-POPULATION, THE HANDS DISCHARGED BEING ABSORBED IN OTHER EMPLOYMENTS.
-_At the beginning of the century the cost of spinning a pound of yarn
-was a shilling. The pound of that same yarn is now spun for a
-half-penny by hands earning double wages for their increased energetic
-attention and skill. It is now found, however, that the strain of the
-increased responsible attention cannot be so long sustained as the
-slow, semi-automatic pace by the old working of the old mills with the
-long hours. Hence there is a tendency to a further voluntary reduction
-of the working hours in the best mills, first to nine hours. In one
-mill, in which 2000 men are employed a voluntary reduction has been
-effected to about eight hours with a more equable production; and I
-have heard of other examples. As showing the cost of working with
-inferior hands and loose regulations, a recent report from the
-Manchester Chamber of Commerce states that 20s. worth of bundled
-yarn may be produced at a cost of from 2d. to 3d. per pound less
-in Manchester than in Bombay, notwithstanding the hours of working
-are 80 hours per week, while in Manchester they are only 50. At
-the present time Lancashire, with its short hours, will meet Germany
-or any other country, in neutral markets, in the world. In Germany the
-spinners and weavers still work 13 hours a day as they once did in
-England; France has only come down to 12 hours; whereas the English
-rate has long been 10 hours, and may soon be 9 or even 8. And
-this reduction improves the health of the wage-workers, while the
-reduced cost of production allows them higher wages; yet Germany with
-its long hours and high tariff maintains a system_ OF LOW PAY, DEAR
-PRODUCTION, HIGH COST OF DISTRIBUTION, AND LIMITED SALES."
-
-The accuracy of these important statements of fact is confirmed on
-every hand. Committees of British spinners and weavers have repeatedly
-visited the United States, and then reported to their fellows at home,
-that wages, all things considered, were equal for spinners and weavers
-in Great Britain and the United States, and in some cases and respects
-higher in the former. Many times before his late lamented death,
-John Bright publicly testified that wages in England during his
-parliamentary life had risen in general 50%, and in some of the
-manufacturing lines 100%. A few months before these statements of
-Chadwick were made, Sir Richard Temple reported to his section of the
-British Association, "_That the average earnings per head in the United
-Kingdom, taking the whole population without division into classes, is
-£35, 4s., and exceeds the average of the United States, which is £27,
-4s., and of Canada, which is £26, 18s., and of the Continent, which is
-£18, 1s.; while it falls below that of Australia, which is £43, 4s. per
-head._"
-
-According to this, the average earnings in Great Britain per head of
-the population are 30% higher than in the United States, and 81%
-higher than on the Continent of Europe. Truly, Britain is a prosperous
-and profitable country so far as average earnings of the whole people
-by the year is concerned. Sir Richard goes on in the same statistical
-paper to show, that the average annual profit on British Capital is
-14%, and that Capital yields about the same rate for the United
-States.
-
-Now, can we easily give the grounds on which the introduction of more
-and better machinery, instead of displacing laborers, tends to lift
-and actually does lift the wages of those concerned, who continue to
-work with their hands and heads? We will try it.
-
-(a) It takes the hands and heads of laborers to invent and construct
-and keep in repair the machinery itself, that is often supposed to
-displace laborers, and so far forth opens a vent for the more
-profitable employment of some of the laborers, who before performed
-the cruder and more repetitive and automatic parts of the processes,
-which parts alone machinery can be made to perform.
-
-(b) Machinery always lessens the cost of a given amount of production,
-otherwise there would be no motive for its introduction. But, other
-things being equal, the lessened cost of a commodity broadens the
-market for its sale. The cheaper a useful commodity is offered, the
-more the buyers of it the world over. The more and the better the
-machinery brought in, the more and the cheaper the commodities
-produced and the broader and better the markets to be supplied; and,
-therefore, the more and the more skilful the hands needed to tend the
-machinery and to market the products.
-
-(c) The more commodities thus created by men and machines, and the
-wider the markets found for them over the earth, the more laborers are
-required to extract and prepare and transport the raw materials for
-the now augmenting commodities, and also to ship and distribute the
-finished products. As Chadwick says, notwithstanding the strictly
-_factory_ hands have diminished one half in one place, "yet the _mill_
-population has increased, as well as the general population, the hands
-discharged being absorbed in other employments."
-
-(d) These improvements in machinery, and the consequent refinements in
-the skill of the laborers, cheapen also of course the commodities
-consumed by the laborers themselves, and therefore a given rate of
-wages, to say nothing of a rate sure to enlarge under these
-circumstances, now secures for the laborers a higher grade of
-comforts.
-
-More and better and more durable machinery, consequently, so far
-forth, tends at once to enhance the rate of laborers' wages and
-increase the purchasing power of the unit in which wages are paid.
-
-To return now to the main line of discussion under the present head,
-we have shown by proof positive that there is nothing either in new
-machinery introduced, or in higher wages paid in connection with such
-machinery, or in shortened hours made possible by these two, to lessen
-the Demand of Capitalists for the personal services of Laborers;
-because, there is nothing in all these, commercial and industrial
-freedom being presupposed, to lessen the Profits of the Capitalists,
-which profits are the sole motive actuating them as such. That high
-wages and short hours are rather an advantage to Profits in connection
-with skilled laborers and fine machinery, than a disadvantage when
-compared with long hours and low pay and poor implements, is clearly
-shown by Chadwick in the passage quoted comparing England with English
-Bombay, where the working hours are 60% more and the wages greatly
-less and the cost of the machinery very little; "twenty shillings'
-worth of bundled yarn may be produced at a cost of from 2_d._ to 3_d._
-less in Manchester than in Bombay"; call it 2-1/2_d._ less; that is,
-it costs the Bombay spinner more than 1% per pound of yarn more to
-spin it than it costs the Manchester spinner! For truth and decency's
-sake, then, let us have done with the gabble in this country about the
-advantages of "pauper labor" over skilled, of low wages over high, of
-cheap machinery over dear!
-
-The penetrating reader will perceive, that the root of this whole
-matter lies in the breadth and quickness of the _Markets_, in which
-the commodities produced by the laborers and capitalists may be sold
-against other commodities, and against Services and Credits; if the
-markets of the world are free to all to buy in and to sell in, which
-seemingly two things are precisely one and the same thing, then the
-Demand of Capitalists for the services of laborers to create and
-market salable commodities wherever these may be wanted, can
-apparently never slacken on the whole; because, the desires of men
-which the efforts of other men may satisfy commercially, are
-indefinite in number and unlimited in degree; and, therefore, the
-Wages of the skilled laborers, the commercial freedom of the nations
-being presupposed, are likely to be on the whole on a steady rise
-throughout the world; and the amount and excellence of the machinery
-on a similar rise, since Capitalists can always under these
-circumstances see their Profits looming up ahead of them,--the profits
-of an endlessly diversified and marketable Production.
-
-The chief reason at any rate, and almost the only reason in common
-sight, why little England has surpassed in commercial prosperity of
-every sort every other nation on the globe during the past forty
-years, as evidenced by these statistics of Sir Richard Temple and
-other abounding proofs on sea and land, is in the fact, that her
-statesmen of the last generation came to perceive clearly, and then
-helped the people to see, that a market for products is products in
-market; that her traditional tariff-barriers to keep foreign goods out
-kept in equally domestic goods that wanted to get out for a profit,
-and so down went the tariff-barriers little by little, accursed alike
-by God and Englishmen, never to be set up again around the shores of
-the land of Cobden and Bright and Elliott; and to-day we read, that
-the average annual Earnings per head of the entire population of the
-United Kingdom, men and women and children, English and Irish and
-Scotch, are $176, while the annual average Profits of Capital within
-the three kingdoms is 14%.
-
-(3) In the last place here, we must now look at the Demand for the
-personal services of Professional laborers. These are persons, who
-have done something more with reference to their life-work than serve
-an apprenticeship to a trade, or acquire some mechanical skill in
-connection with some kind of machinery. An Education rather than an
-Apprenticeship is implied in Professional laborers. Knowledge of the
-bodies and of the minds of men; acquaintance with some one section at
-least of the general laws that pervade the universe; some confidence
-(the more the better) in God, who created and governs the world; are
-all requisite to a reasonable success on the part of Professional
-laborers. The Demand for their services, and of course also the Return
-made to them for such services, will largely depend on such superior
-knowledge and confidence acquired by such persons, and involved in
-their services. Clergymen, physicians, lawyers, statesmen, literators,
-actors, teachers, and scientific experts, may serve as our chief
-examples of Professional laborers.
-
-(a) "All that a man hath will he give for his life." When men fall
-sick, or those fall sick who are dear to them, they send for the
-doctor. Scarcely any trait of human nature is more universal than
-this. And the trait puts honor on human nature, because it implies a
-relatively high estimate of the worth of life in the mind of the
-patient, and also a relatively high confidence in a certain class of
-one's fellow-men. As Society progresses, and as Christianity deepens
-the sense of the worth of the individual life, and knits a stronger
-tie of confidence between man and man, a change is slowly coming over
-the relations between physicians and their patients; people do not
-wait to fall sick before they send for the doctor, so much as they
-formerly did; some individuals and families are establishing
-connections with a medical adviser, who studies their constitutions
-and habits of life beforehand, guides them in general sanitation, and
-thus both he and they are better ready for curatives in times of
-illness. Gladstone has long had such an attendant, with the best of
-results as he thinks, and strongly commended such action to John
-Bright, but too late to save the latter from what was thought to be
-premature death in consequence of imprudent and ill-advised handling
-of his health. In a few cases in England and the United States an
-annual salary is paid a physician for general care of the family's
-health, whether sickness befall or not, instead of the more usual fees
-on consultation and attendance. Dr. Munn of New York receives such an
-annual salary from Mr. Jay Gould. But in whatever way medical services
-are paid for, the Demand for them is constant and intense. The motive
-to buy them is immediate and personal, not mediate and remote, as in
-the case of capitalists and laborers of the second class.
-
-It is to be noticed further in respect to physicians, and indeed in
-respect to all professional laborers much more than in respect to
-other laborers, that much knowledge has been gained by them for its
-own sake, out of pure love for it, rather than for the sake of merely
-selling their services as laborers; while this does not diminish in
-the least the commercial character of their services, it tends to
-beget on the part of the buyers of them a stronger confidence in the
-men who render them, so that the Demand for such services and
-consequently the pay for them is enhanced by the trust reposed in the
-laborers on the ground of something acquired by them for other than
-selling purposes, and which indeed _cannot be sold_; and superior
-_character_ also, as well as superior knowledge, which is wholly
-_moral_ in its basis and not mercantile at all, affects the Demand for
-the services of the possessor of it to increase it, on the ground of a
-naturally stronger trust in him as a professional laborer, and at the
-same time tends to increase his Wages by limiting the circle of those
-who can offer in competition such services on the background of such
-superior knowledge and character.
-
-(b) Lawyers do not meet such a universal Demand in the nature of
-things as do physicians. Said Jonathan Smith of Lanesborough in the
-Massachusetts Convention of 1788: "We have no lawyer in our town, and
-we do well enough without." Still, one hundred years after that time
-there were about 70,000 lawyers in the United States, and Lanesborough
-itself had had in the meantime at least three distinguished ones. The
-interests of property and of reputation, and the constitutional rights
-of individuals as over against the claims of Government, so far as
-these may be conserved through the agency of lawyers, are by no means
-so constant and imperative as are the interests of life and health.
-Yet lawyers are in legitimate request in all civilized countries. A
-Latin legal maxim announces the obvious truth: _It is the interest of
-the Commonwealth that there should be an end of disputes and
-litigations._ Beyond question courts and counsel are wholesome on the
-whole for the individual and for the commonwealth. But the extremely
-complicated and unsatisfactory condition of American Law at present,
-owing to the fact that we have a none too simple United States Law
-with its three grades of courts and judges, and considerably divergent
-bodies of Law in each of 42 States, and owing also to the fact that
-our law in general is drawn almost at random from two pretty distinct
-Sources, the Common Law of England and the Civil Law of Rome,
-multiplies the number of lawyers relatively to the population out of
-all proportion to such ratio in other countries, and tends to make the
-lawyers as a class too conservative of old and drawn-out processes to
-the extent of opposing obvious betterments and simplifications. Said
-David Dudley Field, President of the American Bar Association, in
-August, 1889, at Chicago: "_So far as I am aware, there is no other
-country calling itself civilized where it takes so long to punish a
-criminal, and so many years to get a final decision between man and
-man. Truly we may say, that Justice passes through the land on leaden
-sandals. One of our most trustworthy journalists asserts that more
-murderers are hung by mobs every year than are executed in course of
-law. And yet we have, it is computed, nearly 70,000 lawyers in the
-country. The proportion of the legal element is, in France, 1:4762; in
-Germany, 1:6423; in the United States, 1:909. Now turn from the
-performers to the performance. It appears that the average length of a
-lawsuit varies very much in the different States; the greatest being
-about 6 years, and the least 1-1/2. Very few States finish a litigation
-in this shorter period. Taking all these figures together, is it any
-wonder that a cynic should say that we American lawyers talk more and
-speed less than any other equal number of men known to history?_"
-
-Mr. Field then repeated his well-known argument for Codification,
-ascribing the law's delays to the chaotic condition of the law, and
-maintaining that it is the first duty of a government to bring the
-laws to the knowledge of the People. "_You must, of course, be true to
-your clients and the courts, but you must also give speedy justice to
-your fellow-citizens, more speedy than you have yet given, and you
-must give them a chance to know their laws._"
-
-Owing to the immense difficulties in the way of any one person
-mastering the various branches of the law in this country, it is
-falling more and more into specialties, and lawyers are devoting
-themselves to some one of its many branches, the main division line
-being between "Law" and "Equity" technically so-called; and whenever
-one becomes eminent along any line, his compensation is apt to be very
-large owing at once to a large Demand and to a small Supply at that
-point, while the average compensation of the lawyers as a whole class
-is meagre enough, because there are too many of them, and the people
-have become very suspicious of the law's meshes and delays.
-
-(c) The grounds for the unabating Demand in Christian countries for
-religious teachers and preachers, let us rather say, for spiritual
-guides, lie deep down in the nature of man. If there be one
-proposition about men more incontestable than another, it may be this,
-that men are made in the image of God, and that there is among men in
-general an irrepressible striving to maintain and deepen this image.
-The touch between man and man and between man and God is such at this
-point, that men can help each other in this striving, and that they
-_feel_ that they can help each other. This is the chief reason why
-some men are constantly consecrating themselves to the Christian
-ministry, and other men as constantly soliciting these to become their
-pastors and teachers. Those more enlightened in divine things and more
-spiritually minded offer themselves, as it were, not commercially but
-morally, to the unenlightened and less advanced as guides and helpers.
-It is, as it was with Wolfe and his men at the Heights of Abraham:
-those who got first to the top tarried a little to help those up who
-came after. And the most striking thing about it is, that the masses
-of men at bottom are as desirous to be uplifted as the choicer spirits
-among them are desirous to help the work forward. Ministers are still,
-and always will be (human nature is unchangeable), eagerly called;
-chapels and churches and cathedrals are still going up all over the
-earth; worship and petition and aspiration are ever ascending on the
-great world's altar stairs towards heaven, guided and inflamed by the
-chosen and choosing men of God,--"_when priests on grand cathedral
-altars praise_!"[5]
-
-It is a monstrous perversion of language to maintain, that a clergyman
-in rendering such services as these is selling his religion. It is
-true, that he is selling under Demand services to the appropriate
-rendering of which his own personal piety contributes one large
-element, and thorough confidence in him on the part of his people as a
-good and earnest man contributes another large element; but the piety
-and the spiritual power and the worthy example are not nourished for
-the sake of selling the services, but for their own sake in personal
-worth and worthiness, and these things must not be confounded with the
-services that are sold. Accordingly, while the clergyman's vocation is
-sacred, and belongs to the sphere of religion, his salary belongs to
-the sphere of exchange, and its determination, in harmony of course
-with the higher impulses, is a business transaction. This distinction
-ought to be better understood than it is; and both clergymen and
-people need to be reminded that the spiritual things belong to one
-sphere, and the temporal things to another. The amount of a minister's
-salary, and the time and mode of its payment, are matters of pure
-business; and the minister himself is to be blamed if he does not
-attend to them, and insist on them, on business principles.
-
-In the professions generally, and particularly in the ministerial
-profession, while, if we confine our attention to those persons who
-both have the requisite gifts of Nature and have been also thoroughly
-trained, we shall find a high rate of compensation on the two grounds
-of a strong Demand and a limited Supply, we must bear in mind too the
-counter-working influences which tend to increase the competition and
-thus decrease the compensation, namely, the respectability which
-attends them, the desire of knowledge for its own sake which is gained
-in connection with them, the instruction wholly or in part
-gratuitously offered to those in course of preparation for them, and
-the desire to do good without regard to pecuniary reward which
-actuates many who enter upon them.
-
-(d) Physicians and lawyers and clergymen serve primarily individuals,
-or at most relatively small groups of individuals, and of course look
-for their pay to those whom they have served. It is different with
-Statesmen, the fourth class of professional laborers that we need to
-look at in an economic view. Statesmen worthy of the name serve at
-least a whole nation, and to the nation as such must they turn for
-their pecuniary rewards. And such men have never turned in vain to
-those whom they have benefited as a whole. Bismarck is the best modern
-instance of a Statesman, who has received from a grateful country
-immense money-measured remunerations for immense political services
-rendered. The Demand for the services of Statesmen rests in the deep
-consciousness of men organized politically into a Nation, that they
-need, especially in trying times, a Man of the highest natural gifts,
-and of the broadest attainments and of the loftiest political
-integrity to plan and act for them in emergencies, as they are
-conscious that they cannot plan and act for themselves organically.
-This does not mean, that the one ever knows essentials better than the
-many: he does not. This does not mean, that the true objective of a
-nation's march is ever discerned more clearly, or rather _felt after_
-more eagerly, by one man than by the many men concerned: it is not.
-Still less does it mean "_a man on horseback_." But it does mean this:
-a Nation (as the very name implies) is made up of the thoughts and
-hopes and throbbings and dim forecastings and half-formed purposes of
-multitudes constituting a unit (born together for one destiny on
-earth); and the true Statesman is one of themselves, sharing with them
-at once the traditions of the past and the perspectives of the future;
-one, with the instinct and the intellect to gather up and embody the
-general feeling and the general will; one, who has gained in some way
-the confidence of the masses who are willing for the time being to
-entrust to him the guidance of their affairs, and to empower him to
-plan and act for them as their champion and deliverer; and one, who
-(because he _is_ one) can better seize the propitious moments for
-declaration and negotiation and public action, yet who never forgets
-that he is nothing but an _agent_ for others, and is as ready to lay
-down responsibility at the public will as to assume it at the public
-will.
-
-Washington was such a statesman, and Lincoln. Even Bismarck, under
-monarchical and later imperial environment, disclaims anything
-substantive and original in his own action: he did what he could not
-help doing: he followed the instincts of Prussia, and his own; and
-became the means of fulfilling as they gradually ripened the longings
-of the other German people for unity and order. Such a statesman was
-Chatham in England, and Cavour in Italy. Now, such services as these,
-done for a whole people, always deserve and usually receive, though
-not expressly bargained for beforehand, yet implied in the public
-devotion of one party and the general _consensus_ of the other,
-extraordinary honors and emoluments. This is right, even on purely
-Economic principles. The services of great statesmen to their country
-in great epochs and emergencies are at once a gift and a sale, they
-are both patriotic and economic, there is equally a national Demand
-for them and a grateful recognition of them, the Supply is always
-exceedingly rare and the reward often exceedingly great; and it is to
-be put down to the lasting credit of the science of Economics, that
-its peculiar motives and results may mingle in and harmonize with the
-motives and results of the higher moral impulses, such as those of
-Patriotism and Religion, as in the cases of the Soldier and Statesman
-and Clergyman. There was no rational ground for the hesitation of
-Garibaldi to receive from the Parliament of Italy in 1875 an annual
-pension of 50,000 lire.
-
-(e) There is a single class more of Professional laborers, loosely
-so-named, which should be noted before we dismiss the subject of
-Demand for laborers to pass to consider the Supply of them, namely,
-Literators and Artists and Actors of the highest rank. Statesmen
-primarily serve the individual nation that selects and rewards them,
-though their influence may indirectly uplift other nations also; but
-the great Writers and Painters and Actors, whatever may be their local
-habitation and name at first, soon come to belong to the world at
-large and to derive their revenue from many lands, because the highest
-Art is cosmopolitan in its own nature, and the best characterization
-of men as such cannot but be the property of Mankind. Shakspeare is no
-longer English, nor Angelo Italian, nor Mozart German, nor even
-Bernhardt French. Deep as are the scars and the sea that separate
-nation from nation, there is something deeper still in the innate
-recognition by man of man as depicted by the great Masters in immortal
-lines. There is, accordingly, a sort of Demand in the inmost soul of
-Humanity as such for these living and lofty touches and delineations
-of itself, whencesoever they may come. There is not indeed nor can
-there be, as in most other cases of sale, a bargain made beforehand
-between these preordained sellers of the rarest services and their
-silent yet waiting purchasers, yet there is after all an antecedent
-and an assured understanding between them. They are in touch even
-across the sea. The master strikes his chord, and the audience, fit,
-though few and scattered, listens and applauds _and makes return_.
-
-Is the principle of "International Copyright," so-called, correct? Let
-us look narrowly before we pronounce. At present this good country of
-ours makes itself a mocking and a by-word even to its own intelligent
-and art-loving citizens by putting a tariff-tax of 30% on paintings
-and statuary by foreign artists, not at all to get revenue thereby,
-but to "protect" domestic artists in their inferior work by
-artificially lifting the price of their wares. So far is carried this
-jealousy of foreign works of art, that when the artists generously
-loan them for exhibition on our national occasions, they are put under
-bonds _not to sell them on this side_ without previously paying the
-tariff-tax, which is graciously intermitted during the Exposition.
-This is Restriction. This is Protectionism pure and simple. This is
-legally excluding the Better in order to give a forced currency to the
-Worse. Now, domestic Copyright restricts the sale of any book to one
-publisher in his interest and in that of the author. The book now in
-the reader's hand is thus copyrighted. This legal arrangement between
-authors and publishers and their public may be perhaps logically
-defended, it may even be for the public weal on the whole, though in
-many cases it doubtless raises the price of good books, which would
-have been published without any such artificial encouragement. The
-copyright, however, like all patent-rights also, soon expires by
-limitation of time, and the public thereafter have the unrestricted
-use of what is really their own.
-
-For what is sometimes called "literary property" is not property in
-the strict sense of the word. A book is not like a plough or a house.
-Its contents even when most original have been but colored, as it
-were, and rearranged and reinforced by the author's individual mind.
-Its substance always comes out of the common stock. It cannot be the
-author's own, as the bushel of wheat is the farmer's, who sowed the
-seed on his own land and threshed it in his own barn and carried it to
-market in his own wagon. The rights of the individual and the rights
-of the Community commingle more or less in private property of every
-kind, at least to the extent that the latter may tax the property if
-needful for the common wellbeing, as it is bound also legally to
-secure it to the owner when threatened by others; it is no part of the
-purpose of the present book to draw the wavering line in general
-between the rights of individuals and the rights of their Government
-as towards them; but the distinction between common property and
-copyrighted property is plain enough to everybody, and the Law puts
-emphasis on the distinction by making the one quickly terminable and
-the other continual. So then, when the Government under which the
-author resides, has given him a limited copyright within its own
-jurisdiction, it would seem as if the individual right in the premises
-had been sufficiently recognized alongside of the undoubted right of
-the Whole to the ultimate use of the labors of their own citizen.
-
-When, however, it comes to International Copyright, which is an
-attempt to secure to authors of one country artificial privileges
-under restriction in selling their wares in all other countries, the
-argument breaks down. Even for the one country, in which the author
-lives and is taxable, the argument is not very strong, and hardly
-binds advanced public opinion either as to the grounds of it or even
-the practical benefits of it on the whole. By the attempted extension
-of it to all countries, its reasonableness disappears. Taxation cannot
-extend beyond the jurisdiction of the country taxing; and it certainly
-seems as if a legal privilege, beyond common law privileges, ought not
-by extension through the formal action of other countries to exempt
-from taxation (in case it were needful) the results of the original
-privilege. The purpose of International Copyright is not the blessed
-one as announced to the world by James Smithson, "_the increase and
-diffusion of knowledge among mankind_," but directly and artificially
-by means of legal restrictions the "increase" of the prices of books
-and of other "knowledge" to the masses of "mankind," and the
-"diffusion" of these extra prices as between authors and publishers.
-Protectionism does not seem to be one whit more respectable in this
-form than in the form of tariff-taxes on foreign works of art.
-
-2. We have already seen in our first chapter the proofs of the
-proposition, that the Value of anything whatsoever bought and sold is
-determined by the Demand for it and the Supply of it then and there
-present. Also we have now seen at considerable length the main phases
-and grounds of the Demand for each of the three classes of Personal
-services bought and sold among men. The next topic in order is the
-Supply of personal services in the various markets. Here it will not
-be necessary to distinguish particularly the three classes of
-Services, inasmuch as the circumstances governing the Supply in each
-are substantially similar.
-
-In Economics generally we have to deal chiefly with Persons, and only
-subordinately with Things; when we come to the Supply of personal
-services, answering to the Demand for them on the part of other
-persons, this point becomes conspicuous; and it is here, if anywhere,
-within the realm of our science, that we need to devote a word to a
-singular doctrine, that has been famous for nearly a century under the
-term of _Malthusianism_. Thomas Robert Malthus, 1766-1836, was an
-English clergyman and teacher, a wide traveller and keen observer of
-men, one who divided his time during a long life between cure and
-chair and the libraries of the Universities, published in 1798 his
-"_Essay on the Principles of Population as it affects the Future
-Improvement of Society_"; in this and in subsequent editions enlarged
-and enriched, he brought out with its proofs the core of his startling
-pronouncement, that the human race is found to increase in numbers in
-something like geometrical progression, while the means of subsistence
-for them on any given area of agriculture can only increase in
-something like arithmetical proportion; the United States was then
-doubling its population in 25 years, and he calculated that, at this
-rate, the inhabitants of any country in five centuries would increase
-to above a million times their present number, which would give
-England in that time more than twenty million millions of people, or
-more than could even get standing-room there; for this natural
-tendency of the law of human fecundity to outstrip the results of the
-law of returns from land, he saw no remedy except in checks to
-population, which he divided into _the positive_ and _the preventive_,
-the first of which, such as war and famine and disease, increase the
-annual number of deaths; and the second of which, such as prudence in
-contracting marriage and temperance after marriage, diminish the
-number of births; and Malthus and his followers, among whom the famous
-Thomas Chalmers was prominent, were at great pains to inculcate upon
-the laboring classes the duty of later marriages and fewer children,
-as an indispensable condition of their rise in comforts, and of "the
-future improvement of Society."
-
-These discussions have attracted great attention almost to the present
-day, and have been supposed to be very pertinent to the subject of
-wages, and thus to be an important part of Political Economy; but when
-one looks more closely, the force of that spring of population which
-the Creator has coiled up in the nature of man, as contrasted with the
-weakness of that power by which the earth brings forth sustenance for
-man, is seen to be a topic in Physiology and not in Political Economy
-at all. Political Economy presupposes the existence of Persons able
-and willing to make exchanges with each other, before it even begins
-its inquiries and generalizations. How they come into existence, the
-rate of their natural increase, and the ratio of this increase to the
-increase of food, however interesting as physiological questions, have
-clearly nothing to do with our Science. Each adult human being is as
-much constituted by Nature to receive personal services as to render
-them, in Economics each without exception receives when and because he
-renders, and all alike are naturally able to become capitalists also;
-economical laws present no obstacles, that we can see, to all men
-becoming _rich_, as we use that term; the town or city in which many
-people are growing rich simultaneously, is the best place in the world
-for other people to go to get rich in, and not at all towns in which
-other people are getting poorer; most men are unwilling, some perhaps
-may be unable, to fulfil the moral conditions of growing rich; while,
-we may depend upon it, the famines of the world have been caused more
-by the indolence and want of foresight of individuals, and especially
-by the monstrous maladministrations of Governments, than by any law of
-the increase of population.
-
-Experience too has shown, that the strong impulse in mankind towards
-procreation is not too strong for the purpose intended by the Creator;
-that HE who is the author of the impulses is author also of natural
-counterworkings of them; that, as men under moral and religious
-training come more and more under the influence of reason and
-affection, the preventive checks to population come silently and
-effectually into operation; and that, taking the world at large, food
-and comforts have more than kept pace with the stride of population,
-since its inhabitants as a whole were plainly never so well fed and
-clothed and housed as now. The abstract antagonism of the law of the
-increase of population with the law of the increase of food, or what
-we prefer to call the law of diminishing returns from Land, may be
-admitted, if one chooses to insist on it; but any practical _tendency_
-of these to come into collision, as the world is and is to be, is
-confidently denied. When Malthus wrote, and long afterwards, England
-was under the dominance of Protectionism; the wretched Corn-laws
-forbidding the importations of foreign grain, in order that the
-domestic growers might sell to their countrymen at artificial prices,
-and thus grow the richer as bread became the dearer, were only
-repealed in 1846; and the demonstrated ability of Great Britain under
-free trade to draw on the fertility of the whole world for the
-steadily and increasingly cheap maintenance of her people,
-demonstrates the irrelevancy of Malthusianism to the Science of
-Economics.
-
-The Supply of personal services at any time or place in answer to the
-Demand for them, is affected by several important circumstances, which
-we shall now proceed to consider in their order.
-
-(a) The _agreeableness_ or disagreeableness of rendering a given set
-of services will affect the Supply of laborers at that point, and help
-to determine the rate of Wages paid to them; because the more
-agreeable employment will attract the larger number of laborers, will
-experience in consequence the press of competition, and the rate of
-wages then and there will be lessened thereby. The more disagreeable
-employment will feel less the pressure of numbers, and will secure,
-other things being equal, a higher rate of remuneration in
-consequence. Among the elements which, in spite of diversity of
-tastes, make any employment agreeable or disagreeable to the laborers,
-are (1) the less or greater exertion of physical strength required,
-(2) the healthfulness or unhealthfulness of the service, (3) its
-cleanliness or dirtiness, (4) the degree of liberty or confinement in
-it, (5) the safety or hazard of the employment, (6) the esteem or
-disrepute of it in public opinion. To illustrate each of these in
-order, the stone-mason, the glass-blower, the scavenger, the factory
-operative, the worker in a powder-mill, the smuggler, will each
-receive a larger compensation owing to the peculiar element of
-disagreeableness involved in his own personal service; and he will be
-able to demand and secure the higher rate through the action of this
-disagreeableness upon the Supply of such laborers. Of all these
-elements, public opinion is perhaps the most operative; and if this be
-favorable to an employment, and some social consideration be attached
-to it, and only common qualifications be required for it, the wages in
-it will infallibly be low. This is doubtless the main reason why so
-many young women prefer to teach, rather than be employed in mills or
-shops or offices, and why the wages of female teachers have been so
-remarkably low; although each of the elements of agreeableness
-specified above may also contribute something towards the same result.
-If a business be decidedly opposed to public opinion, it must hold out
-the inducement of a large reward, or nobody will engage in it. This
-explains the abnormal gains of the slave-trade, the liquor-business,
-of gambling-houses, and of lotteries.
-
-(b) The _easiness_ or difficulty of learning to render acceptably a
-given set of personal services, will have a quick and constant
-influence on the Supply of these services, and of course also on the
-rate of the return paid for them. The elements of this Difficulty in
-general are time, expense, lack of natural gifts, want of foresight on
-the part of those concerned, and lack of push and persistency on the
-part of the learner himself. To put a boy apprentice to a trade, for
-example, requires on the part of the parents a foresight, an ability
-to get on without his immediate help, and sometimes also an amount of
-money for his board and clothes which all parents do not possess; many
-boys too, who must acquire their skill to sell personal services when
-they are young, if at all, find on trial that they do not like the
-trade, or have not the requisite gifts, or fail in the appropriate
-patience and propulsion; and the consequence is, that the Supply of
-laborers along that particular line is lessened, and the right to
-demand and the ability to secure a higher rate of wages than is
-accorded to common laborers accompany the small supply, through the
-reduction of numbers which these obstacles at the entrance occasion
-and the consequent weakness of competition. This is one principal
-ground of the difference in the wages of skilled and unskilled
-laborers; the other being, as we have seen, the stronger and more
-constant Demand for the former, owing to the impulse imparted by
-Capital. All these points of difficulty at the outset apply still more
-strongly in the case of professional laborers, serving more
-effectually to thin out the ranks of these, and pushing upward still
-higher the gauge of compensation for the successful competitors.
-
-(c) The _constancy_ or inconstancy of prospective employment in a
-given business, is a consideration that affects the Supply within it,
-and then the wages. If the services be of such a character, that they
-can only be carried on during nine months of the year, the wages of
-the renderers will be greater by the day or the month than they would
-be, provided the services were in order during all the twelve months.
-The laborer is apt to look at the aggregate earnings of the year, and
-will hardly take up a trade which affords employment but a part of the
-time, unless some compensation can be found in the higher wages for
-that time. This is the chief reason why the wages of the mason and
-house-painter, in this climate at least, are higher than those of the
-blacksmith and carpenter. The coachman, also, may stand by his horses
-half the day or night with no call for his services, and must have,
-therefore, a proportionably higher fare from those whom he does
-transport. In general, it is found that men prefer a constant
-rendering with a lower rate of pay, than an inconstant one with a
-prospect of larger wages for the particular jobs actually done; and
-because the many prefer that, those who take up with the other are
-able to secure a higher relative rate of pay in their less eligible
-vocation. It must be noticed, however, as counterworking this, that
-some men have desire for intervals of leisure in their business, and
-for opportunity to make these intervals subservient to some avocation
-or other means of livelihood.
-
-(d) The _probability of success_ or the opposite in any line of
-personal services, is a circumstance that has some influence on the
-rate of wages paid in it, through the action of this probability on
-the numbers of those who enter upon it. If ultimate success be
-doubtful, fewer persons will naturally engage in such a business, and
-those who dare in it and succeed, will probably reap a very high
-reward. So, also, those who take jobs by the contract, and therein
-assume more or less of risk, are commonly paid at a higher rate for
-their services than those who do similar work by the day. It is true,
-that this is owing partly to the fact that the contractor usually puts
-in his own capital more or less, and must therefore be paid profits as
-well as wages, and also that the wages of superintendence are due to
-him in addition to ordinary wages; still, there is a residuum of
-difference, which can only be accounted for by the risk he runs of a
-successful issue of his contract. The general variation in Supply and
-wages from this fourth cause, would certainly be greater than it is,
-were it not for the overweening confidence which men in all
-generations seem to have in their own good luck. This excess of
-worldly faith is always seen in the rush which is made for newly
-discovered mining regions. It was seen to perfection in 1889 in the
-uncontrollable advance of thousands _into_, and their almost immediate
-exit _out of_, the then just opened territory of Oklahoma. The
-facility with which lottery tickets are sold even yet in many
-countries proves the prevalence of this over-confidence. It is
-demonstrable beforehand on the doctrine of Chances, that no person can
-rationally buy _any_ lottery ticket at its advertised price, because
-if that person should buy all the tickets advertised he would
-certainly lose money, since the sum of the prizes is always less than
-the sum of the prices. Otherwise the projectors of the lottery would
-always lose money.
-
-(e) The _mobility_ or immobility of laborers as a class acts powerfully
-upon the Supply of them at any one time and place, and consequently
-upon the rates of wages then and there. In some countries, notably in
-the United States, laborers as a class move from place to place with
-considerable facility under the action of Demand for personal services.
-According to the Census of 1870, 7,500,000 of the native population
-dwelt in other States than those in which they were born. Many of
-these, doubtless, had left their native region to obtain more fertile
-land, and many also to obtain more remunerative employment as laborers.
-The native American, more than most other persons, is not only willing
-to move from place to place in the hope of bettering his condition, but
-is also willing to change his occupation from time to time in the same
-hope. There is more freedom of movement locally, and less fixedness of
-occupation on the part of laborers and others, in this country than in
-any other industrial country. Even foreign immigrants here,--factory
-operatives, miners, and other laborers,--seem to catch after a while
-the spirit of the country in both these respects. There is one
-considerable advantage in all this, namely, competition becomes more
-uniform in all places, an unusual demand for laborers at any one point
-is easily met, and wages neither rise so high nor fall so low at
-special points as they otherwise would. But there are considerable
-disadvantages in all this too, chiefly these, the services of laborers
-floating locally or changing the kind of their labor can never become
-so excellent as service more _steady_ in place and time; and,
-especially, thorough apprenticeships, or whatever may be equivalent to
-these, are held in too little esteem by public opinion, and are too
-little requisite in order to obtain transient employment. To meet the
-obvious pressure of these disadvantages, an admirable device is now
-being hit on, namely, to introduce into our public schools something in
-the way of "manual training" for the various trades. Public
-institutions also, some of them on a great scale, as the Cooper Union
-in New York and a more recent munificent foundation in Philadelphia,
-have been established on purpose to train boys and girls both in eye
-and hand to render skilfully those artisan services of the various
-kinds which will always be in demand among men, and which have
-certainly deteriorated among us owing in part to the disuse of the old
-apprenticeship-system.
-
-In Europe, on the other hand, the laborers as a class are far less
-mobile than here; and in Asia still less so. There is said to be no
-country in Europe in which the proportion of foreigners to the native
-population exceeds _three per centum_. In England, which is a small
-country, the difference in Wages between the northern and southern
-counties is very remarkable. Professor Fawcett is authority for the
-statement, that an ordinary agricultural laborer in Yorkshire during
-the winter months earns 13 shillings a week, while a Wiltshire or
-Dorsetshire laborer doing similar work during the same number of hours
-earns but 9 shillings. The contrast in general between the Wages of
-English agricultural laborers and those paid in mills and mines and
-furnaces is still more striking. And so more or less, in respect to
-the Value of Commodities: competition is yet by no means perfect in
-distributing these so as to make their price uniform in the same
-country or even in the same county; but the immobility of laborers for
-an obvious reason is much greater than the immobility of goods. While
-laborers should certainly be free to go wherever their services may be
-in greater Demand, the natural reluctance of most men to leave their
-native haunts, enables each of the nations to work out its freely
-chosen ends without wholesale interference from abroad. If China
-should precipitate itself upon the United States, or India upon
-England, as the mere _economical_ impulse might indicate, it would be
-disastrous to the western nations; but men are everywhere under other
-influences besides the economical one, although this is strong and
-distinct and pervasive; Political Economy deals with men as they _are_
-all things considered, and with Buying and Selling as this actually
-takes place over the world, or rather as it would take place if
-factitious economical restraints were removed; and Providence has
-other great ends in view besides commercial prosperity, vital as that
-is to all other progress, and often holds one impulse in check by a
-stronger one.
-
-(f) _Custom_, with its cognates Prejudice and Fashion, has still a
-good deal to do with the Supply of laborers in certain departments of
-effort, and of course with the rates of wages in them. In former times
-in this country and in the older countries particularly, Custom and
-decree were dominant in determining, for example, the current fees of
-lawyers and doctors, competition coming in to decide how many such
-fees a professional laborer should get, rather than the amount of each
-particular fee. The shares of the produce going respectively to the
-agricultural tenant and to the landowner, were specially under the
-dominion of Custom; as the mode (now decadent) of taking farms "_at
-the halves_," once universally prevalent in New England, sufficiently
-shows. In certain other matters relating to land and trade, Custom has
-long been gradually hardening into express law, as, for instance, the
-famous "Ulster Right" in Ireland. Prejudice, which is only another
-name for Custom, has some voice still in adjusting rates of wages, as
-may be seen in women's wages crowded down apparently to a point
-unreasonably low as compared with the wages of men; and also in the
-rate of John Chinaman's wages in those parts of the United States
-where he ventures to offer his services in the teeth of public opinion
-and hostile legislation. It may be spoken with general truth and
-satisfaction, that competition seems now to be breaking down mere
-custom and prejudice in all directions, and may perhaps in the good
-time coming reign supreme over the economic field; while Fashion,
-which bears indeed on one side of its shield the motto "custom,"
-carries too on the other the bold word "competition," and this second
-side is likely to be presented to the public mostly in the future,
-because, they who lead the styles in any department whatsoever will
-always offer their services to Society at an advantage to themselves,
-that being one form of competition, and their rate of compensation
-will be legitimately higher than the average rate of their fellows, of
-which a good instance was the marked worldly prosperity during the
-decade of the Eighties of Worth, the man-dressmaker of Paris.
-
-(g) _Legal Restrictions_ are another cause acting on wages, by acting
-directly on the Supply of laborers. Laws inhibiting or promoting
-immigration; laws appointing the fees and salaries of officials;
-tariff-taxes, whether prohibitory or only restrictive; laws creating
-privileged classes of any kind, which is only another designation for
-laws restricting the rights of the masses; unequal modes of taxation,
-whether adopted in ignorance or by design; all have a direct and
-powerful agency upon the distribution of laborers, upon the supply of
-them at given points, and upon the rates of their wages. Governments
-are coming, however, much more freely than formerly, but never through
-their natural choice and drift as governments, only by the gradual and
-oft-disappointed compulsion of their citizens, to leave all these
-matters Economical except the wages of their own servants and those
-commodities which they choose to tax, to the simple and safe action of
-Supply and Demand.
-
-(h) _Voluntary Associations_ for that avowed purpose were a mediæval,
-and have come to be again a modern, agency in adjusting the Supply of
-laborers to their respective markets, and in regulating the wages of
-various classes of them. The Guilds of the Middle Ages, and
-particularly the old guilds of London, had a remarkable history, upon
-which we can not here even touch. Their local importance is
-sufficiently attested by the fact, that the City Hall of London is to
-this day the "Guildhall." King Edward III. humored the civic feeling
-of his time by becoming himself a member of the Guild of Armorers. "A
-seven years' apprenticeship formed the necessary prelude to full
-membership of any trade-guild. Their regulations were of the minutest
-character; the quality and value of work was rigidly prescribed, the
-hours of toil fixed from daybreak to curfew, and strict provision made
-against competition in labor. At each meeting of these guilds their
-members gathered round the Craft-box, which contained the rules of
-their Society, and stood with bared heads as it was opened. The warden
-and a quorum of guild-brothers formed a court which enforced the
-ordinances of the guild, inspected all work done by its members,
-confiscated unlawful tools or unworthy goods; and disobedience to
-their orders was punished by fines, or in the last resort by
-expulsion, which involved the loss of right to trade. A common fund
-was raised by contributions among the members, which not only provided
-for the trade objects of the guild, but sufficed to found chantries
-and masses, and set up painted windows in the church of their patron
-saint. Even at the present day the arms of the craft-guild may often
-be seen blazoned in cathedrals, side by side with those of prelates
-and kings."[6]
-
-The Trades-Unions and Brotherhoods of the present day cannot plead the
-provocations and justifications of their mediæval predecessors. It
-cannot be denied, however, that they have some provocations and
-justifications in the bad example set before them by the various
-combinations (implied or explicit) of the Wages-payers as a class. If
-the Wages-payers combine, then the Wages-takers would seem to have no
-resource but in combination. Both alike are wrong in this. Both alike
-oppose in this the spirit of Political Economy, which is ever the
-spirit of Freedom, and is ever against such factitious associations
-for such purposes, because they tend to destroy the independence of
-personal action on the part of both payers and takers of wages, and
-tend also to bring all the workmen of any one general grade down to
-one level of effort and reward.
-
-(i) Lastly, we must note the influence of _Casual Events_ upon wages,
-as these events affect the Supply of laborers. For example, in 1348, a
-terrible plague, called the Black Death, invaded England and swept
-away more than one-half of its population. "Even when the first burst
-of panic was over, the sudden rise of wages consequent on the enormous
-diminution in the supply of free labor, though accompanied by a
-corresponding rise in the price of food, rudely disturbed the course
-of industrial employments; harvests rotted on the ground, and fields
-were left untilled, not merely from scarcity of hands, but from the
-strife which now for the first time revealed itself between Capital
-and Labor" (Green). The landowners of the country districts, and the
-craftsmen of the towns, not understanding the law of Wages as an
-invariable resultant of the Demand and Supply of laborers, were
-scandalized by what seemed to them the extravagant demands of the new
-labor-class. Parliament equally ignorant with the People of the
-natural economic law, enacted as follows: "_Every man or woman of
-whatsoever condition, free or bond, able in body, and within the age
-of threescore years, and not having of his own whereof he may live,
-nor land of his own about the tillage of which he may occupy himself,
-and not serving any other, shall be bound to serve the employer who
-shall require him to do so, and shall take only the wages which were
-accustomed to be taken in the neighborhood where he is bound to serve
-two years before the plague began._" Afterwards, the runaway laborer
-was ordered by Parliamentary enactment to be branded in the forehead
-by a hot iron, and the harboring of the country serfs in the towns, in
-which under their civic rules a serf keeping himself a year and a day
-was thereafter free, was rigorously forbidden. These acts of
-Parliament, and many more of the same kind, were powerless to keep
-down wages to the old standard, but were powerful to keep up ill-blood
-and social discontent. They prepared the way for agitators like John
-Ball, for the poet-agitator Piers Ploughman, and for the great Peasant
-Revolt of 1381. John Ball's famous rhyme condensed the scorn for the
-nobles, the longing for just rule, and the resentment at oppression,
-of the peasants of that time and of all times:--
-
-    "When Adam delved and Eve span,
-    Who was then the gentleman?"
-
-A hundred years after the Black Death the wages of a common English
-laborer--we have the highest authority for the statement--commanded
-twice the amount of the necessaries of life which could have been
-obtained for the wages paid under Edward III.
-
-3. Having now seen fully the varied action of Supply and Demand upon
-the Value of personal services in their three kinds, we come at length
-to the most important general point in this chapter, namely, that in
-the second class of Services, those purchased in connection with the
-use of _Capital_, WAGES ARE ALL THE TIME ENLARGING RELATIVELY TO
-PROFITS. We have seen clearly already, that Cost of Labor and Cost of
-Capital are the only onerous elements in the cost of Commodities;
-because, while Natural Agents are all the time assisting and assisting
-more and more effectively in such production, they work without
-weariness or decay and without fee or reward. The reward of laborers
-is Wages, and the reward of capitalists is Profits; and we are now to
-demonstrate, that the part of their joint products falling to laborers
-as wages is all the while increasing as compared with the remaining
-part falling to capitalists as profits. This truth is of the deepest
-significance, and of the most cheering character; because men are more
-important in the universe than things; and because the number of men
-who sell their services as laborers is vastly greater than the number
-of men who sell their services as capitalists.
-
-It is another indisputable and exhilarating truth for the masses of
-mankind, that the Value of each item or article of those products
-created by the joint action of laborers and capitalists is ever
-becoming less and less as measured by any relatively fixed standard as
-Money; so that, while wages as thus measured becomes a larger and
-larger aggregate as compared with the aggregate of profits, and is
-shared of course by a much larger number of people, those commodities
-looked at as a collection of items for which the wages of these many
-is usually expended for their own comforts, are becoming all the time
-cheaper and cheaper to everybody, owing to the ever-enlarging and
-wholly gratuitous action of natural forces.
-
-For the sake of simplicity in the argument on this great point, we
-will first look at what the facts are through recent illustrations
-gathered by other parties for a wholly different purpose, and then
-give in detail the economical grounds for these patent and universal
-facts. Take for example, from Poor's Railroad Manual for 1889 a table
-showing in a graphic way the steady reduction in freight charges per
-ton per mile from 1865 to 1888 of seven representative Eastern trunk
-railroad lines, namely, the Pennsylvania, Fort Wayne and Chicago, New
-York Central, Michigan Central, Lake Shore, Boston and Albany, and
-Lake Erie and Western; and of six leading Western roads, namely, the
-Illinois Central, St. Paul, Burlington and Quincy, Chicago and
-Northwestern, Rock Island, and Chicago and Alton. The following are
-the figures:--
-
-  RATE CHARGES PER TON PER MILE (IN CENTS).
-
-  +------+----------+----------++------+----------+----------+
-  | Year.| Eastern. | Western. || Year.| Eastern. | Western. |
-  +------+----------+----------++------+----------+----------+
-  | 1865 |   2.900  |   3.642  || 1877 |    .971  |   1.664  |
-  | 1866 |   2.503  |   3.459  || 1878 |    .898  |   1.476  |
-  | 1867 |   2.305  |   3.175  || 1879 |    .764  |   1.279  |
-  | 1868 |   2.132  |   3.151  || 1880 |    .869  |   1.389  |
-  | 1869 |   1.860  |   3.026  || 1881 |    .763  |   1.405  |
-  | 1870 |   1.593  |   2.423  || 1882 |    .756  |   1.364  |
-  | 1871 |   1.478  |   2.509  || 1883 |    .829  |   1.310  |
-  | 1872 |   1.504  |   2.324  || 1884 |    .740  |   1.220  |
-  | 1873 |   1.476  |   2.188  || 1885 |    .636  |   1.158  |
-  | 1874 |   1.332  |   2.160  || 1886 |    .711  |   1.111  |
-  | 1875 |   1.161  |   1.979  || 1887 |    .718  |   1.014  |
-  | 1876 |    .985  |   1.877  || 1888 |    .609  |    .934  |
-  +------+----------+----------++------+----------+----------+
-
-This reduction of rates in the case of the group of Eastern roads has
-amounted to 79 _per centum_, and in the Western group to 73 _per
-centum_, in the twenty-four years. Not less remarkable than the extent
-of this decline in freight charges per mile is its uniformity. Both
-groups show a wonderful steadiness in the progress of rate reductions.
-Starting at quite different points as to territorial development, they
-have yet travelled at a nearly equal pace in the same direction. This
-shows the operation of causes at once steady and universal. Statistics
-can never of themselves yield us _causes_; but they guide the way to
-them; at any rate, they prevent any radical misinterpretation of them.
-The great and overshadowing cause here of the cheaper freights per
-ton, as everywhere else of cheaper rates at the junction of efforts
-by capitalists and laborers, is of course the perpetual and augmenting
-and ever-gratuitous assistance of natural forces at every point.
-
-While the rates of freight per ton have decreased more than
-three-quarters in less than one-quarter of a century in the case of
-these 13 railroads on the whole average, the entire cost of the
-operation of these roads in this interval of time has not been
-diminished to any appreciable extent, as also stated by the same
-Manual. The main item in all the operation-expenses of railroads is
-the wages paid to the laborers of all grades; and the laborers are
-quite as well paid now on these 13 roads as they were in 1865, proper
-allowances being made for the changed and changing standards in the
-national Money. If, on a broad view, railroad employees of all grades
-have lost nothing as such in their wages in this interval; and the
-general public, including these laborers and also the capitalists
-concerned, have greatly gained, how can we account for the immensely
-lessened freight-charges while the whole operation-expenses continue
-substantially as before?
-
-There is only one rational account to be given of this. And it is
-trustworthy. All known facts jump with it, and nothing substantial can
-be urged against it. The gains to the masses including the capitalists
-and the laborers _have come out of the capitalists as such_. This is
-apparent as well as real. Cost of Labor and Cost of Capital is the
-whole cost. If the whole cost of moving one ton of freight from Boston
-to Chicago is 3/4 less than it was 1/4 of a century ago, the cost of
-the labor being the same at the two points of time, then the
-conclusion is inevitable, that the _cost of the capital_ at the second
-point is less than it was at the first point. With this conclusion all
-facts agree. All the laborers connected with a railroad from highest
-to lowest must be paid at any rate, or else the trains will certainly
-cease to move, whether the stockholders receive any dividend or not on
-their capital invested. The original _stock_--the capital that built
-the roads--of many if not of most the railroads in the country, has
-been annihilated, a new indebtedness in another form called _bonds_
-having taken the place of it. Even the nominal dividends of
-dividend-paying roads have declined in the interval from 10 or 8 to 5
-or 4 _per centum_ in the general, that is, 50 _per centum_. It is
-perfectly evident on every hand, that there is something in the nature
-and progress of things, that makes for wages as contrasted with
-profits: wages hold on and relatively enlarge, profits decline or go
-out altogether.
-
-Fortunately we are not left to generalities here, however plain and
-certain these may be. One of the 13 railroads specified above, the
-Illinois Central, made a remarkable exhibit in its own annual Report
-of 1887, showing the cost of its locomotive service for each year of
-the thirty years preceding. This cost per mile run had fallen from
-26.52 cents in 1857 to 13.93 cents in 1886. This reduction had been
-effected wholly on the _Capital_ side of the account, by inventions
-and improvements of all sorts in the _machinery_ of locomotion; while
-the wages of the engineers and firemen had risen in the period from
-4.51 cents to 5.52 cents per mile run. The cost of the labor had risen
-both relatively and absolutely while the cost of the capital had
-declined both absolutely and relatively. In 1857 the engineers and
-firemen had received as wages 17% of the entire cost of the locomotive
-service, but in 1886 they had received 39% of that total cost. The
-table is as follows:--
-
-  I. C. R. R. CO.
-
-  PERFORMANCE OF LOCOMOTIVES. RELATION OF WAGES TO TOTAL COST PER MILE
-  RUN.
-
-  ------------------------------------------------------------------------
-        | Cost of wages  | Total cost||      |  Cost of wages  |Total cost
-  Years.|  of engineers  |    per    ||Years.|   of engineers  |   per
-        |and firemen per | mile run. ||      | and firemen per |mile run.
-        |   mile run.    |           ||      |    mile run.    |
-  ------+----------------+-----------++------+-----------------+----------
-        |         Cents. |   Cents.  ||      |          Cents. | Cents.
-  1857  |Gold.    { 4.51 |    26.22  || 1872 |Currency. { 5.77 |  21.76
-  1858  |         { 3.97 |    19.81  || 1873 |          { 5.84 |  21.10
-  1859  |         { 3.81 |    20.78  || 1874 |          { 6.02 |  19.57
-  1860  |         { 3.96 |    20.17  || 1875 |          { 6.03 |  19.57
-  1861  |         { 3.84 |    18.92  || 1876 |          { 5.79 |  18.81
-  1862  |Currency.{ 3.85 |    17.42  || 1877 |          { 5.54 |  17.21
-  1863  |         { 3.93 |    22.28  || 1878 |          { 5.46 |  15.29
-  1864  |         { 5.56 |    33.52  || 1879 |Gold.     { 5.41 |  14.15
-  1865  |         { 5.65 |    37.44  || 1880 |          { 5.41 |  14.95
-  1866  |         { 5.78 |    32.67  || 1881 |          { 5.54 |  16.58
-  1867  |         { 6.18 |    29.62  || 1882 |          { 5.09 |  15.82
-  1868  |         { 6.11 |    27.57  || 1883 |          { 5.35 |  15.57
-  1869  |         { 5.88 |    25.49  || 1884 |          { 5.28 |  14.45
-  1870  |         { 5.95 |    25.15  || 1885 |          { 5.49 |  15.02
-  1871  |         { 5.72 |    21.50  || 1886 |          { 5.52 |  13.93
-  -----------------------------------------------------------------------
-
-    In 1857 the engineers and firemen received 17-201/1000 per cent. of
-    total cost.
-
-    In 1865 the engineers and firemen received 15-91/1000 per cent. of
-    total cost.
-
-    In 1867 the engineers and firemen received 20-865/1000 per cent. of
-    total cost.
-
-    In 1886 the engineers and firemen received 39-627/1000 per cent. of
-    total cost.
-
-These illustrations from the railroads are plainly indicative of a
-general truth of the utmost importance in Political Economy, namely,
-_that all increase of Capital and all inventions and improvements in
-its practical application, while it redounds to the benefit of
-capitalists as a class, redounds in a still higher degree to the
-benefit of laborers as a class_. Let us now attend for a moment to the
-convincing Proof of this truth in two phases of such proof, and also
-to a cheering conclusion that follows it.
-
-(a) As any country grows older in time and richer through abstinence,
-and as the whole world thus grows older and richer, the tendency
-there and everywhere towards a general decline in the rate _per
-centum_ for the use of capital becomes patent and universal. The rate
-of interest on money loaned, and the rate of profits on capital used,
-tend all the while to go down as and because capital accumulates. No
-one will dispute this as a simple fact of history. And no economist
-will dispute, that this is just what we might expect beforehand as a
-corollary from the admitted proposition, that, other things being
-equal, an increased Supply of anything means a lessened Value for any
-specific part of it. Three centuries ago in England the legal rate of
-interest was 10%, while now the current rate is about 4% in that
-country, and has been considerably lower than that in Holland,
-although in both countries and everywhere else there are temporary
-interruptions and reactions in the constant tendency now being
-considered. During the first years of mining operations in California,
-from 8% to 15% per month with security of real estate was paid for the
-use of money, which enormous rates long ago declined to rates not much
-higher than those paid in the States along the Mississippi River, and
-in these also the rates are all the while approximating those current
-in the older Eastern States, whose own rates too are slowly declining.
-But, while there is a less rate of profit or interest on each 100
-invested, there are many more hundreds capitalized; consequently,
-there is an absolute gain to capitalists as a class, at once in the
-aggregate amount of the capital and in the aggregate sum of the
-profits from it, since no capitalist would have a motive to capitalize
-further under the smaller rates of profit, unless the aggregate of
-profits under the new conditions were greater than under the old
-condition of higher rates; and, as much of this accumulating capital
-in order to become productive must now be offered to laborers in the
-form of wages, we might almost pronounce beforehand, that it would
-prove both an absolute and also a _relative_ gain to laborers as a
-class. And so it is.
-
-(b) Let us take to figures. An hypothesis or supposed case, whenever
-it may easily become an overt fact, may be reasoned from just as
-logically and securely as the overt fact itself. Let $100,000,000,
-while the rate of profit is 6%, and $500,000,000, when the rate has
-fallen to 4%, be expended in payment of simple wages. So far forth as
-that one element of cost goes, the value of the products to be divided
-yearly between capitalists and laborers will become respectively
-$106,000,000 and $520,000,000. In the first case, $6,000,000 is
-profits and $100,000,000 is wages; in the second case, $20,000,000 is
-profits and $500,000,000 is wages. Here is an absolute gain to the
-capitalists, since profits have gone up from $6,000,000 to
-$20,000,000, and so are more than _three_ times as great as before.
-But wages have gone up both absolutely and relatively to the rise of
-profits. They have risen from $100,000,000 to $500,000,000, and are
-_five_ times as great as before. Profits have risen as in the ratio
-1:3+, but wages in the ratio of 1:5. This arithmetical example is put
-for the sake of illustration merely, but the principle of it holds
-good in every case, in which the rate _per centum_ goes down in
-consequence of the increase of capital in business; and, therefore,
-the advantages of ever-enlarging Capital are even greater to laborers
-as a class than to the capitalists themselves. Most assuredly, if the
-capitalists take less out of each hundred of the swelling hundreds now
-than before, the laborers must take more out of each hundred than
-before. Profits and Wages are reciprocally the _leavings_ of each
-other, because the aggregate products created by the joint agency of
-Capitalist and Laborer are wholly to be divided between the two. There
-can be no other _claimant_ even.
-
-(c) This demonstration is extremely important in Political Economy,
-and consequently in Social Life; for it proves beyond the possibility
-of a cavil, the Value of personal services tends constantly to rise,
-not only as compared with the Value of the material commodities which
-by the aid of capital they help to create (a truth we have seen
-before), but also as compared with the Value of the use of its
-co-partner capital itself; and therefore, that there is inwrought into
-the very substance of things in this world a tendency towards an
-equality of economical condition among men. God has ordered it, and
-men cannot radically alter it. Self-interest is indeed the mainspring
-of movement in the economic world; but the beauty of it and the wonder
-of it is, that no man can labor intelligently and productively under
-the influence of self-interest without at the same time benefiting the
-masses of men. His fair exchanges benefit the parties of the other
-part as much as they benefit himself. His very savings productively
-employed are poor men's livings. Only under the blessed freedom of
-universal Buying and Selling, subject only to the taxation of a good
-Government for public purposes purely, can these broad benefits
-designed by a wise Providence be fully realized in action; and the
-power of individual greed and corporate privilege and governmental
-perversion to thwart the beneficent though complicated workings of
-these laws of Capital and Labor towards the common weal and universal
-progress of mankind is shortlived and soon punished.
-
-4. How comes it about, then, if these laws of mutual inter-dependence
-between capitalists and laborers are so well-placed and Providentially
-balanced, that there always have been and are still so many
-misunderstandings and ill-feelings and actual collisions between
-employers and skilled laborers, whose interests are at bottom one and
-whose relations ought to be so cordial? This is the last topic in our
-Chapter on Personal Services. Here we must look around narrowly and
-tread carefully. But there is a path. We can find it if we will. It
-leads through many short-comings in men's characters and through much
-ignorance of plain economical truths and past unreasoning jealousies
-and aggregated action on the part of both classes, and over the
-needful distinctions between impulsive selfishness and a true
-self-interest back to the same old laws of God laid down at once in
-the constitution of things and in the constitution of men.
-
-Labor-troubles are almost as old as Civilization. The Greek poet
-Euripides in his play of the "Supplicants" both indicates facts as
-they were then, and points out a future hope in which we may share,
-that these middle classes by a better harmony preordained and mutually
-beneficial may yet "save the State":--
-
-                                  "In each State
-    Are marked three classes: of the public good
-    The rich are listless, all their thoughts to more
-    Aspiring; they that struggle with their wants,
-    Short of the means of life, are clamorous, rude,
-    To envy much addicted, 'gainst the rich
-    Aiming their bitter shafts, and led away
-    By the false glosses of their wily leaders.
-    'Twixt these extremes there are who save the State,
-    Guardians of order, and their country's laws."
-
-At Rome and in the Roman Empire, instead of the usual voluntary union
-of capitalists and laborers for the mutual advantage of each other,
-the laborer was owned by the capitalist, and the true relations
-between the two were thoroughly disguised and wretchedly distorted.
-Business in all its branches came to be carried on by means of slaves;
-the lands were tilled by slaves; slaves became the artisans of the
-country; the money-lenders and bankers of the centre scattered
-branch-banks in the towns under the direction of their slaves and
-freedmen; the Company that leased on speculation the Customs-Taxes
-from the State had their slaves and freedmen levy these taxes at each
-custom-house; the contractor for buildings bought architect-slaves;
-and the merchant imported his goods in ships of his own manned by his
-slaves or freedmen, and then sold the same at wholesale or retail by
-the same means. In this way a gigantic system of unnatural traffic was
-built up and extended. In this way the very name "laborer" became
-tainted by the vile system of slavery of which he was a part, and the
-distinction itself between capitalist and laborer was obliterated.
-"Roman mercantile transactions fully kept pace with the contemporary
-development of political power, and were no less grand of their kind."
-"The Roman _denarius_ followed up closely the Roman legions." "It is
-very possible that, compared with the suffering of the Roman slaves,
-the sum of all negro suffering is but a drop" (Mommsen).
-
-We want now to examine critically the CAUSES of these constantly
-recurring labor-troubles, the true economical REMEDIES for them, and
-in connection with these the futility of the remedies popularly
-recommended for low Wages and the disputes between employers and
-employed of the second class.
-
-(1) There is an extremely common misapprehension on the part of both
-labor-givers and labor-takers as to the real _nature_ of the
-transaction between them. Both parties forget, or rather neither party
-is ever fully instructed, that it is a case of pure Buying and
-Selling. There is never any _obligation_ of the moral sort between
-buyers and sellers. The relation itself is purely economical. Moral
-considerations indeed cover this relation from above, just as they
-cover all other relations between man and man in human Society; and
-any two individuals standing over against one another as buyer and
-seller, also stand over against each other in higher and broader
-relations as man and man; but it works confusion and mischief as
-between both, whenever relations differing in their nature and
-operation and reward are not separated from each other in the mind of
-each relator, and whenever each does not act in the particular
-relation according to the nature and rules of that relation alone.
-When A hires B to work in his factory, this new relation is economical
-not moral; there were moral relations between the two before this
-relation was knit, and will be again after this has been broken, and
-indeed are while this continues; but the economical relation is one
-thing, and the others a very different thing; they are so different,
-that they cannot be blended in mind or motive to any advantage to
-either individual or to either set of relations; and any degree of
-confusion as between the relations has always wrought mischief as
-between the individuals, because instead of seeing either set of
-relations in its own clear light, they now see both in a commingled
-twilight.
-
-What is the economical relation? This. A desires the personal service
-of B in his factory purely for his pecuniary benefit, and assumes his
-own ability to make all the calculations requisite for determining how
-much he can (profitably to himself) offer B for his service; and B,
-who knows all about his own skill, how it was acquired and how much it
-has cost, wants to sell his service to A for the sake of the pecuniary
-return or wages. There is no obligation resting upon either. Man to
-man, each in his own right. There is no benevolence in the heart of
-either, so far as this matter goes. Benevolence is now an
-impertinence. It is a question of honest gain in broad daylight.
-Benevolence is blessed in its own sphere, but there is no call for it
-here and now. If it comes in an unbidden guest, it comes in to mar and
-to distort. It is an incongruity. "_I never knew a Jew converted but
-it spoilt him_," was the word of one deeply versed in human nature and
-in Christian experience. Conversion is good, and its field is broad;
-but the Jew _as such_ is incongruous with it. Good is benevolence and
-wide its field, but Buying and Selling does not need it. Its own
-motives are independent of it, and sufficient without it.
-
-A clouded understanding of this vital distinction has always played
-its part in Labor-troubles. Buyers and Sellers of personal services
-are always on a plane of perfect equality as such exchangers, and no
-one can be more independent than either of them except the hermit in
-his cell. Which must look out for the interest of the other beyond the
-terms implied in the trade itself? Which is the superior party? Which
-should take off his hat, the other remaining covered? The truth is,
-and all experience and all analysis brings us up abreast of it, that
-the two parties to a trade of any kind stand on a footing of absolute
-equality towards each other then and there in the economical relation
-about to be knit, and any conception in the mind of either that he has
-the other "at his mercy" in either the good or bad sense of that
-phrase, disturbs and destroys the proper conditions and balances of
-the exchange in hand; and, what is more to the point, it implies that
-each party has _not_ all he can do to fulfil in the letter and in the
-spirit what is always implied in the terms of a trade deliberately
-entered upon by two parties. When B agrees to work for A at skilled
-labor in his factory for a year at $15 per week, he makes a good deal
-of a contract; and virtually pledges to A not only the motions of his
-hands for that period of time, but also the vigorous attention of his
-mind to that service and to the general interests of his employer so
-far as these come under his own eye and supervision. Nor is this all:
-he virtually pledges himself to B to coöperate with the least possible
-friction in all plans for betterment in his division of the work, and
-to cordially coalesce with all other employees for the general ends of
-the business without too much of self-assertion and without too little
-of courtesy to others. To fulfil this contract in all its spirit
-rounds up the circle of B's economical obligations to A. He will
-practically have all he can do, so far as A is concerned, and in
-consistency with all his various duties to others, to make good to him
-at all points his simple business pledges. Benevolence, the interests
-of a common citizenship, and the reciprocal ties of religion, lie
-wholly outside.
-
-A will practically have all he can do, so far as B is concerned, to
-fulfil in the letter and in the spirit his economical obligations to
-him, without troubling himself to see whether B is going to vote the
-same party ticket that he himself votes, and without confounding
-either B's poverty or prosperity with his own obligation to be polite
-to him at all times and to pay him promptly his weekly stipend. So
-long as B renders in letter and in spirit what he has agreed to
-render, and A returns in the same way what he has promised to return,
-the less either thinks and talks and acts about the other in all the
-other relations of life, the better hope of good success to both in
-this relation. Church relations and social relations and political
-relations are all of consequence in themselves; but when any of these
-begin to get mixed up with labor-relations, there is soon a muss and a
-mess. Incongruous things, things no way vitally connected with that,
-often come in to disturb and destroy a simple matter of mutual
-renderings.
-
-(a) The first practical remedy for difficulties arising under this
-first head, is a clearer separation in the mind of both parties to a
-trade of what really belongs to Buying and Selling from what belongs
-to all other departments of activity. More common sense is needed at
-this point, more simple analysis, more daylight, more personal
-independence, more introspection as to motives, more power in making
-distinctions, and a more practical separation of what is clear and
-fixed from what is complex and obscure in human relations. Metaphysics
-may yet lie in cloud-land, Ethics may not yet have drawn its outer and
-interior lines so strong and deep as it will, Sociology also is a vast
-field of complexities, but truth to tell Economics has no mysteries to
-speak of. I buy and sell for my own advantage, which proves in the
-nature of things to be for the equal advantage of my compeer. It is my
-business and my compeer's business and every other man's business who
-buys and sells, to pick that action out in its motive and result from
-the great mass of dubious actions, and to set it up in its own light,
-to rejoice in it as the clearest thing in social action, to claim it
-as God's own plan so far forth for our comfort and progress, and then
-to see to it that no preposterous hand mixes it up with perplexities
-or theologies or other abominations--muddying with a tentative pole
-the stream of our clear brook! In this country at least, in its
-ignorance of common things and common science, the pulpit often
-fulminates against the gains of exchange as "materialism," and mixes
-up buying and selling with "worldliness," and only half permits its
-deluded hearers the privileges of the market, and illustrates again in
-modern times such teaching as is denounced to St. Timothy,--"_some
-swerving turned aside to vain babbling, desiring to be teachers of the
-Law, understanding neither what they say, nor whereof they affirm_."
-"Let every shoemaker stick to his last." Those who have looked into
-it with any care have found, that Exchange in all its natural
-outgoings is not answerable to these pulpit charges, nor is contrary
-to the letter or spirit of the biblical precepts, but on the other
-hand is in full harmony with the claims of Conscience and with all the
-inbreathings and aspirations of Christianity.
-
-(b) The second practical remedy for the labor-difficulties arising
-from the want of thorough understanding by both parties of the real
-nature of hired renderings of the second class, is fair _common
-honesty_. More of an easily accessible intelligence, more of
-penetration and separation as to social relations in general, meets
-the first point; but quite as needful as this simple intellectual
-process, is the still simpler moral habit of doing just what one has
-agreed to do, without evasions and without diminutions. Labor
-difficulties take their origin more often, perhaps, in some clouded
-moral action of one of the parties, than in a clouded mental
-apprehension. Men are too conscious as men of their own temptations,
-to be lax in their pledged renderings and of their own shortcomings at
-this point, not to be suspicious of each other as buyers and sellers,
-for fear the party of the other part is about to withdraw something
-either in quantity or quality of what he has promised to render; there
-is almost always something or other to give color to such a suspicion,
-and it grows by what it feeds on; frank explanations are not had at
-the outset, and a good understanding is not come to, as it doubtless
-might be in nine cases out of ten; and the little cloud, at first no
-bigger than a man's hand, by and by becomes black and threatening, and
-bursts at last in a strike or lock-out of large proportions. An open
-honesty that is such and seems such, that is not beyond the aim and
-reach of common men, that is taught in scores of forms in "Poor
-Richard's Almanack," and that each man ever likes to meet with and so
-ought ever to put forth, is in fact a preventive of conflicts between
-laborers and employers, and would if properly manifested have
-prevented multitudes of such actual conflicts. Here is the main,
-almost the sole, point of contact between strict Ethics and the
-Economics. What buyers and sellers, that is to say, the whole
-practical world, needs, is not disquisitions on Morals from Press or
-Pulpit, but an inner ear to hear the true click of Conscience, and the
-quick and open answer in honest action.
-
-(2) A second general cause of the Labor-troubles of the past and
-present has been a strong tendency to neglect the special
-_preparation_ for their peculiar functions by both capitalists and
-laborers. A successful employer of laborers year in and year out to
-their advantage and his own is always one who has been _trained_ to
-that function by special preparations. He is a living man with all the
-limitations of living men: he has to deal with many living men with
-all their imperfections: he has to deal also, and constantly, with
-what is in its own nature dead, namely, Capital, always either a
-commodity or a claim: to animate and invigorate these dead forms of
-value, to put them into vital connection with living men who shall
-enhance their value, and thus to become a leader to living men as
-towards swelling interests, demands unusual native gifts and a special
-long-continued training. When one looks from without upon such an
-establishment as this in full action, it seems automatic, it seems as
-if almost anybody with a clear head could continue to direct it; and
-when this "captain of industry" departs this life, perhaps his son or
-some previous subordinate, without the proper gifts and at least
-without the peculiar training, assumes the post of direction. For a
-little everything seems to go on as before. As sure as fate, however,
-a friction will soon develop here, and a misunderstanding there,
-there will be whisperings among the men, some breath of suspicion will
-be likely to cloud the borrowing-power, opening difficulties of any
-kind such as loss of credit or a weakening of the usual markets are
-apt to throw a new operator more or less off his base, and gathering
-labor-troubles of any sort commonly find such a man unprepared for
-lack of suitable training and experience to ward them off or to make
-timely concessions to the men or to minimize the evil results when
-these become inevitable.
-
-Also labor-troubles are quite as likely to arise from the want of
-character and training and considerateness of the employees towards
-the capitalists. The relations are reciprocal and they are also in
-their very nature delicate. One poor workman however good his
-disposition, one unfaithful overseer no matter how great his possible
-skill, may mar the current product in such a way as to lose it the
-market and cost the establishment the present profit. The strength of
-a chain is the strength of its weakest link. It is a matter of immense
-difficulty at any time, and emphatically so at the present time to
-organize a working force in factory from top to bottom so as to have
-it go forward as a unit as towards the marketing of the product,
-without bad workmanship at some point and unskilful supervision at
-another; because the laborers as a rule have not given themselves time
-to learn thoroughly their special parts, because they are not content
-to remain steady at one thing and at one place, and because they do
-not practically recognize even if they perceive it that their own
-permanent interests are exactly coincident with the permanent
-interests of their employers. Just now in this country the public Law
-robs the manufacturers (at their own behest) of their best markets at
-home and abroad, makes it difficult or impossible for them through
-wanton taxation of their raw materials to create a good quality of
-goods for any market, and so multiplies frictions and failures and
-losses along the whole line of production. The lack of what may be
-called Apprenticeship on the part of skilled laborers, the consequent
-difficulty of rising from one gradation of effort to a higher and
-better-paid one, the restlessness of native laborers under such
-disabilities, the rapid admixture of foreigners, the lack of coherence
-throughout in point of intelligence and apparent identity of
-interests, together with the instability and haphazardness of the
-resources and personal training of the employers as a class, gives
-birth to Labor-troubles which are at the same time Capital-troubles,
-to read the daily record of which makes one sick at heart.
-
-(a) The only possible and practicable remedy for this state of things,
-so far as the employers are concerned, is in a more conservative
-attitude of capitalists as a class about passing over their resources
-to the hands of men who have not proven their ability to handle them
-wisely by a full course of training in the management of practical
-affairs. By a wretched policy in this country at present Capital is
-prohibited from building and from buying ships, with which to navigate
-the oceans; from selling domestic manufactures in foreign markets; and
-also from a profitable agriculture, which may sell its products abroad
-and take its pay back. Consequently Capital, eager in its own nature
-to be invested to a profit somehow somewhere, has rushed without due
-circumspection into the hands of domestic operators, who have not been
-half fitted for their task, who have knitted relations with laborers
-without being able to secure their permanent respect or to control
-their services, and who have lost to their owners in multitudes of
-cases the entire capital intrusted to them. If capitalists had had
-during the last quarter of a century one-half of their natural and
-proper chance to invest their money to a profit, there would not have
-been such a reckless investment through incompetent hands in building
-mills and foundries in this interval of time, and such wholesale
-losses in connection with them. When capital comes to be at liberty to
-turn right or left according to its own will in view of a prospective
-profit, factory companies and projectors cannot draw resources from
-the public for their operations, without demonstrating to the owners
-the trained and tried capacity of the practical operators, who will
-buy the materials and hire the laborers and market the products.
-
-(b) The practical remedy for the inexperience and instability and
-unskilfulness of laborers as tending towards labor-troubles of all
-kinds and degrees, is only to be found in a want of market for such
-services. In a natural and wholesome state of things, such as would
-exist in the United States were it not for national laws tampering
-with Trade and with Money, the questions asked an applicant for
-skilled work by any labor-taker would be, "_What have you learned to
-do? How long and for what pay do you want to do it? What do you want
-to reach next, when the present job is done?_" When employment turns
-on good answers to such questions as these, and when the questions
-themselves are put in good faith, there will be an end of Strikes and
-Lockouts. Untrained and restless hands will get nothing to do in mills
-and factories. Apprenticeship in its various forms will come back into
-vogue, and will probably be made a part of the course in public
-schools. The division and gradation of laborers will be carried out
-further than it ever yet has been. Laborers will then be _organized_
-in the best sense of that word, and to the best advantage of
-capitalists. The permanent Supply of skilled laborers will be
-constantly adjusting itself to a permanent and increasing Demand for
-them. And it requires no millennium for such a state of things to
-come in. It requires nothing but an ordinary and enlightened and
-beneficent selfishness on the part of capitalists to adjust itself to
-the ordinary selfishness of laborers sure to become enlightened and
-beneficent to the best and ever-growing interests of both parties.
-This is not the spoken word of Morality, still less is it the divine
-word of Religion, it is only the common programme of a common-sense
-Political Economy.
-
-(3) The third and last general cause of misunderstandings and
-embittered disputes as between laborers and capitalists is partly
-economical and partly moral, and consequently the remedy for it is
-partly moral and partly economical. The Past projects itself down into
-the Present partly with blessings and partly with curses. In the old
-times under Slavery and Feudalism the laborer always came forward to
-his task with a taint upon him. Sometimes the taint attached to his
-birth, and at all times it attached to his calling. Slavery in all its
-forms always makes manual labor degrading. The courtly Cicero
-_apologizes_ in a letter to his friend for his open sorrow over the
-death of his favorite slave; and in several passages of his treatise
-on Morals he follows his Greek teachers, Plato and Aristotle, and
-declaims in a pitiful way against the noble rights of laborers. "_All
-artisans are engaged in a degrading profession._" Again, "_there can
-be nothing ingenuous in a workshop_." When trade and commerce are
-carried on on a small scale, "_they are to be regarded as
-disgraceful_"; when on a large scale, "_they must not be greatly
-condemned--non admodum vituperanda_!" (I, 42.)
-
-Serfdom once existed in England, and threw its shade over free
-laborers there long after itself had disappeared. A class of indented
-servants pervaded all the New England Colonies, and a clause of the
-New England Confederation of 1643 provided for their forced rendition
-from Colony to Colony, and passed over almost verbally into the
-Constitution of the United States of 1787 as applicable to the slaves
-of the South. In this way in all parts of this country manual laborers
-came to be more or less off color, and this has continued in a
-continually lessened degree till this time. When those who work with
-their hands are looked down upon by those who do not, two sets of
-feelings are apt to be engendered equally unfortunate to the two
-classes that entertain them. The non-manual workers, the employers,
-are more or less puffed up with pride and a sense of superiority
-(there are beautiful exceptions) as towards their laborers, and the
-latter in their turn are apt to develop alongside an unmanly servility
-and an apparent deference, a sort of secret breasting up of hostility
-and defiance, which is sure to manifest itself when labor troubles
-come on even when it has not helped to brood these troubles into life.
-The parties then are not well placed as towards each other to
-negotiate and to compromise and to coalesce in a future harmony. The
-party of the first part is too proud to yield to their inferiors, and
-the party of the second part is too bitter to be sweetened. Who is
-sufficient for these things? And what is the remedy for them?
-
-(a) So far as employers are concerned, their natural though
-unreasonable and provoking arrogance may well be reduced by the
-economical reflection, that the laborers are exactly as necessary to
-production as the capitalists are, that the two stand on a precise
-level so far as the product goes, that each is one blade of the shears
-and the other the other and that it takes both blades to cut anything,
-that while the laborers are sellers in the open market the capitalists
-are likewise sellers and that the same ultimate purchaser furnishes
-the market for both sets of sellers, that as sellers they are only
-equal in position, that buying and selling is a levelling as well as
-an uplifting process the world over, and that as such co-equal
-partners in one indivisible operation all haughtiness on one side and
-all undue humility on the other is nothing but obstacle as towards the
-common end; and also by the moral and social reflection, that their
-laborers are just such men as themselves in motive and action, that
-the two are very likely to exchange places with each other before very
-long, that riches are extremely liable to take to themselves wings and
-fly away, that Christianity is no respecter of persons, that humanity
-deems nothing human alien from itself, that morality puts the golden
-rule upon the fore-front of its precepts, and that whatever may unite
-any body of men in a legitimate purpose of achievement along any line
-of human action multiplies the power of each individual and exalts his
-standing and responsibility as such individual and thus reduplicates
-the reward of his individual action.
-
-(b) So far as the employees are concerned, in any temporary sense of
-dependence or even of injustice, there is open to them the economical
-reflection (and it will do them good to bring it home) that their best
-route to the respect and favor and feeling of equality of their
-employers is through the excellence of the service they render them
-and the courtesy (not servility) with which they render it, that as
-every capitalist becomes such by means of abstinence they may
-themselves by saving become capitalists, that there is nothing in the
-nature of their work or its relations to capital to cause them to hang
-down their heads, that handsome is that handsome does, that the
-opportune offer of the present capital to work on gives them a chance
-to exhibit their skill and to earn a living, that the capitalists are
-just as dependent on them as they upon those, and that as single
-sellers of a valuable personal service they daily confront on a
-footing of equality the sellers of a valuable product so created; and
-there is open to them also the moral and social reflection fortified
-by constant observation and experience, that no matter where a man
-begins it is the end that crowns his work, that life to all is a
-series of stepping-stones, that manly qualities are appreciated
-everywhere, that character tells in the lowest position however high
-and low are reckoned, that the poor gain and hold friends quite as
-well as the rich, that there was a certain poor wise man that saved
-the city by his wisdom and gained a lasting record in consequence,
-that the poor and the rich are constantly changing places in this
-world, and that there is no respect of persons with God.
-
-We may see now what we are to think of some popular remedies
-constantly recommended for low Wages. A brief discussion of what is
-false will give us a stronger hold of what is true. The chapter will
-close with relevant reference to three current remedies.
-
-1. It is being dinned into the ears of the present generation, that
-Government has large functions in the ongoings of business, that it
-ought sometimes to interfere to better the rate of Wages, at least to
-designate a minimum below which they shall not go, and that Government
-should hold itself ready to undertake directly to carry on certain
-branches of business under certain circumstances. This scheme goes
-under the high-sounding name of _Nationalism_. Richard T. Ely,
-Professor of Political Economy in Johns Hopkins University, is one of
-the most prominent representatives at present of this school of
-thought. In his Introduction to Political Economy just published
-(1889), he lays down this principle: "_When for any class of business
-it becomes necessary to abandon the principle of freedom in the
-establishment of enterprises, this business should be entirely turned
-over to Government, either local, state, or federal, according to the
-nature of the undertaking._" He begins his book by attempting to
-hammer in the "lesson" that as Civilization improves, coöperation
-takes the place of individualism. The golden age of individualism, he
-says, is among the wild tribes of Australia. They never coöperate with
-each other in their economic efforts, or in anything else. No one
-expects anything from his neighbor, and every one does unto others as
-he thinks they would do to him. The life there is one prolonged scene
-of selfishness and fear. But as civilization comes in, he says,
-individualism goes out, and coöperation takes its place. The fine old
-Bentham principle of _laissez faire_, which most English thinkers for
-a century past have regarded as established forever in the nature of
-man and in God's plans of providence and government, is gently tossed
-by Dr. Ely into the wilds of Australian barbarism.
-
-There are some propositions that are _certainly_ true, and one of them
-is, that no man can write like that, who ever analyzed into their
-elements either Economics or Politics, who ever gained a clear
-conception of the sphere of either science in its relation to the
-other, or who ever saw distinctly the relations of either to the
-nature of Man. The sole motive in Buying and Selling is the gain of
-the individual, each for and by himself. That always was the motive,
-is now, and always will be. No complications of modern business, no
-complexities of credit, no combinations of capitalists or laborers,
-ever altered or ever can alter one particle the motives of men in
-buying and selling. In a natural and progressive state of things,
-Individualism, instead of going out, comes more and more into play,
-through the Division of Labor and the falling of all sorts of services
-more and more into specialties. To talk glibly, as Professor Ely does,
-about Government taking up easily and carrying on in a better way and
-to better ends branches of pure business as they are dropped or
-forced from the hands of Individuals, is ignorance at once and alike
-of the real nature of Government and of Business. Let us look at a few
-of the native incongruities and logical fallacies of this
-nationalistic position.
-
-(1) What is human Government? Is there anything substantive and
-continuous in its _personnel_ and purposes, as there is in the
-government of God? Is government anything more, can it be anything
-more, than a transient Committee of the citizens charged and changed
-to do in certain few particulars the changing will of a Majority?
-Government is indeed a necessity, as men are, to restrain the lawless,
-and to shape the ends of the law-abiding; but it has to be
-administered, if at all, by precisely the same kind of men as the rest
-are, chosen for brief periods, their duties sharply prescribed by
-constitution or custom, and impeachments or other punishments provided
-for them when they transgress. One President of the United States and
-one Judge of its Supreme Court have already been solemnly impeached by
-the sovereign people themselves.
-
-Government, then, is an _Agent_, and nothing more. Even nationalists
-will not contend for the divine right of kings. And the duties of
-every decent government on earth are _political_ in their character.
-The agents are chosen and dismissed with a direct reference to that
-kind of action. Politics has a sphere wholly distinct from Economics.
-The true and only end of politics is the greatest good of the greatest
-number, so far as that end can be mediated by governmental agents of
-the people. Individualism as such does indeed sink out of sight under
-a true Politics, and the inalienable rights of one are maintained for
-the sake of and in consistency with the greater rights of all. But
-Economics is all individuals from beginning to end. "_It takes two to
-make a bargain._" Only two. Each of the two has his own motive,
-estimates for himself, gives and takes for himself, and enjoys alone
-his own gain. All this is involved in the very idea of _Property_,
-which is derived from _proprius_, and which means _one's own_. How
-illogical, then, and incongruous, to suppose, that a set of limited
-human agents briefly trained to purely _political_ action, and liable
-to be turned out of office by every change in party administration,
-can be competent at the same time and in addition to perform
-_economical_ functions for the people!
-
-Notice, too, that governmental agents in all good countries are
-already _overburdened_ with their mere political duties. Work is
-behindhand in every portfolio, on every court calendar, and in every
-legislative body, in Christendom. How absurd it is, therefore, to talk
-about throwing upon shoulders, already overburdened, additional loads
-of a different kind, for which shoulders and heads are wholly
-unfitted!
-
-Why not, then, inquires our nationalist innovator, organize new
-bureaus to undertake in their behalf the buying and selling of the
-people? Ah! Who pays the taxes needful for the support of the present
-_political_ bureaus? And who would have to pay the taxes needful for
-the support of the new _economical_ bureaus? Besides not having any
-substantive existence of its own Government has not one cent of money,
-except what the people voluntarily pay in taxes out of their own
-personal gains, in order to maintain their own agents to do certain
-political things for them, which they cannot do as well for themselves
-directly; and when it comes to the cold question for the people
-themselves to answer, whether they will organize a new set of hired
-men to do their trading for them, and pay them for doing this out of
-aggregate gains certainly to be vastly diminished by the process, our
-nationalistic leaders will perhaps find out that the people have
-common sense, whether the said leaders have it or not.
-
-But the damning difficulty with this governmental business association
-is, after all, in the inevitable _lack of motive_ on the part of the
-hired men doing the buying and selling. It is an honor to human
-nature, that hired men never have and never can have the zeal and
-enterprise of principals and owners to forecast and to perform and to
-lay up; because it shows that man is a rational animal, made in the
-image of his Maker, always acting under the pressure of personal
-motives, and always estimating what is his own more highly than what
-belongs to another. Business motives act in their fulness only on the
-individual, whose is the effort and whose is the return. Any policy
-whatever on the part of Government, which lessens the number and the
-eagerness of individual operators in favor of great artificial
-combinations resting in the shadow of the Law, lessens of necessity
-the gains of exchanges, and the progress of the nation, because it
-lessens of necessity the press of motive on the many to work and save.
-
-Government, accordingly, is quite too far off in every respect from
-the business, that is to say, from the buying and selling of the
-people, to undertake any branch of it when "it becomes necessary to
-abandon the principle of freedom in the establishment of enterprises."
-It will then be high time to "abandon" the "enterprises" themselves.
-If the "principle of freedom" cannot compass the "establishment of
-enterprises," is it likely that the "principle" of secondary and
-irresponsible agents can do it? To show the people how to make their
-bargains, how to buy and sell and save and spend, is a function
-government is not fitted for, was not established to perform, and
-never undertook without making a botch of it.
-
-In the Preamble of the Constitution of the United States there is a
-careful and complete and elegant enumeration of the purposes, which
-the body of the instrument was designed to attain. These purposes are
-six. No one of them contains even a hint of any purpose to enter upon
-the "establishment of enterprises," still less of any necessity "to
-abandon the principle of freedom." The last of these six purposes is
-phrased: "AND TO SECURE THE BLESSINGS OF LIBERTY TO OURSELVES AND OUR
-POSTERITY." The liberty to buy and sell freely was precisely that
-"liberty" of the Colonies which was most threatened and infringed by
-the British Government, to vindicate that special "liberty" was the
-chief cause of the American Revolution, and "to secure the blessings"
-of that and other forms of similar "liberty" was the final purpose of
-the Constitution of the United States.
-
-It is true indeed that the Constitution empowers Congress, a creature
-of the People, "_to establish Post Offices and Post Roads_"; but the
-purpose of this was _political_, and not pecuniary; it was to bind all
-the States together in one Union of intelligence and intercourse; it
-was to keep the outlying and distant parts in touch with the central
-and seaboard; it is not in any sense a "business" enterprise; the
-department of the mails is not now and never has been, for any length
-of time, self-supporting; and it illustrates through and through in
-its "Star route frauds" and other contracts, in its appointment and
-removal of postmasters, and in the sickening dependence of primal
-Service of the people on partisan and corrupting impulses, many of
-them inherent evils of the much-vaunted Nationalism.
-
-But besides all these vital and political objections to the assumption
-on the part of government of any direct industrial functions whatever,
-there remains two other fundamental objections, of which the first is,
-that our national government has received no powers to any such end,
-and is emphatically prohibited in the Constitution itself from
-exercising them:--"THE POWERS NOT DELEGATED TO THE UNITED STATES BY
-THE CONSTITUTION, NOR PROHIBITED BY IT TO THE STATES, ARE RESERVED TO
-THE STATES RESPECTIVELY OR TO THE PEOPLE."
-
-(2) The second remaining objection is, that such proposed action of
-government could have no tendency at all either to enlarge the
-Wages-portion, or to increase the industrial efficiency of the
-laborers, or to diminish the number of competitors at any one point of
-the wages-scale. As a matter of fact, such governmental action would
-have precisely the opposite effect at each of these three vital points
-of wages: employers would have less motive to swell the wages-portion,
-laborers less motive to improve their capacity, and more motive to
-congregate locally. Suppose, that at some given point in the scale of
-wages, free and intelligent competition has been had on both sides,
-and that the average rate of wages as thus determined proves one
-dollar per day for each laborer. Suppose further, that everybody
-outside the employers thinks this is quite too little, and that
-government accordingly issues a decree that wages at that point must
-be thereafter one dollar and a half per day. That decree can have no
-tendency at all to enlarge the _wages-portion_ of those particular
-employers, because _that_ has already been determined for the next
-industrial cycle by the general productiveness of the cycle last past,
-and by the last division under free competition between wages and
-profits; if, therefore, the decree were carried out, as it never
-practically could be, the result would be that only two-thirds of the
-laborers previously employed could be employed then at all, and the
-remaining third would certainly be worse off than before; and besides
-the Division of Labor being necessarily lessened, production would be
-less profitable to the employers, and the next wages-portion would
-certainly be less than the one before, and thus the outcome of the
-_remedy_ would be worse than the _disease_. Now let alone the
-artificial interference of government, and all natural accessions to
-Capital at that point, all investment of profits in an enlarged
-business, all saving from expenditure for the sake of further
-production, tend strongly of their own accord to enlarge the
-wages-portion, and thus, the number and intelligence of the laborers
-continuing as before, are sure to raise the rate of wages. Or, if
-there be no accessions to Capital, or other influence swelling the
-wages-portion, and the number of laborers be diminished at that point,
-as by migration to new fields of effort or enlistment in armies, the
-competition of wages-givers for laborers will be quickened, and the
-rate of wages will rise. Reversed conditions will of course give
-reversed results.
-
-2. A second popular remedy for low Wages, not only proposed, but also
-for a long time brought into practical action, is Labor-Unions in
-their various forms and with their manifold methods of operation upon
-employers. It is important to note here and to remember, that the
-Guilds of the mediæval times, from which the modern Trades-Unions have
-borrowed something of form and much of nomenclature, were in substance
-extremely different from their modern imitators. Those were
-combinations of Masters with their journeymen and apprentices and
-dependents in order to control the entire manufacture and sale of a
-certain class of products, from the name of which the Guild usually
-took its own name, as "Cloth-workers' guild," "Shoemakers' guild," and
-so on. Whittier, himself a shoemaker in his boyhood, apostrophizes the
-latter guild in words which more or less describe them all:--
-
-    "Ho! workers of the old time styled
-      The gentle Craft of Leather!
-    Young brothers of the ancient guild,
-      Stand forth once more together!
-    Call out again your long array,
-      In the olden merry manner!
-    Once more on gay St. Crispin's day,
-      Fling out your blazoned banner!"
-
-These masters thus organized with their laborers were the capitalists
-of their time, and in this vital matter differed from the Unions of
-to-day, which are made up of laborers as such organized to confront,
-and if need be, to antagonize, capitalists. A royal charter was
-indispensable to the legal existence of those craftsmen. It took money
-for them to start their guilds, and in progress of time most of them
-became very rich. "A common fund was raised by contributions among the
-members, which not only provided for the trade objects of the guild;
-but sufficed to found chantries and masses, and set up painted windows
-in the church of their patron saint. Even at the present day the arms
-of the craft-guild may often be seen blazoned in cathedrals side by
-side with those of prelates and kings." This radical difference
-between the two must always be borne in mind in all arguments and
-inferences drawn over from the mediæval "unions" to those of the
-present day.
-
-Two points may be freely conceded to these labor-organizations before
-we pass to the economic objections to them. In the first place, the
-employers _set the example_ for the employees in a tacit if not open
-combination as against the employees in their own interest and
-emolument. The so-called "protective" tariff, for instance, is nothing
-in the world but a strongly-linked combination of certain rich
-capitalists to extort from the masses (their own laborers included)
-artificially lifted prices for the necessaries of life; and the
-certain result of shutting out imports by tariff-taxes is the
-shutting in of would-be exports, to the certain lowering of general
-wages in a country, because there is a lessened demand for laborers in
-consequence. For a second good instance of combinations as against
-employees on the part of employers, take the well-known understanding
-among manufacturers of the same sort of goods in the same general
-locality, that laborers discharged from one establishment shall not be
-hired in any of the rest; and that if the general voice call for a
-"shut down," or for three-fourths time or less, all in that line of
-goods shall comply. How can laborers be blamed for organizations in
-their own behalf when they find themselves confronted as individuals
-with an organization of employers?
-
-Then, too, it must be acknowledged, that, had it not been for united
-action of some sort on the part of the laborers, the unreasonable
-hours of fifty years ago in mills and factories would probably not
-have been shortened to this day. Capitalists as a class are
-conservative of methods, as well as of ends. The cotton and woollen
-manufacturers of Berkshire County, for example, who may doubtless be
-taken as a fair sample of the manufacturers of New England, stiffly
-refused the demands of their work-people that the hours might be
-reduced from an average of 14 throughout the year to an average of 11.
-When the late Civil War was going on, and the manufacturing became
-extremely profitable, and the mills were more or less depleted by
-enlistment, and the remaining hands felt more independent from the
-consequent rise of wages, the combined demand in one mill for fewer
-hours was reinforced by simultaneous demands for the same in other
-mills in the neighborhood (the time and manner having been agreed upon
-beforehand), and visits in force by the work-people from mill to mill
-completed the desired reform. The mill-owners were sullen and
-indignant, and submitted of necessity. The work-men were right. The
-reform was imperative. Credit must be given to them for the good they
-have done acting as a body on this and other occasions.
-
-On the other hand, all this is not _business_. All this is contrary to
-the very old, and the very good adage, that it takes _two_ to make a
-bargain. If we express this adage in the language of our science, it
-will take some such form as this: When two men have mutual services to
-exchange, let them come to a fair agreement as to the terms on which
-they will exchange. Certainly, let each make the best terms he can,
-but let the bargain always be free. If one party, who happens to have
-the power to do it, uses anything like compulsion upon the other, it
-ceases so far forth to be a bargain at all, and becomes a sort of
-robbery, of which in some cases courts will take cognizance. Now,
-workmen bring a certain valuable service to the market, just such a
-service as the capitalist wants, and he has to offer just such a
-service as they want, namely, wages: let the two parties come to a
-free and fair agreement on the terms of their exchange; let each
-workman by all means make the very best terms he can, insisting to the
-last penny on all he can get elsewhere, for the value of his service
-is determined, as other values are determined, by what it will bring:
-let the employer do just the same on his side, and so let a fair
-bargain for the time present be struck. This is a very good kind of
-_striking_, and the more intelligence and skill and self-respect a
-workman has, the better prepared he is to strike the bargain and
-secure his just due by and for himself alone; and this gives a good
-chance for every man who has any peculiar gift, who may have surpassed
-his fellows in diligence and skill, to secure a proportionate reward
-now and to go on higher in future; all this gives opportunity for
-_diversity of relative advantage_, which, as we have seen, lies at the
-basis of all exchange, which itself starts in individualism and
-naturally proceeds in a still higher individualism to the end. This is
-the only way for a laborer of talent and diligence to secure fully
-what belongs to _him_ as a man and a workman. If he cannot get from a
-given employer what he thinks he ought to get, what he thinks the
-service is worth in another market, let him exercise his perfect right
-to quit and go elsewhere. All this is fair and aboveboard and
-individual and progressive.
-
-Everybody knows that there is a kind of _striking_ now in vogue wholly
-different from this, in that it brings a sort of compulsion into play.
-_A fair bargain should be broken, if at all, just as it was made, with
-the two parties face to face, and everybody else aloof; and a new
-bargain should be made, just as the old one was, with the two parties
-face to face, and everybody else aloof._ But a combination among
-workmen to leave an employer in the lurch, and especially a
-combination which forces into its ranks by cajoling or menaces those
-who are unwilling to join it, as is so commonly the case in Strikes,
-is not only contrary to the inmost nature of a bargain, but is also of
-itself a sort of confession of the injustice of the claim. If the
-claim be just so far as _all_ the individuals are concerned, there is
-no occasion to extort it. If the value of the service rendered by each
-be equal to the sum demanded, and especially if this can be obtained
-elsewhere, which is the only gauge of the value of any service
-anywhere, there is no need of conference and combination and
-conspiracy. Of course, this radical argument against Strikes implies
-that employers of that grade have not entered into a combination not
-to hire dissatisfied laborers from other establishments; if they have,
-then the agreement can be turned with equal force against the
-employers themselves, for _they_ are resorting to means outside the
-nature of a bargain, means of the same nature as a Strike. Let, then,
-each workman tell his employer the present facts just as they are, and
-if this appeal prove ineffective to secure his commercial right, let
-him go quickly where he can get the most for his service. That this is
-not done, that means of the nature of a threat are brought to bear
-upon the employer, that the justice of the claim is not relied on in a
-case where more than anywhere else justice can enforce itself, that
-free and full explanations are not had, that no notice is given, that
-great damage is expected by their action to accrue to the
-employer,--all this seems to forget that the transaction between
-employers and employed is a case of pure exchange, a simple bargain of
-one service against another service.
-
-The above is the universal and fundamental objection to Strikes. _The
-remedy for economical evils, real or supposed, must ever be found in
-economical considerations._ The strong but foolish tendency of the
-times is to mix up things that are quite distinct; to try to apply to
-the evils of Trade the rules of Morals, which is a useless task; to
-appeal to Politics in matters of pure Bargain; and to resort to Force
-to cure the evils that flow from the wholly voluntary action of
-individuals. This is like the doctor who would cure bodily ailments by
-mental and spiritual recipes. It has all the absurdities of the late
-famous "Mind-cure." The mind is indeed higher than the body, but
-bodily maladies must be treated as such, or the patient will die; the
-imperatives of Ethics are certainly superior to the profitables of
-Economics, but the latter are well able to take care of themselves on
-their own ground; Religion is loftier than Morals, but it becomes a
-very poor substitute for morals in the daily routine of life.
-_Similia similibus curantur._ Economical evils can only be removed by
-a better Economics better applied. Strikes are an outside and
-irrelevant remedy for low Wages.
-
-A bad principle works badly in practice of course; the principle that
-underlies strikes is so opposed to the fundamental nature of exchange,
-that we might know beforehand that it would work badly; and as a
-matter of fact, it does work badly enough both upon employers and
-employed, because strikes are certain to embitter the relations
-between the two classes, which ought always to be cordial and free,
-and especially, because strikes must work on the minds of the
-capitalist to lessen the Wages-Portion for the next industrial cycle.
-Fortunately, we possess authentic statistics gathered about Strikes by
-the Massachusetts Bureau of Statistics of Labor, and published in
-detail in the Report of December, 1888. The information given is exact
-in relation to five principal States, and approximate in relation to
-the other parts of the United States. We will copy first the table
-exhibiting the Losses in six years on account of Strikes of both
-Employers and Employees, and the outside assistance received by the
-latter:--
-
-  EMPLOYEES' LOSS AND ASSISTANCE AND EMPLOYERS' LOSS IN THE FIVE
-  PRINCIPAL STATES ON ACCOUNT OF STRIKES AND
-  LOCK-OUTS FOR 1881-1886.
-
-  +------------------------+-------------+------------+-------------+
-  |        STATES.         | Employees'  | Employees' | Employers'  |
-  |                        |   Loss.     |Assistance. |   Loss.     |
-  +------------------------+-------------+------------+-------------+
-  |       _Strikes._       |             |            |             |
-  | Illinois,              |  $6,636,208 |   $238,452 |  $5,251,829 |
-  | Massachusetts,         |   4,200,489 |    266,708 |   1,970,881 |
-  | New York,              |   8,581,784 |    726,696 |   5,966,421 |
-  | Ohio,                  |   6,378,757 |    415,568 |   2,793,427 |
-  | Pennsylvania,          |  12,890,346 |    781,338 |   3,897,757 |
-  | Other parts of the     |             |            |             |
-  |     United States,     |  13,127,139 |    895,795 |  10,821,238 |
-  |                        +-------------+------------+-------------+
-  |  THE UNITED STATES,    | $51,814,723 | $3,324,557 | $30,701,553 |
-  +------------------------+-------------+------------+-------------+
-
-The large percentage of establishments represented in this table, in
-which the strikes were ordered by labor-organizations, is particularly
-noticeable. In New York 94.26% of the establishments had strikes which
-were ordered, in Illinois 83.96%, in Massachusetts 81.91%, and in the
-United States 82.24%. The "walking-delegate" so-called became the
-principal personage in all these strikes; he brought the orders to the
-men from the "central-union" of their special organization, and became
-in most cases the sole means of communication between the two. "_You
-are the strike_," exclaimed the Lord Mayor of London the other day to
-Mr. Burns, the walking delegate of the dock-laborers now on strike in
-that city. That the daily bread and home comforts of tens of thousands
-of men depend on the secret and irresponsible decision of a little
-knot of agitators, sending out their verbal and often ambiguous
-written orders by a walking-delegate or two, is one of the
-monstrosities of Strikes often witnessed in the United States. The
-laborers sometimes do not know even the causes of the strike. There
-has been great want and suffering for three months past among the
-striking coal-miners in the State of Illinois; and a brief editorial
-in the "Springfield Republican" of Aug. 24, 1889, describes the state
-of things so justly, that we quote it:--
-
-"Ex-Congressman William L. Scott, who owns coal mines at Spring
-Valley, Ill., has offered to pay 75 cents a ton for mining to the
-strikers who in their destitution have been subsisting for some time
-on public charity. This is 2-1/2 cents a ton more than the miners have
-asked for, but it is coupled with the condition that each man must
-seek work individually and not through some outside union committee.
-Although the men have been reduced to a state of abject want it is
-said the conditions imposed will prevent a settlement. In that case we
-may conclude that a few well-fed walking delegates are acting for the
-men and not they for themselves. It is a strange time to quibble over
-such a matter. The worst and most oppressive enemy of labor is the
-parasite who lives upon its distresses."
-
-A strike is a state of war, and like war, there are two parties to it,
-and it cannot be expected that the party of the other part should not
-strike back. The "_lock-out_" is the counter-stroke of the capitalist
-to the "_strike_" of the laborer. Lock-outs, however, are
-comparatively infrequent. Capitalists, as a rule, are conservative and
-forbearing. Massachusetts took the statistics of lock-outs as
-carefully as those of strikes, and the following is the table:--
-
-  +------------------------+------------+------------+------------+
-  |        STATES.         | Employees' | Employees' | Employers' |
-  |                        |   Loss.    |Assistance. |   Loss.    |
-  +------------------------+------------+------------+------------+
-  |      _Lock-outs._      |            |            |            |
-  | Illinois,              |   $533,497 |     $5,374 |   $347,065 |
-  | Massachusetts,         |    952,310 |    136,626 |    550,675 |
-  | New York,              |  3,150,123 |    392,316 |    845,262 |
-  | Ohio,                  |    848,829 |    231,870 |    493,100 |
-  | Pennsylvania,          |    712,956 |     77,038 |    237,735 |
-  | Other parts of the     |            |            |            |
-  |     United States,     |  1,960,002 |    262,814 |    988,424 |
-  |                        +------------+------------+------------+
-  |  THE UNITED STATES,    | $8,157,717 | $1,106,038 | $3,462,261 |
-  +------------------------+------------+------------+------------+
-
-Like war too, strikes and lock-outs are wasteful and demoralizing to
-both parties. Why should there be a resort to force to settle an
-industrial dispute any more than to settle any other private dispute?
-Will such a resort be long tolerated by public opinion in civilized
-countries? The Legislature of Massachusetts in 1886 provided for a
-State Board of Arbitration for the settlement of differences between
-employers and employees. The statute was crude in some respects, and
-the basis of it not very firmly fixed in the nature of things, but the
-Bureau of Labor reports that it has been justified by the results in
-its practical application during the short time of its operation. The
-broad truth is, that the value of Commodities and the value of Credits
-is now left to the safe action of Demand and Supply under free
-competition in every country in Christendom: why should not the value
-of Services be left to the same safe and inexorable action?
-Governments gave up long ago all idea of regulating directly or
-indirectly the prices of merchandise and the prices of commercial
-claims of all kinds: will they not shortly give up also all idea of
-regulating directly or indirectly the rates of Wages? They will. The
-three kinds of things bought and sold are on an exact level in the
-nature of things, so far as Government is concerned. Wages are
-abundantly able to take care of themselves in the ordinary way, as
-goods do, and stocks and bonds; and an enlightened Public Opinion is
-fast coming to see, that a man's personal service rendered needs no
-more the oversight of the State in its sale than his horse, or note of
-hand at interest. Strikes, and lock-outs, and all extraordinary courts
-or boards to settle quarrels between a labor-giver and a labor-taker
-as such, since it is a case of ordinary buying and selling, are
-foredoomed to pass out in the good time coming.
-
-Towards this good end works strongly the common _futility_ of strikes
-and lock-outs. Carroll D. Wright, chief of the Bureau of Labor in
-Massachusetts, now the head of the National Bureau of Labor, in his
-State Report for 1880, gave a succinct account of all strikes in that
-State from their beginning in 1830. They were 159 in all, of which 109
-were unsuccessful, 18 apparently successful, 16 compromised, 6 partly
-successful, and 10 "result unknown." In Great Britain during the year
-1878, there occurred 277 strikes, of which 256 were failures, 17 were
-compromised, and only 4 were successful. The following table taken
-from the Massachusetts Report of 1888, gives on a broad scale the
-results of Strikes in the United States for six years:--
-
-  GENERAL SUMMARY OF STRIKES IN FIVE PRINCIPAL STATES FOR 1881-1886.
-
-  _Percentages._
-
-  +--------------+-------+---------+-------+-----+--------+-------+-------+
-  |  CLASSIFI-   | Illi- |Massa-   | New   |Ohio.|Pennsyl-|Other  |THE    |
-  |  CATIONS.    | nois. |chusetts.| York. |     |vania.  |Parts  |UNITED |
-  |              |       |         |       |     |        |of the |STATES.|
-  |              |       |         |       |     |        |United |       |
-  |              |       |         |       |     |        |States.|       |
-  +--------------+-------+---------+-------+-----+--------+-------+-------|
-  |  _Strikes._  |       |         |       |     |        |       |       |
-  |Ordered by    |       |         |       |     |        |       |       |
-  | labor organ- |       |         |       |     |        |       |       |
-  | izations,    | 83.96 |  81.91  | 94.26 |71.21|  61.59 | 73.06 | 82.24 |
-  |Establish-    |       |         |       |     |        |       |       |
-  | ments closed | 70.70 |  79.10  | 51.01 |81.21|  70.11 | 57.57 | 60.13 |
-  |              |       |         |       |     |        |       |       |
-  |Causes:       |       |         |       |     |        |       |       |
-  |Against       |       |         |       |     |        |       |       |
-  | reduction of |       |         |       |     |        |       |       |
-  | wages,       |  5.35 |   6.23  |  2.50 |20.73|  22.65 |  8.61 |  7.77 |
-  |For change of |       |         |       |     |        |       |       |
-  | hour of      |       |         |       |     |        |       |       |
-  | beginning    |       |         |       |     |        |       |       |
-  | work,        |   -   |    -    |  3.86 |  -  |   -    |  0.05 |  1.61 |
-  |For increase  |       |         |       |     |        |       |       |
-  | of wages,    | 41.54 |  35.28  | 39.09 |52.42|  46.97 | 45.01 | 42.32 |
-  |For increase  |       |         |       |     |        |       |       |
-  | of wages and |       |         |       |     |        |       |       |
-  | reduction of |       |         |       |     |        |       |       |
-  | hours,       | 17.85 |   0.50  |  9.37 | 1.85|   1.06 |  4.96 |  7.59 |
-  |For reduction |       |         |       |     |        |       |       |
-  | of hours,    | 18.35 |  42.71  | 24.31 | 5.32|   5.32 | 17.23 | 19.48 |
-  |For reduction |       |         |       |     |        |       |       |
-  | of hours and |       |         |       |     |        |       |       |
-  | against being|       |         |       |     |        |       |       |
-  | compelled to |       |         |       |     |        |       |       |
-  | board with   |       |         |       |     |        |       |       |
-  | employer,    |   -   |    -    |  7.32 |  -  |   -    |  2.19 |  3.59 |
-  |Other causes, | 16.91 |  15.28  | 13.55 |19.68|  24.00 | 21.95 | 17.64 |
-  |              |       |         |       |     |        |       |       |
-  |Results:      |       |         |       |     |        |       |       |
-  |Succeeded,    | 54.16 |  35.28  | *51.05|49.44|  32.60 | 42.69 | *46.52|
-  |Succeeded     |       |         |       |     |        |       |       |
-  | partly,      | 10.33 |  45.93  |  *8.14| 8.87|  17.57 | 17.27 | *13.47|
-  |Failed,       | 35.51 |  18.79  | *40.65|41.69|  49.83 | 40.04 | *39.95|
-  +--------------+-------+---------+-------+-----+--------+-------+-------+
-
-    * In 15 establishments the results were not ascertained.
-
-3. The third popular remedy for low Wages, which has at least the
-merit of being in the line of economical considerations, as the other
-two are not, is "Co-operation." The interest in this proposed remedy
-is much less both in Europe and in the United States than formerly,
-owing to the failures that have mostly attended the attempts to put
-the scheme into practice, although there have been some remarkable
-successes also, particularly in England. The idea of Co-operation is
-this, namely, that certain laborers within given classes combine of
-their own accord, (1) _either to purchase their necessaries in common
-and at wholesale, hence at cheaper rates because avoiding all profits
-of the middlemen_; or (2), _more especially to engage in the joint
-production of the commodities they are familiar with, the laborers
-furnishing the capital also from their little hoards or borrowing it
-on the strength of their individual or associated credit, managing the
-business themselves, all being co-partners, and of course all sharing
-pro rata the entire profits of the concern_.
-
-All this is well; and in countries where laborers have been under
-traditional disabilities, it may be in some cases very promotive of
-their self-respect, activity, frugality, and general welfare; but any
-one can see that no new economic principle is involved in the plan. As
-in all other production, so here, there must be (1) capital from some
-source, (2) steady and skilful labor, and (3) superintendence or
-management of the business. It is at the third point that schemes of
-co-operation have mostly broken down. The faculty of good management
-is rare; the organizing and executive ability needful to carry through
-any scheme of co-operation will not come upon call; if any of the
-co-operators chance to possess it, the scheme may succeed, although he
-who is conscious of having it will prefer to use it for his own gain
-in his own way, to say nothing of the practical impossibility of any
-man's working with the same spirit when the gain or loss is to be
-largely another's as when it is to be wholly his own; moreover, it has
-been well said, "it is impossible _to hire_ commercial genius or the
-instincts of a skilful trader"; so that, while there is no trouble
-about the workmen uniting the character of capitalist and laborer in
-their own persons, and no doubt that they will work harder and more
-skilfully while sharing profits as well as receiving wages, it is
-still true, that the difficulty of securing a real "captain of
-industry," and thus a perfect organization and management of the
-whole business, puts the scheme of co-operation out of the question
-as a means of raising wages, or promoting the general welfare of
-laborers.
-
-In this country, where there is nothing to hinder any laborer from
-becoming a capitalist, where the savings-banks are open to the
-smallest gains, where nothing is more common than for two or more
-workmen to organize a firm to carry on some branch of business, where
-most of the present capitalists proper were formerly laborers proper,
-and where the shares of most of the joint-stock companies are open to
-everybody who has the means to buy them, there is only one
-consideration that seems to justify any special jealousy of laborers
-as such towards capitalists as such; and that is the fact, that
-Legislation, every now and then, sometimes on a small scale and then
-on a gigantic one, now by means of corporate charters and then by
-other means more indirect and effective, _does confer certain
-extraordinary privileges upon capitalists_. So long as capitalists and
-laborers rest upon their natural rights and positions, neither can get
-any undue advantage of the other; and just so far as each recognizes
-their identity of economic interest and the consequent reciprocity of
-obligation and effort, the prosperity of each will help build up the
-other; but, on the other hand, so far forth as any advantages are
-given to capitalists by special laws, either of State or Nation, these
-become necessarily unjust to laborers, and ultimately also injurious
-to capitalists; and in this case, the laborers, seeing just what it is
-that hurts them, _ought to combine together and to strike, not capital
-(their best friend), but a piece of perverted legislation (their worst
-enemy)_.
-
-FOOTNOTES:
-
-[5] O'Reilly's Poem, at Plymouth, 1889.
-
-[6] Green's Short History of the English People, p. 144.
-
-
-
-
-CHAPTER IV.
-
-COMMERCIAL CREDITS.
-
-
-Political Economy is the Science of Sales; and because it _is_ the
-science of sales, its definitions and principles must cover equally
-all cases of sales actually occurring or possible to occur. We have
-seen repeatedly, that only three kinds of things are ever bought and
-sold, or ever will be, and these are Commodities and Services and
-Claims. The first two kinds have been fully elucidated already in the
-two preceding chapters, and it belongs to the present chapter to
-explain and illustrate clearly the peculiarities of the third kind of
-things salable. Ours is the only science that has to do with the
-motives and facts and economic results of all sales as such.
-
-The discussions of the present chapter will proceed orderly through
-the following topics:--
-
-    _The Nature of Credit._
-    _The Forms of Credit._
-    _The Advantages of Credit._
-    _The Disadvantages of Credit._
-
-1. Certain things are essential in every sale of anything, and of
-course are common to all sales of everything, such as two persons and
-two desires and two estimates and two renderings; while there are
-certain _peculiarities_ in the sale of things belonging to each of the
-three special classes of things salable; for example, in the sale of a
-commodity there is a rendering of a tangible object that has been
-prepared for sale in past time, and in the sale of a service a
-rendering of an intangible something wholly in the present time; while
-in the sale of a credit there are likewise two peculiarities, one of
-them relating to future time and the other to a special trust felt in
-a person by some other person. We must now study these two
-peculiarities with care; and, mastering these, we shall be master of
-the Nature of Credit.
-
-a. Some sales are consummated at once, the things exchanged and the
-ownership in them are mutually passed over then and there, the
-reciprocal satisfactions are entered upon immediately, and there is at
-once an economical end.
-
-For example, one neighbor sells another a peck of green peas and takes
-in pay a peck of new potatoes, both vegetables may be cooked for
-dinner in the respective families the same day, and the commercial
-transaction is all over. But there are other exchanges, an immense
-class of them, different from these in this respect, that though the
-transaction considered as a mere case of value created and measured is
-then and there ended, yet considered as to the nature of that
-preliminary exchange which implies and requires another future
-exchange to consummate it, it is not then and there ultimately closed,
-but one (or both) of the parties then exchanging relies on the good
-faith of some one else to fulfil in the future a pledge expressly or
-impliedly made in the prior exchange. Commonly some external evidence
-of the pledge is created and passed at the time, but this is not
-essential to the validity of the pledge itself. For example, A buys 50
-bushels of wheat of B, and B takes in pay for it A's note of hand at
-six months for $75. The note is not the pledge, but it is a legal and
-convenient proof of it. As a case in Value, the wheat is sold for the
-pledge and the pledge is the equivalent of the wheat. Each party
-rendered the other then and there satisfactory equivalents. All our
-definitions apply here perfectly.
-
-Still a further and future exchange was contemplated by both parties
-at the time of making this exchange, and as a silent part of it. A
-takes what is now his own wheat, and B takes as an equivalent for what
-was his wheat a right to demand of A in six months an equivalent for
-the present equivalent (the pledge) for the sake of which B rendered
-the wheat. The note of hand is the evidence of this pledge, and it
-belongs absolutely to B. It is his property. He may keep it till
-maturity and then sell it to A for its face, or he may sell it at once
-to a bank for its face less the discount for six months. Discount is
-the difference between the face and the present price of a note of
-hand. The first peculiarity, then, of Credit is, that it always
-involves the element of future time. But it involves this secondarily,
-and not primarily. In other words, a present equivalent is always
-rendered by both parties in every commercial transaction; but the
-present equivalent in the case of a credit transaction is the right to
-demand something of somebody sometime in the future. This distinction
-is very important, as we shall see clearly when we come to treat of
-Banking, though it is generally ill-understood at present. Valuables,
-when they exchange at all, exchange once for all. But there is one
-kind of valuables, namely, claims, which, when subject to exchange,
-imply and require another and a future exchange, not necessarily
-between the parties to the first exchange, but between _some_ two
-parties; and not, speaking strictly, to _consummate_ the first
-exchange, because that took and gave its own satisfactory equivalents;
-but, as involving both time and trust, the credit sale must in the
-nature of things be followed by another sale of one of the three
-kinds.
-
-We see, accordingly, that in Credit our science of Economics takes
-partial possession of future time for certain purposes of its own.
-Exchange sets its throne and reigns pre-eminently in present time; but
-its sceptre extends also over past time, so far as all capital is
-concerned, and so far as all material commodities (the result of past
-work) are exposed for sale in the present; and its right hand of rule
-goes forth also to grasp the future, under limitations indeed both as
-to the stretch of time covered and as to the character of the persons
-concerned, but still there is there a fair domain and a broad domain,
-and a realm on the whole winning a wider and wider circuit. It is one
-of the proud boasts of Political Economy as a science, as it is too
-one of the exalted traits of human nature, that the lordly impulse to
-buy and sell does not confine itself to what the Past offers in all
-its accumulated valuables, nor to what the Present unfolds in the
-unlimited desires and efforts of congregated men, but reaches out also
-into the Future, and makes that pay tribute more and more into the
-vast treasury of its Gains. And this too is legitimate. Man is at once
-and all the time actor and historian and prophet. The future is not
-wholly unknown. Given the one assumption, that Earth and Men go on as
-heretofore, Exchange knows well enough, and better and better, whom of
-the coming men to trust and for how long a time. The doctrine of
-averages and of probabilities comes along to guide and to enhearten
-the investor. Any thoroughly established government of to-day can
-borrow all the money that it wants on its public pledge to repay the
-principal fifty years hence. England has borrowed millions of pounds
-sterling, giving no day certain in the future for its repayment. These
-funds are called "Consolidated Annuities": the interest on them is
-paid on a day nominated in the bond: the principal is to be paid when
-the borrower chooses, or never.
-
-b. The other and final peculiarity of Credit is, that it always
-involves on the part of one person a commercial confidence in some
-person _as such_. The term, Credit, is derived from the Latin CREDO,
-_I believe_, and the corresponding term, Debt, from DEBEO, _I owe_.
-Thus the personal element and the future element are wrapt up in the
-very origin of the words. There is no credit without debt, and no debt
-without credit. The very words imply a _belief_ of one of the two
-parties in a commercial promise made by the other, and also an
-_obligation_ acknowledged by this party as due to the first. There is
-a basis for credit in human nature. Faith in each other to a certain
-extent is natural to men. Whatever enlarges the intellectual
-foresight, and especially the moral character of men, opens a broader
-and surer field for Credits. Civilization, so-called, and Christianity
-certainly, deepens and broadens the natural trust of man in man.
-Despite all the instances of broken faith, and they are too many;
-despite the shocks and cautions that come every now and then to every
-man who trusts much in his fellow-men; experience itself justifies and
-rewards an ever-growing commercial trust. It is one of the noble
-things in international commerce, as we shall see, that men trust each
-other across the oceans, and lay millions of value upon the faith of a
-single firm. As the core of the Christian religion is confidence in a
-_Person_, so the very substance of credits is a natural and in general
-well-grounded faith in _persons as such_.
-
-A Credit, then, may be defined to be _a Right to demand something of
-somebody_; and a Debt to be _an Obligation to pay something to
-somebody_. What always lies, accordingly, between creditors and
-debtors, are Rights coupled with Obligations; and these are
-_Property_, just as much as anything is and for the same reason, since
-they always may be, and usually are, bought and sold by other parties
-as well as the original parties. In these Rights or Claims,
-therefore, arises a commerce, domestic and foreign, immense in extent
-and amount, and the Rights themselves take their undisputed place on
-an equality with tangible Commodities and personal Services.
-
-Having thus reached an ultimate and satisfactory definition of Credit,
-we must still pursue a little further our present object, namely, to
-obtain a clear conception of the _nature_ of this great class of
-Valuables, by drawing two or three distinctions between Credit-Rights
-and some other rights very apt to be confounded with them.
-
-(1) The distinction between credit-rights and other rights is well
-rooted in the Latin language and in the Roman law, while the
-corresponding English terms are quite ambiguous and need to be used
-with great caution. In Latin, a true debt is called a _Mutuum_,
-because it lies between two persons, a creditor, and a debtor, and is
-a credit-right independent of the question of fact whether the debtor
-has now the thing rendered to him or not, indeed whether he has
-anything at all to pay with or not; on the other hand, a thing merely
-lent, when the very thing lent is to be returned to its owner, who has
-not in the meantime parted with his property to the other, is called
-in Latin a _Commodatum_. The English tongue has but the one word,
-_Loan_, for the two very distinct operations: for the loan of a book,
-for instance, which is to be returned after use, and which may be
-legally reclaimed by the owner if he chance to find it anywhere, that
-is, the Latin _commodatum_; and for the loan of money, or other such
-measurable thing, which is to be returned _in kind_ only, and which
-may _not_ legally be reclaimed except through some action of the
-borrower, since the ownership of that thing rendered has passed over
-to him completely, that is, the Latin _mutuum_. The same ambiguity of
-course inheres in the corresponding English word, _Borrow_. The
-English language is relatively poor in words expressing nice legal
-distinctions.
-
-Now, as a true debt is a claim on a _person_ and never on a _thing_,
-the Roman Law is true to the nature of things and to the vital
-distinctions of our science, when it names the right to which a
-_mutuum_ gives birth as a _jus in personam_, that is to say, a right
-against the person; while it names the legal obligation arising out of
-a _commodatum_ as a _jus in re_, that is to say, a right to the very
-thing. So strongly is this doctrine, namely, that the security of a
-true debt lies against persons and not against things, intrenched in
-the Roman Law, that debts or credits are even termed "_nomina_,"
-_names_, in that law, as when Ulpian says, "_Nomina eorum qui sub
-conditione vel in diem debent et emere et vendere solemus_": We are
-accustomed to buy and sell DEBTS payable on a certain day and at a
-certain event. The fundamental law of the present national banks of
-the United States explicitly recognizes this old and good distinction
-by requiring the banks to loan money on _personal_ security only, that
-is to say, no tangible things, not even real estate, may be taken as
-_original_ security for any loan.
-
-(2) Henry Dunning Macleod, who has cast fresh light on the nature of
-Credit, draws another distinction that lies on the threshold of the
-subject, namely, that between paper documents conveying titles to
-_specific things_, such as a bill of lading, for example, and those
-conveying _credit-rights_, such as a bank-note, for example. Bills of
-lading describe the goods, go out with the goods, are a title to the
-goods, and have no value separate from the goods; bank-notes have
-nothing to do with any specific pieces of property anywhere, are in no
-proper sense a title to anything whatever, but a general _claim_ for
-something upon some person somewhere that awaits his action for its
-validity and realization. For instance, a grain-dealer in Chicago
-sells 1,000 bushels of No. 2 wheat to a party in New York, and ships
-the grain to that point by rail: two kinds of paper documents arise in
-connection with this transaction, which are quite diverse in their
-nature and course of operation: one is a _bill of lading_, that goes
-along with the wheat, and gives the person named in the bill a
-complete title to 1,000 bushels of wheat of a certain description, and
-the holder of the bill takes the wheat and asks no favors of anybody;
-and the other is a _bill of exchange_, drawn by the grain-dealer in
-Chicago on the consignee of the wheat in New York, which bill of
-exchange is sold at once by the creditor in Chicago to a banker there,
-provided the banker has commercial confidence in the two names on the
-bill and a sufficient motive in the shape of a discount for buying it:
-thus the bill of lading has in it neither element of Credit, neither
-Time nor Trust, while the bill of exchange has both of these elements
-in it.
-
-(3) Attention should be called to a third distinction of the same
-general nature, as between relations very different in themselves and
-yet extremely liable to be confounded with each other. Let us take a
-common instance: a customer of a bank takes a package of valuables of
-any kind to his banker, such as bonds and bills payable and jewels and
-plate, and asks him to take care of it for the present in his vault,
-subject of course to a return to him or any one else to his order at
-any time: no property in these valuables passes over to the banker, it
-is not a deposit in the ordinary banking sense, the relation of debtor
-and creditor does not arise as between banker and depositor, the
-banker becomes Trustee or Bailee of the package, and is bound to
-exercise common vigilance in the care of it, but if it be burned or
-stolen extraordinarily the loss is the customer's and not the
-banker's. But now, on the other hand, when a customer deposits in the
-banking sense money or bills payable with his banker, the property in
-the money and bills passes over to the banker instantly, the relation
-of debtor and creditor arises, the depositor receives a credit on the
-banker's books in return for the money and bills rendered, the
-exchange as a mere case of value is consummated to the profit of both
-parties, but the return-service to the depositor is _the right to
-demand equivalents of the banker at some future time_. In other words,
-it is a case in Credit.
-
-(4) As this general distinction is vital, we shall lose nothing in the
-end if we make even a fourth exemplification of it. The United States
-Treasury receives silver dollars of its own minting from any person
-who chooses to place them there, and gives out in token what are
-called "Silver certificates" to the same amount, entitling the bearer
-to take out the dollars again at will, and thus the certificates being
-more convenient than the dollars and just as valuable become a part of
-the money of the country. The Treasury is bound to exercise due care
-in the keeping of these silver coins, and to return them to the
-holders of certificates on demand, just as the elevator and railroad
-companies are under legal obligations to show diligence in keeping and
-transporting the wheat of our former example; but the United States is
-not _debtor_ to the holders of these certificates any more than the
-elevator company is _debtor_ to the wheat shipper, and consequently
-there is no element of Credit in these certificates. Just so of the
-later gold certificate. On the other hand, the so-called greenbacks
-issued by the United States are also a part of the money of the
-country, but they are _credit_-money, inasmuch as they are a _promise_
-to pay to the bearer some time in the future so many dollars. The
-Treasury has never kept up any special fund of gold and silver, with
-which to redeem the greenbacks. They rest back for their value on the
-good faith of the country. The United States is _debtor_ to the
-bearers, and these in turn are _creditors_, and the legal-tender
-quality of the greenbacks does not alter their character as a form of
-pure credit. Both the elements of good faith and future time inhere in
-the greenbacks, as they do also in the bonds of the United States,
-while in the certificates neither of these elements appears.
-
-However, circumstances easily conceivable and which were actually
-realized in the case of the famous Bank of Amsterdam, founded in 1609,
-might make the United States a debtor and the holders of the silver
-certificates creditors in the commercial sense of those terms. The
-Directors of the Bank of Amsterdam, towards the close of the second
-century of its beneficent existence, loaned out to the Dutch East
-India Company and to the City of Amsterdam large parts of the bullion,
-on which its certificates ("bank money") were based, unknown to the
-public, which felt unlimited confidence in the bank, and the result
-was in 1795, when the French invaded Holland and the facts became
-known, that bank money which had previously borne a premium of 5% fell
-at once to a discount of 16%, although the bullion that remained and
-the debts due the Bank were fully equal to redeem the certificates and
-were used for that purpose. So, if the United States should use,
-clandestinely or otherwise, the silver dollars for other purposes than
-to redeem the certificates on demand, the latter would undoubtedly
-both in law and fact be transformed from mere token-money (as now)
-into credit-money valid as against the United States as debtor, like
-the greenbacks at present.
-
-Have we now compassed our first object? Do we fully understand, from
-the foregoing descriptions and distinctions, the _Nature_ of Credit?
-If so, we are prepared to look narrowly into its _Forms_.
-
-2. Credit-rights are commonly, but not always, recorded upon paper;
-but it is important to observe, that the paper-document is the mere
-evidence of the right, and not the right itself, which lies back of
-the paper as substance to shadow, and persists intact even were the
-paper lost or destroyed. These paper instruments of Credit are
-commonly contemplated as of two kinds, Promises to pay and Orders to
-pay, but there is not at bottom any radical difference between these,
-the Right as between two persons is not affected by this superficial
-difference, as we shall see, and the present enumeration of
-credit-forms will proceed independently of it.
-
-_a._ Book Accounts. A charge in a trader's books is both a current and
-a legal evidence that the person charged has received a certain
-service, and has virtually promised to render the sum charged as a
-return-service. Book accounts are the most common of the forms of
-credit; and if the person charged fails of his own accord to complete
-the exchange thus commenced, the law, in the absence of any proof to
-make the charge suspicious, collects it, if possible, and forcibly
-completes the exchange. The convenience of this form of credit is so
-great, that it is not likely ever to be disused; and as between people
-who deal much with each other is very useful, inasmuch as their
-respective book accounts are set against each other in settlement, and
-only balances are required to be cancelled in money. It is for the
-benefit of both creditors and debtors, however, even when the same
-parties are both creditor and debtor, that such credits should be
-short in time and such settlements frequent, since in book accounts
-there is no interest on charges however long they run, and since in
-this way only can the creditor realize the full gain of the exchange,
-and the debtor keep fair his mercantile name. If it be difficult or
-impossible to follow strictly the excellent financial maxim, "Pay as
-you go," the next best thing to that is, "Go and pay." The gains of an
-exchange are lessened, or its terms become more onerous, just in
-proportion as delay in its completion is experienced or expected. Book
-accounts are subject also to this disadvantage as compared with other
-forms of credit, that their number and amount as against any person
-are less likely to become publicly known, and therefore he is more
-likely to be trusted in this form by others beyond the point of his
-solvency and their safety.
-
-_b._ Promissory Notes. These differ from Book accounts in that they
-are always either expressly or virtually on interest, and are
-consequently negotiable. They are issued by individuals, corporations,
-and Nations. If the principal be deemed secure, that is, if there be a
-thorough trust on the part of the holder in the maker of the note, the
-time of the payment of the principal becomes a matter of comparative
-indifference, because the interest is compensation for delay, and is
-often the motive on the part of the holder for rendering that service
-of which the note is evidence. Indeed a long obligation, other things
-being equal, is commonly preferred to a short one, and bears a higher
-price. When a note is sold (negotiated) by the original holder it
-becomes payable to the purchaser, or to each subsequent purchaser in
-turn, and thus may run a devious round, may play a part in many
-commercial transactions, may be set off by the transient holder
-against a debt owed by him and thus cancel that, and when itself is
-cancelled by ultimate set-off or by any other mode of payment the last
-holder takes the return for the service originally rendered by the
-first holder. The promissory notes of individuals are frequently
-discounted by Banks in a manner to be presently explained. These are
-always for short times, and are debts bought by banks on the personal
-security of the names upon the notes. The notes are founded on the
-relation of debtor and creditor, which is always a personal relation,
-and so differ in their nature from a _mortgage_, which is a qualified
-_title_ to a specific piece of property, usually real estate. A note
-secured by a mortgage is, as it were, absorbed into the mortgage, and
-becomes another thing from a common promissory note, or _commercial
-paper_, as it is called. A mortgage rests therefore on other grounds
-than a commercial trust in the good faith of a _person_.
-
-Corporations also issue promissory notes, and as such issuers become
-in a sense _moral persons_ entitled to confidence according to the
-character and purposes of the individual corporators and the financial
-means and methods of the corporation itself. It is an old saying, that
-"corporations have no souls"; economists as such have no need to
-pronounce on that proposition; the fact is enough for them, that the
-short notes of corporations are often discounted by bankers on the
-same ground as the notes of individuals are discounted; and that their
-long-time obligations, commonly called _Bonds_, are all the time
-bought and sold in the market like commodities. Many of the Railroad
-bonds, of which immense quantities are in the markets of the world,
-rest back also for their security upon _Mortgages_ of the real estate
-of the corporations made over to Trustees to hold for the assurance of
-the holders of the bonds. The personal obligation of the corporators
-is thus reinforced, much as a common mortgage reinforces the note or
-bond, to secure which the mortgage is executed. Whenever _all_ the
-real estate of a railroad company becomes subject to a mortgage, when
-there are previous partial mortgages or liens, these latter take
-precedence in due order of any subsequent pledges or bonds secured by
-what is properly called the _consolidated mortgage_. Such a mortgage
-has recently been executed by the Northern Pacific Railroad Company
-for $160,000,000. Railroad Bonds so fortified in proper and legal
-terms possess the highest possible credit-security to their holders.
-When no such consolidated or "blanket" mortgage has been put on the
-property, first and second and third mortgages sometimes support bonds
-of primary and secondary and tertiary validity; and sometimes
-so-called _Income-bonds_ are issued, with or without mortgages behind
-them, for the payment of the interest on which bonds the net earnings
-of the corporations are specifically pledged. Frequently also simple
-long-time bonds resting on corporation security only are negotiated
-without difficulty.
-
-It must be constantly borne in mind, that certificates of Stock in
-railroad and all other similar corporations are not credit-documents
-at all, but are mere evidences of so much proportional _ownership_ in
-the corporate property. They are not interest-bearing documents at
-all, although they may draw interest or rather dividends, if the
-property be prosperous. They are somewhat like deeds to land, in which
-no element of credit inheres.
-
-Nations too are moral persons in the same loose though binding sense
-as corporations, and as such often issue promissory notes on interest,
-commonly called in this country Bonds, in Great Britain Funds, and in
-some countries Stocks. These are always pure credit. Nations give no
-mortgages. Yet they often borrow at a less rate of interest than the
-most solvent individuals or corporations can, as is seen by the fact,
-that British consols carry but 3%, and yet bear a premium in the
-present market. The term, "consols," is a popular contraction of
-"consolidated annuities," the Act to create which at 3%, out of a then
-confused mass of public debts at various rates of interest passed
-Parliament in 1757. The maximum of the British debt was
-$4,500,000,000 in 1815, and has now decreased to $3,467,787,960.
-
-The United States also sold its bonds at 3% for a small premium in
-1882. It had borrowed of its own citizens in 1862-65, both inclusive,
-about $2,500,000,000 on its bonds at different rates of interest and
-at different times of repayment: some of these bore gold interest at
-6% annually, Government reserving the right to pay the principal in
-five years and pledging itself to pay it twenty years from date, and
-so these bonds were called "Five-twenties"; others bore gold interest
-at 5%, becoming payable at ten and demandable at forty years, and so
-were called "Ten-forties"; and still others bore greenback interest at
-7-30/100%, the principal payable in greenbacks at three years, or
-fundable in gold sixes, at the option of the holders, and these were
-named "Seven-thirties." Over $90,000,000 of this last kind of bonds
-were subscribed for by the American people in the course of a single
-week in the spring of 1865. The whole of our national debt issued
-prior to 1865 was made payable on a day certain; the so-called
-"consols" of 1865 and 1867 and 1868 were payable _not more_ than forty
-years from date; while all the bonds authorized from 1870 to 1882 were
-Consols proper, whose peculiarity is, that they never fall due so as
-to become a claim for the principal against the Government, but after
-a day fixed or on a condition fixed are payable "at the pleasure of
-the United States."[7]
-
-The separate States of our Union, as sovereign in their own sphere
-quite as much as the national Government is sovereign in its sphere,
-have unlimited power to contract debts for State purposes through
-their regularly constituted authorities; and consequently to issue
-promissory notes or bonds to liquidate such debts. New York commenced
-in this way in 1817 the magnificent enterprise of the Erie Canal, to
-connect the great Lakes with the city of New York by an inland
-water-way for commerce, and the completion of this in 1825 made the
-State the "Empire State," and the city the undisputed commercial
-metropolis of the Union. In a similar way Massachusetts undertook in
-1862 the completion of the Hoosac Tunnel for a railway lengthwise of
-the State; and although the process became unduly expensive, and great
-abuses sprang up in connection with it, no one now questions that the
-pecuniary and moral resources of the State have been augmented, on the
-whole, by contracting the debt and providing by taxation for the
-liquidation of both interest and principal. The credit of
-Massachusetts, that is, the ability to borrow money at low rates of
-interest, has been at times greater than that of the United States;
-mainly because the State in 1862 and onwards refused to avail itself
-of a depreciated national paper-money (greenbacks) made legal tender
-for all debts, with which to pay the interest on its then existing
-State debt, but persisted throughout (alone of the States) to pay that
-interest so soon as due in gold coin. On the other hand, several of
-the States of the Union at different times, and under more or less of
-provocation and justification, have made a partial or entire
-repudiation of certain portions of their public debts, justly damaging
-to their individual credit, and even to the good name abroad of the
-whole people of the United States.
-
-Counties and cities and towns may also issue interest-bearing bonds
-for public improvements, which have a _quasi_ governmental character,
-but only under conditions and to a maximum amount prescribed by a law
-of the State.
-
-_c._ Bank Bills. These are a form of promissory notes not on interest,
-and thus differ from the notes of ordinary corporations, and from the
-bonds of nations and states and municipalities; but the issuing Bank
-offers, as a sort of compensation for the privilege of circulating
-notes not on interest, to convert them into coin, that is, to pay them
-instantly on the demand of any holder. It is this proffered and
-immediate convertibility into coin that enables the promissory notes
-of a bank to circulate as money, while the notes of other corporations
-and individuals equally solid and solvent do not circulate as money.
-It must be borne in mind, however, that this offer to convert them
-into the legal and ultimate coin-money does not essentially alter the
-nature of Bank Bills; they are a form of commercial credit; and
-although they are commonly issued against another form of such credit,
-namely, against the interest-bearing promissory notes of individuals
-and corporations who resort to the bank for discount, this only
-complicates the exchange without changing its nature. It is a common
-instance of exchanging one form of credit for another form which
-happens to have a greater currency or validity than the first, and for
-this superiority of the bank credit the individual credit pays an
-interest, in other words, is discounted; and such exchanges of one
-form of paper credit for another, with or without a premium, may go on
-indefinitely; especially as _credit-money_ in the form of bank bills,
-such paper may serve as a medium in many exchanges; but ultimately,
-and before the entire series of transactions is closed, such bank
-bills are to be redeemed in coin, or taken in by the banker in payment
-of some debt due to him, in both which cases they are extinguished as
-an instrument of Credit.
-
-The Bank of England keeps out in circulation on the average
-£25,000,000 in bank bills. It has been computed, that the average
-length of life of a Bank of England bill between its issue and
-redemption is about three days; and no bill once redeemed or received
-back over the counters of the Bank is ever issued again. It is then
-placed on file for record only. The joint-stock and private banks of
-England and Wales circulate on the average rather more than £4,000,000
-of bank bills of their own; and no bank bill of any kind is legal in
-England and Wales of a less denomination than £5. The ten Scotch banks
-and their branches keep out in bills about £5,000,000; six out of the
-nine Irish banks and their branches issue on the average not far from
-£10,000,000; but both the Scotch and Irish banks are allowed to put
-out £1 bills.
-
-Bank bills, as a form of paper credit not on interest, but ostensibly
-redeemable in coin on demand of the holder, have been issued in the
-United States by more parties and to a larger extent and with more
-recklessness as to redemption than in any other country. Omitting all
-reference to Colonial issues, and confining the outlook to the first
-century under the Constitution, let us note, that when the present
-national government went into operation in 1789, the "Bank of North
-America" in Philadelphia and the "Bank of New York" in New York and
-the "Bank of Massachusetts" in Boston had been opened for business,
-and all three were State banks issuing bills convertible into coin,
-though each confined its business mostly to the city in which it was
-located. Two years later under the auspices of Alexander Hamilton,
-then Secretary of the Treasury, the first "United States Bank" went
-into operation at Philadelphia under a charter from Congress that was
-to run twenty years with a capital stock of $10,000,000. At first no
-bills were issued by this bank of a less denomination than $10; the
-money was popular and was converted on demand; the Bank was
-prosperous, and paid dividends to stockholders never falling below 8%
-and frequently rising to 10% annually; as the time approached for the
-charter to expire, the stockholders were anxious for a renewal of
-their privileges; but the opposition to them in Congress was now
-strong, owing mainly to the increase in the number of State banks from
-3 to 88; and accordingly the recharter was defeated in the House by
-one vote, and in the Senate also, by the casting vote of the
-Vice-President, and the Bank was obliged to wind up its affairs in
-1811.
-
-Then came in a sort of mania for the creation of new State banks,
-under the hope that these, now there was no National Bank, might
-obtain the Custody and temporary use of the national funds, and
-especially might furnish the country with paper money in the shape of
-State bank bills. The number of banks went up to 246 in 1816. So many
-bank bills were put out, and became so much distrusted, and so many
-were presented for redemption, that the banks could not respond in
-coin, and in the fall of 1814, there was a general stoppage of specie
-payment in all the banks of the Country excepting those in New
-England. General resumption of specie payment by the banks did not
-take place till 1819. New York bank bills went down to 90%, those of
-Philadelphia to 82%, those of Baltimore to 80%, and those of Pittsburg
-to 75%.
-
-Under these circumstances the Second Bank of the United States went
-into operation in January, 1817, also with a charter to run twenty
-years, with a capital stock of $35,000,000, of which the national
-Government subscribed one-fifth. The new Bank helped indeed the State
-banks to resume specie payments, as was a part of the purpose, but it
-pushed its own bills into circulation with such eagerness, that it is
-thought $100,000,000 of them were in the hands of the people, before
-the first year was out. In this way the Bank fell into difficulties.
-Its bills were distrusted. Coin came to bear a premium over them of
-10%. President Jackson began his famous contest with the Bank seven
-years before its charter was to expire, and took care that it went out
-of being the same year that he went out of office, in 1837, namely.
-
-The next year the State banks increased in number to 675, and
-continued to increase till 1862, when there were over 1500 of them,
-and when the issue of the "Greenbacks" by the national Government
-interfered with what had been their exclusive issuing of the paper
-money after 1837. In 1857, before the commercial panic of that year,
-the aggregate of their bills stood at $214,000,000, the largest it
-ever reached. These bills were nominally convertible into coin at the
-will of the holders, but they were never actually so convertible for
-any great length of time. The ratio of their volume to the specie
-reserved to redeem it was always a very high ratio. For instance, the
-average for the whole country in January, 1863, was 4:1; in Rhode
-Island 12:1; and in Vermont 28:1. Such a paper money can be called
-convertible only by a stretch of courtesy.
-
-It was wisely determined by the People to abandon this loose form of
-paper money, and in 1863 went into operation the present national
-banking system, under which originally $300,000,000 of bank bills were
-authorized to be issued in the aggregate, but this limit was extended
-in 1870 to $354,000,000, and the Act of 1875 removed all restrictions
-on the total amount, while there have always been restrictions on the
-amount that can be issued by any _one_ bank in the system. By the law
-of 1882, national banks may withdraw their bills by depositing lawful
-money in the Treasury to take them up, and then take back the
-proportionate amount of the bonds held for the security of the bills.
-There were outstanding Dec. 26, 1883, $341,320,256 of these national
-bank bills, but their volume declined under the law of 1882 to
-$151,702,809 on Oct. 4, 1888. These bills were from the first
-redeemable in greenbacks, which were themselves, however,
-irredeemable in gold and silver till New Year's, 1879, since which
-time till the present all the paper money of the United States of both
-kinds has been convertible into coin at the will of the holder.
-
-_d._ Bank Deposits. We are studying in order the forms of commercial
-Credits, and we have now come to that one which is central in the
-operations of Banking, and accordingly this is the place for us to
-understand clearly what a Bank is, who a Banker is, and what are the
-motives actuating at once the Banker and his Customers. A BANK IS AN
-INSTITUTION FOR THE CREATION, MANAGEMENT, AND EXTINCTION OF CREDITS.
-Money of any kind plays a very subordinate part in the general
-operations of banks, which live and move and have their being in the
-sphere of pure Credits. _Bankers are buyers and sellers of credits._
-As merchants are dealers in commodities, so bankers are dealers in
-credits, buying (1) some credits with other credits, (2) some credits
-with money, and (3) money also with credits. Before unfolding these
-three operations of bankers in their motives and profits, a glance
-backward to the origin of banks would be a help to us in grasping
-their nature and benefits.
-
-The word "bank" meant originally a mass or pile or ridge of earth, as
-we still say, a _sand-bank_, and the _banks_ of a river. When first
-applied to commercial transactions, the word had a different meaning
-from what it has at present, although the idea of _credit_ has inhered
-in it from the first: in 1171, the Republic of Venice, being at war,
-ordered a forced loan from its citizens, and promised to pay interest
-on it at 5%; and certificates were issued for the sums paid in, and
-public commissioners were appointed to manage the payment of the
-interest and the transfers of the certificates, which were made
-negotiable. The Italian word applied to such a public loan is _monte_,
-but as the Germans were then strong in Italy, the German equivalent
-word, _bank_, came to be used alongside of it and instead of it. It
-meant this common contribution of the citizens to the wants of the
-State, represented by the mass of the certificates, and came to be
-applied also to the _place_ where the commissioners paid the interest
-and transferred the shares. Two other such loans were contracted there
-afterwards, and an English writer, in 1646, quoted by Macleod, speaks
-of the "_three bankes of Venice_," meaning these three public debts,
-including the evidences of them and the place where they were managed.
-
-The Bank of England also was in its origin in 1694 an incorporation of
-those persons willing to subscribe to a public loan in time of stress,
-as "The Governer and Company of the Bank of England." The subscribers
-to a loan of £1,200,000 became an association, or bank, on the
-condition that the Government should pay interest to the lenders at 8%
-annually, and also £4000 a year in addition for the management of the
-bank, that is, of this debt of £1,200,000 which was the sole capital
-stock of the new Company, which was authorized to issue an equivalent
-amount of bank bills to circulate as money. The capital stock was of
-no use, so far as redeeming these bills was concerned, the
-stockholders must furnish other money for that purpose besides what
-they have loaned to the State, but the ownership of so much of the
-public debt divided among the shareholders, made the Bank respectable,
-and tended to give public credit to its bills, which at first were
-paid promptly in coin on demand, and thus the Bank, by increasing the
-volume of money and by showing confidence in the stability of the
-State, strengthened the revolutionary position of William and Mary,
-and consequently the Whigs were the friends and the Jacobites the
-enemies of the Bank. This function of issuing bills or promissory
-notes designed to circulate as money, thus begun and still continued
-by the Bank of England, is much less important in modern banking than
-the other two functions of receiving Deposits and making Discounts,
-but it was the function on which the turn began to be made from the
-older to the newer modes of Banking. All that is needful to be said on
-this tertiary or money-issuing function of Banks has been already
-urged under the last head.
-
-The two Banks of the United States in succession, as they were more or
-less modelled after the Bank of England, gave the same prominence to
-the function of issuing paper money, under the belief that government
-bonds afford the best security for the redemption of bank bills, an
-idea that underlies our present system of National Banks also; and,
-moreover, those two great banks began to teach the people of the
-United States something of the mysteries of _Deposit-banking_, the
-point that we have now in hand. One-fifth of the capital stock of the
-first Bank, $2,000,000 out of $10,000,000, was subscribed by the
-national Government; and besides, the proceeds of the national taxes
-as they were paid in were passed over to the Bank as _Deposits_, that
-is to say, the Bank bought this money of the Government, paying for it
-with a Credit; and then properly used the money as its own in paying
-expenses and in discounting paper. Bank deposits do not belong to the
-depositors, but to the bank; which has thus bought money with credit;
-and when Andrew Jackson suddenly removed from the second Bank of the
-United States the national moneys deposited there, and placed them "in
-the custody," as he expressed it, of certain selected State banks,
-these amounted at the moment to $10,000,000, and the discount line
-resting in part on these deposits was at the time over $60,000,000, he
-removed them under a strong misapprehension _of the nature of such
-deposits_; and their _removal_ affected credit, and disarranged
-business to a remarkable degree, and caused intense excitement all
-over the Union. Depositing those national moneys with the Bank was a
-_trade_ between the Government and the Bank for the time being. The
-Government took in return for the moneys a Right to demand of the Bank
-in future by cheque or otherwise sums at its convenience to the
-aggregate of the sums deposited; the moneys became the property of the
-Bank to be used at its discretion in its ordinary business; the
-Government took its return-service for the moneys in a Credit, that
-is, a right to draw out at its convenience in the future corresponding
-sums; there was a commercial understanding in that case between the
-Government and the Bank underlying the buying and selling involved in
-the Deposit, as there always is between depositors and their banks;
-the banks are always bound to order their business in such a way as to
-be able to respond to every depositor's call for money, when it comes;
-but banks in general find practically that a cash reserve of one-third
-of their Deposits is ample to answer the current demands of their
-depositors, and the remaining two-thirds may be safely used in
-discounting short-time commercial paper to their own profit; Deposits,
-accordingly, are not placed "in the custody" of the banks receiving
-them; they are really bought by the banks of their customers, who
-receive in return certain privileges and credits that they prefer to
-the "custody" of their own moneys; and under these general motives on
-both sides, there has grown up in all commercial countries an immense
-line of Bank Deposits so-called, and perhaps we may say that the
-principal function of banks at present is to buy these deposits with
-their Credit, and then to handle them in further operations to the
-convenience of their customers and to their own gain.
-
-Under our present national banking system the Government is still a
-depositor of public moneys in some of the banks designated as
-"depositaries." At the close of the fiscal year, 1888, there were 290
-of such depositary national banks, and the Treasurer held United
-States bonds of the face value of $56,128,000 and the market value of
-$68,668,182 in trust for these banks to secure public moneys lodged
-with them. This system of national deposit with the banks began in
-1864. The total held by the banks June 30, 1888, was $58,712,511, an
-increase during the year of $35,395,633.
-
-But our concern is especially with the Bank Deposits of individuals,
-with their motives in making these, and with the motives and the
-methods of the bankers in handling them. In order to draw the
-confidence of the people in its locality, a bank must not only be, but
-also _seem_ to be, well-to-do and prosperous. Most bankers find it to
-their account to become known owners of public stocks; and in many
-cases, as in the present national banks of this country, are required
-by law to own such stocks, and this gives them a kind of credit and
-public standing scarcely to be reached by the ownership of ordinary
-property. Thus the Bank of England held at the outset £1,200,000, and
-now holds £15,000,000 of securities, mostly of the public debt of
-England. As merchants begin by laying in stocks of goods of the kinds
-they purpose to deal in and offering them for sale, so bankers begin
-by bringing together money and credits of their own in order to
-attract to themselves in the way of buying and selling the money and
-credits of other people. In order to deal successfully in credits the
-banker must have _credit_, that is, he must have the reputation of
-having property of his own, and of being an honest and careful manager
-of his own affairs and of the affairs of others so far as they are
-intrusted to him. Each of our present national banks, now (1890) 3150
-in number, must have by law a paid-up capital of not less than
-$100,000, and in cities of 50,000 people their capital must not be
-less than $200,000 each, except that in places having less than 6000
-inhabitants banks with not less than $50,000 capital _may be_
-organized at the discretion of the Secretary of the Treasury. The main
-purpose of all this is to secure strong financial organizations fitted
-to draw the confidence of the communities in which they are placed,
-and in this manner and by means also of constant national supervision
-to attract the Deposits of the people to the banks.
-
-Now, as was said a little while ago, perhaps the central function in
-banking is for the banker to receive his customer's money and also his
-credits falling due, and to render to him in return for these _a
-credit_, that is, a right to demand from himself an equal sum at a
-future time or times. The evidence of this right is entered on the
-banker's books, and usually too on the customer's passbook, and thus
-becomes what is called a DEPOSIT. The ownership of the money and of
-the credits deposited passes over completely from the customer to the
-banker. It is a complete case of buying and selling to the mutual
-profit of the parties. The banker has the right to do just what he
-pleases with his deposits, and the customer has a right to draw
-cheques on his credit as and when he pleases; only the banker's entry
-of the transaction on his books is a virtual and a legal _promise_ to
-pay that amount to his customer, and therefore he must be ready to
-respond to his customer's call, whenever the latter demands, not his
-own money, but so much of his banker's money. _A deposit, accordingly,
-is not the very thing deposited, but a credit._ It is the banker's
-promise and the depositor's property. It is in this way that a banker
-buys ready money with a credit.
-
-The motive, then, that leads the depositor to intrust his money to the
-banker is the desire, not to have that specific money kept safely for
-him, for he lost possession of it absolutely when it passed the
-counter, he _sold_ it and took his pay in something else, but rather
-to have the unquestioned right to call on the banker for such sums
-(not to exceed the deposit in the aggregate) and at such times as may
-suit his own convenience. He has such confidence in the integrity and
-solvency of the banker, finds it so practically convenient to have
-dealings with him, and comes to have certain minor privileges at the
-bank in other relations over non-depositors, that he quite prefers a
-credit on the banker to the possession of the money itself.
-
-The corresponding motive of the banker to receive his customer's funds
-on these terms is that he finds by experience (his own and others'),
-that he can safely use a large portion of these moneys deposited in
-other operations in credit profitable to himself, and at the same time
-be practically sure of meeting all his customer's calls for money as
-they are made. Every good banker finds out, that many of his customers
-wish always to leave a balance in his hands; that while some of them
-are constantly drawing cheques on him for cash, others of them are as
-constantly depositing with him in cash; and that consequently he can
-properly and safely use a large part of the money he has purchased
-with his credit to purchase other credits with. Deposit-banking,
-therefore, is not only convenient and profitable for the depositor,
-but also excellent and profitable for the banker.
-
-Besides these two parties benefited, there is a gain, too, for the
-community at large in deposit-banking; inasmuch as a new capital as
-such has been thereby created, a series of new values, which would not
-otherwise have existed at all. Were there no deposit-bank in that
-locality, every man now a customer of it would of course keep his own
-reserves for himself for prospective contingencies: now, all these
-little reserves are aggregated in the bank, the convenience of them
-for each customer's contingencies is just as great as if he kept his
-own in his own safe or wallet, but the banker finds that he can use,
-say two-thirds of the whole, and still answer each customer's call.
-Here is a new capital. Here are scattered valuables brought together
-to be loaned out to a profit, which were otherwise barren and useless
-for the time being. Industry is quickened in a wide circle, products
-are created and brought to market, wages are paid and profits are
-gained, in direct consequence of bringing together under favorable
-auspices for safe loaning the little hoards and driblets of many
-individuals, which were practically useless in isolated hands.
-
-It may easily be objected at this point, that it is entirely possible
-that any banker might be called upon to pay off all his
-deposit-liabilities at once in money, which, if it happened, would
-break him of course; so it is abstractly possible that all the lives
-insured in a Life Insurance Company might terminate in one day, in
-which case no Company in the world could meet its obligations; and so
-it is abstractly possible that all the houses insured in a Fire
-Insurance Company might be burned up in a single night, which, if it
-happened, would cause the collapse of the soundest company; but in all
-these cases of possibility there is a _certainty_ that the possibility
-will not become a fact. _Ex nihilo nihil fit._ A supposition
-practically impossible to become a fact can yield no logical inference
-whatever. The Greek language has a special grammatical form for a
-hypothesis impossible to be realized in fact: would that the English
-had also such a form of speech! It would save us a mess of bad
-reasoning. If, however, any banker may have misjudged for his locality
-at any time the proper ratio of reserves kept to deposits received,
-and be crowded in consequence, he must sell some of the securities
-bought with the excess, or borrow money on them.
-
-Surprisingly large is the amount of bank deposits in all the leading
-commercial nations of the world. The average public and private
-deposits of the Bank of England, on which no current interest is paid
-by the Bank, amounts to about £40,000,000 all the time. The ten
-joint-stock banks of London carry about £80,000,000 in private
-deposits, of which those to remain some time _draw_ an interest, but
-those lodged on current accounts and on call _draw_ none. Scotland has
-carried deposit-banking further and to greater advantage than any
-other country in the world. There are now no private banks in
-Scotland, but the ten joint-stock banks with their numerous branches
-scattered to every village in the land hold constantly about
-£70,000,000 as individual deposits, on which current interest is
-allowed, and so the habit of keeping one's account with a banker has
-become universal with the people. No one thinks of keeping money to
-any amount in his house or about his person, and consequently
-house-breaking and highway robbery have almost ceased. Bankers even
-attend all the great fairs in the country to receive deposits and to
-pay off cheques. Credit in this form and in another form soon to be
-described treads its utmost verge in Scotland. Although in the United
-States the custom of keeping deposits with bankers and drawing cheques
-against them has not gone nearly so far as in Scotland, and not nearly
-so far as it will go in the immediate future, yet the aggregate of
-individual deposits in the national banks alone, Oct. 4, 1888, was
-$1,350,320,861, an increase in just seven years of 26%.
-
-_e._ Bank Discounts. The credits that are discounted by bankers may be
-either the promissory notes of individuals and corporations already
-characterized, or the Bills of Exchange soon to be characterized, but
-the entire function of discount is so peculiar, that the paper
-subjected to it ought to be enumerated in a classification of the
-instruments of Credit. The discounting of commercial paper is the
-second essential function of banking, as the buying and handling of
-deposits is the first; and it is more in accordance with genuine
-_banking_ to pass the price of the paper discounted to the seller's
-credit in the form of a deposit, that is, to buy one credit by
-creating another, than to pay the money over the counter at once, and
-thus to buy credits with money. Those who do the latter are called
-_bill-discounters_ rather than bankers, but most of our bankers do
-both, though there is a tendency towards the separation of the two in
-this country also.
-
-Manufacturers and wholesale merchants usually sell their goods _on
-time_, as it is called, say three or six months. Debts are thus
-created, or to say the same thing in other words, Credits are thus
-given. The manufacturer or wholesaler is creditor and the jobber or
-retailer is debtor. But a debt is property; and the creditor in this
-case wishes to avail himself of his property at once for further
-production; so he either takes a Promissory Note from his debtor, or
-draws a Bill of Exchange upon him, and this piece of property is ready
-for sale. Neither piece mentions _interest_ expressly, but the face
-sum virtually covers it as contemplating discount. Banks have been
-organized for the express purpose of buying for their own profit and
-for the convenience of business such pieces of property; some banker,
-accordingly, buys this particular piece, that is to say, this creditor
-passes over to this banker the commercial right to demand payment from
-this debtor at the end of three months, and receives in return from
-the banker either money direct or so much of the banker's credit, that
-is, a deposit in favor of the creditor on the banker's books. For
-furnishing this creditor either with ready money or a more available
-credit in lieu of his mercantile paper, the banker charges of course
-_a percentage_. This is _Discount_. _Discount is the difference
-between the face and the price of the paper._ This percentage called
-discount is the chief source of profit in ordinary banking. It is
-virtually compound interest on the sum advanced till the maturity of
-the paper, when the banker realizes from the debtor its full face.
-
-The following is a common form of a bankable note:--
-
-    $1,000               WILLIAMSTOWN, Mass., Nov. 10, 1889.
-
-     Three months after date I promise to pay to the order of
-     JOSHUA SWAN, one thousand dollars, payable at the
-     Williamstown National Bank, value received.
-
-     Due Feb. 10/13.                          LEANDER ALLEN.
-
-When Swan has put his name on the back of this note, that is in bank
-phrase, has _indorsed_ it, in token that he thereby at once sells and
-guarantees it to the bank, it is then discounted on the strength of
-the two _names_, Allen and Swan. As Allen technically takes the
-advance from the bank for his own benefit, he is technically expected
-to take up the note when it matures, and if he do not, the bank falls
-back on Swan, who is equally bound with Allen to see that it is paid
-at the proper time. Two names are nearly always, not always, requisite
-to a note acceptable for discount at a bank; and more names merely
-strengthen the note, since it is discounted on the combined validity
-of all the names upon it.
-
-One obvious advantage of discount is, that it tends to make all
-capital active and thus productive. It enables the banks to sell their
-credit and make a gain, to use a part of their money deposits to buy
-mercantile paper with, and so get a bank interest on them; it enables
-dealers in commodities to realize in cash _minus_ the discount the
-sum of what they have sold _on time_; and by means of _accommodation_
-notes or bills, which only differ from the others in that there is no
-_actual_ debt between the parties, business men may swell the volume
-of their business temporarily, and non-business people may borrow
-small sums for convenience or emergencies. Bankers have not always
-credit enough or money enough from their depositors to buy in either
-mode all the good paper that is offered to them, in which case, they
-raise the rate of discount unless the law forbids, or by easy evasions
-even when the law forbids; or else accommodate regular customers and
-large depositors first, or buy of all that are "good" a certain
-proportion only.
-
-The discount line of 3140 national banks reporting Oct. 4, 1888, was
-$1,674,886,285.29.
-
-It is thus through the purchase of discountable notes for money, that
-banks derive their partial character as money-lenders. Also, such
-reserve sums as they do not wish to invest in negotiable paper, on
-account of the time involved before such paper matures, banks
-frequently loan _on call_ to those customers who have good collateral
-securities to pledge for the repayment of such loans. The terms of
-such a contract give the bank full authority to sell such collateral
-"_at the Brokers' Board or at public or private sale, or otherwise at
-said bank's option, on the non-performance of this promise, and
-without notice_." So far forth banks become direct money-lenders. It
-ought also to be added, that promissory notes with a single name (or
-more) are often discounted by banks partly on the strength of
-collateral securities deposited to fortify the names upon the notes.
-
-_f._ Bills of Exchange. A Bill of Exchange is a written instrument
-designed to secure the payment of a distant debt without the
-transmission of money, being in effect a setting-off or exchange of
-one debt against another. It is in form and in several technicalities
-different from a promissory note, inasmuch as it is an _order to pay_
-instead of a _promise to pay_, and inasmuch as the maker of a note is
-always _debtor_ and the drawer of a bill of exchange is always
-_creditor_; but all this makes practically very little difference
-between the two as instruments of Credit, since nearly all bills of
-exchange come into banks in the way of ordinary business, either for
-discount or collection, and as the banks care nothing except for
-_names_, the _form_ of the purchasable paper is a matter of
-indifference to them. The following is the essential form of an inland
-bill of exchange:--
-
-    $3,000                 PITTSFIELD, Mass., Oct. 16, 1889.
-
-     Four months after date pay to the order of JOHN KENT three
-     thousand dollars, value received, and charge the same to
-     account of
-
-     To ELI TRIPP, Boston, Mass.                 DAN STORRS.
-
-In the case of this bill, which may serve as a sample of thousands,
-Storrs is the _drawer_, who is creditor in relation to Tripp, and
-Tripp is _drawee_, but Storrs is debtor in relation to Kent, who is
-the _payee_. A bill of exchange is the sale of a debt, in such a way
-that two debts are so far forth set off against each other, and both
-transactions are closed without sending any money at all. Tripp owes
-Storrs, and Storrs owes Kent, and so Storrs pays Kent by an order on
-Tripp. As this is a bill at four months, Kent will doubtless send it
-to Tripp for his _acceptance_, as it is called, that is, his
-acknowledgment that he owes Storrs to that amount, and that he will
-pay the sum to the holder of the bill when it becomes due. An
-acceptance is written on the _face_ of a bill, and an indorsement upon
-the _back_ of the note: the initials are sufficient for the name of
-an acceptor, but the full business name is usual for an indorser.
-
-Thus a bill of exchange is the formal sale of a debt, in order to
-liquidate thereby another debt, when the parties to the transaction
-live in different and distant places. Storrs does business in
-Pittsfield, and Tripp in Boston, and it is a matter of comparative
-indifference where Kent lives, unless there is trouble at the time of
-collection, for he will perhaps negotiate this bill again, that is,
-make use of it to pay some debt that he himself owes. It is not often
-that the same person, as Tripp, happens to owe another person in a
-distant town, as Storrs, the same amount as Storrs owes another person
-somewhere, as Kent; but by two bills of exchange, one drawn by each
-creditor on his own debtor, and then each set off against the other,
-through the simple and beautiful expedient of bank balances,
-substantially the same advantages are reached as if it always happened
-so. Many bills of exchange are drawn _at sight_, as it is called, in
-which case the payee presents it for payment to the drawee, there is
-no acceptance and no discount, and a bill of this kind becomes the
-same as a cheque.
-
-Time bills, however, are usually discounted: the payee indorses his
-claim over to a fourth party by name, or, by what is called an
-indorsement _in blank_, that is, by merely writing his own name on the
-back of the bill, makes it payable to bearer: when banks buy these
-bills for discount, it is on the joint credit of acceptor and drawer
-and payee, and in that order of validity and precedence: a promissory
-note may be protested by a bank without notice to the maker, but a
-bill of exchange cannot be without notice to the drawer: a promissory
-note has two parties to it, a debtor and a creditor; while a bill of
-exchange has three parties to it, two creditors and a debtor.
-
-Inland bills of exchange, both time bills and sight bills, are very
-convenient in settling debts between distant places without the
-costly, and more or less hazardous, transmission of money back and
-forth; besides this, time bills possess the very useful function of
-enabling a debt due from one person to avail the creditor as a means
-of obtaining credit from a third party in discount; and in addition to
-these two points of benefit, it is plain, that the common use of bills
-of exchange in all their forms releases from use large amounts of
-money that would else be needful in trade. The less money in use in
-any country beyond a certain point, the better, because, if coin, it
-costs much to mint and maintain it, and if paper, it is difficult to
-make and sustain it of full value.
-
-Bankers sometimes change what they call "exchange" for settling debts
-between distant places in the same country; in some cases there may be
-a sound reason for this, in other cases there is none, but in all
-cases it adds a little to the profits of the banks for handling the
-bills of exchange; the principle of charging an "exchange" is
-this,--when one place as Chicago draws more bills on another place as
-New York than suffice to cancel the bills drawn at that time by New
-York on Chicago, the point _at_ which the larger indebtedness lies is
-the point for sending drafts _to_ which banks naturally charge a
-percentage; perhaps the idea, which is actually realized in foreign
-exchange, that money may have to be sent to liquidate such a balance,
-may have brought in the custom of charging "exchange" in such cases;
-and there are instances aside from such a supposed balance, in which
-there may be an extra cost of collection in some form to the bank,
-that may justify an "exchange" charge; but there is another principle
-counterworking and often neutralizing entirely this alleged doctrine
-of a "balance" of debt as between two distant places, namely, that the
-chief settling place and commercial centre of a country, such as New
-York is, draws towards itself from the whole circuit with such force,
-everybody wanting a balance there and having occasion to send funds
-thither, that drafts on such a place are apt to bear a premium without
-any reference to its comparative indebtedness at the time.
-
-Very similar to these inland bills in their nature and course and
-usefulness are Foreign Bills of Exchange, which, as a vastly important
-topic, especially in its relations with Foreign Trade, we must now
-study minutely and completely. Commercial relations between two
-countries, let us say, for instance, France and England, always give
-rise to a mutual indebtedness of their merchants; if these reciprocal
-debts were all to be paid by the actual sending of money to and from,
-there would have to be a constant and expensive and more or less
-hazardous outward and inward flow of the precious metals in respect to
-each country; all which necessity is neatly obviated by the use of
-reciprocal bills of exchange, and coin is only transmitted to settle
-the balances on whichever side there may happen an excess of debt at
-the time. French dealers are always sending goods to England, and
-English dealers goods to France; and for what they send to England the
-French merchants draw bills of exchange on the parties to whom the
-goods are consigned, and the English merchants draw similar bills on
-their debtors in France; then these bills are bought up by bankers or
-brokers in either country, and virtually exposed again for sale
-through new bills drawn against them to any parties who may have debts
-to pay in the other country. Thus bills on London, in other words, on
-English debtors, are always for sale in France; and bills on France,
-that is, on French debtors, are always for sale in London; the
-reciprocal debtors of the two countries, therefore, instead of sending
-coin to cancel their debts, buy and transmit these bills.
-
-Let us take a sample instance. Pierre & Co. of Paris send a cargo of
-wine worth £1000 in English money to John Barclay of London. Barclay
-thus becomes indebted to the Paris firm to that amount, and Pierre &
-Co. draw at once, so soon as the cargo is despatched, a bill in francs
-to the equivalent of £1000. If they themselves have no debt to pay in
-London, they will sell this bill immediately to a Paris banker or
-broker (if the exchange be then at par) for its full face _minus_
-interest for the time it has to run, say two months; this broker is
-now ready to sell this bill again, or what is the same, his own bill
-drawn on the strength of it, to anybody in Paris who may have a debt
-to pay in London; and the party in London who receives it in
-liquidation of a French debt to him, presents it at maturity to John
-Barclay for payment. Thus one bill of exchange serves the ends of two
-creditors and one debtor: Pierre & Co. get their pay for the wine, the
-London party gets his pay for goods, and Barclay pays his debt, by
-means of it. A bill drawn in London for a cargo of hardware sent to
-Paris is similarly negotiated with a London broker or banker, and
-finds its way similarly to France in payment of some English debt owed
-there, and ends its course when it reaches the French firm on which it
-was originally drawn.
-
-We are now in position to understand clearly what is meant by the _par
-of Exchange_ in its commercial (not coinage) import. The merchants in
-Paris, who have debts due to them from London, draw bills of exchange
-for the amount of these debts; and, through the agency of middlemen,
-go into the market to sell these bills to other Paris dealers who have
-debts to pay in London. If the former class have a larger amount to
-sell than the latter have occasion to buy, in other words, if there be
-a larger amount of debts due from London to Paris than from Paris to
-London, then the natural competition of the sellers in Paris of the
-bills on London will lower their price somewhat in that market
-(Paris), in order, as usual, that the Supply and Demand may be
-equalized there. In this case the par of exchange is disturbed, a bill
-on London for £100 in francs may not sell for over £99, and the
-exchange is then said to be 1% _against_ London, or, which is the same
-thing, 1% _in favor_ of Paris.
-
-The _par of Exchange_, accordingly, between two countries, depends on
-the substantial equality of their commercial debts. In the above
-example, if the exchange as against London in favor of Paris continue
-long, and especially if the premium of 1% on bills drawn in London on
-Paris be sufficient to cover the expense of the transmission of specie
-from London to Paris, gold will begin to flow from London to Paris,
-because the debtors there may find it cheaper for themselves to buy
-and send gold than to pay the high premium on bills; and thus the
-equilibrium of payments and the commercial par may be restored. Also,
-this par tends to restore itself, without any sending of specie, in
-this other perfectly natural and effectual way: if bills on Paris are
-at a premium in London, for the same reason that they are so will
-bills on London be at a discount in Paris; therefore, there will be a
-direct encouragement to the extent of the premium for _exportation_ of
-goods from England to France, because on every cargo thus sent bills
-can be drawn and sold in London for a premium; while the more bills on
-Paris thus offered in London, the more the premium disappears of
-course, and the par will be restored so soon as the bills on Paris
-substantially equal the bills on London offered in Paris; and at the
-same time, so long as the discount on London bills continues in Paris,
-there is a direct _discouragement_ to further exportations from France
-to England, because the bills drawn in virtue of such cargoes can
-only be sold below par, and this too tends to _restore_ the par in the
-commercial sense of the term.
-
-Here is another instance of a magnificently comprehensive law, by
-which Nature vindicates her right to reign in the domain of Exchange.
-It is through this natural and beneficent law of automatic
-compensations, stimulating exportations on the one side and slackening
-them on the other, that most of the casual disturbances of the
-commercial par as between two countries are easily and perfectly
-rectified.
-
-While this great law is in full possession of our minds, let us note
-in passing how artificial restrictions by one country on the
-importation of goods from another, commonly called "Protectionism,"
-affects this commercial par as between those two countries. Besides
-stopping absolutely a mass of otherwise profitable exportations and
-importations for both countries, it makes less profitable to the
-country imposing the restrictions whatever foreign trade _does take
-place_ between them in spite of the restrictions. Suppose England, as
-is the fact, opens her ports freely to the commodities of France,
-while France puts restrictions in the shape of heavy taxes upon
-importations from England; more French goods are likely under these
-circumstances to seek English ports than English goods to seek French
-ports, because they are more welcome; consequently, more bills of
-exchange drawn on London will naturally be offered in Paris than bills
-on Paris in London, and will so far forth be sold at a discount, while
-the London bills drawn on Paris will be sold at a premium; in other
-words, the comparatively few goods that do get out of a "protected"
-country, realize less to their owners than the natural value, because
-the bills drawn on them are extremely apt to be sold below par! With
-this course of things all known facts agree. Since the United States
-became conspicuously a "protected" country a quarter of a century ago,
-it has been at rare intervals and for short periods that bills drawn
-here on London have been at par. They have been usually much below
-par. The equivalent of £1 sterling in United States money is $4.8665;
-and when bills on London sell for less per pound sterling than $4.86,
-they are at a discount in New York or Boston; and exporters here are
-direct losers to the extent of the discount.
-
-If, however, notwithstanding the beautiful action of this great law of
-commerce, the disturbance in the commercial par as between two
-countries continues obstinate, it indicates one of several things as
-true of the country, whose bills of exchange drawn on another persist
-in a considerable discount; (1) it has come to be a pretty steady
-debtor country as towards the other, by sending thither its national
-or State or corporation bonds, whose interest and ultimately principal
-also must sooner or later be remitted in exports _extra_ to the
-exports needed to pay for the current imports of goods; (2) it has
-either naturally or by persistence in a bad public policy little or no
-shipping of its own, so that freights both ways have to be paid to
-foreigners in the form of exported goods _extra_ to those exported to
-pay for those imported in transient trade, which of course increases
-the number and face of the bills drawn _in_ the luckless country _on_
-the lucky country or countries; (3) it has made the vast and fatal
-mistake of excluding by legal barriers of taxes put on for that
-purpose the goods of foreigners, whose only motive in coming is to
-take off corresponding goods of the deluded country's own to the
-profit of both, and so these last-mentioned goods must seek a foreign
-market (if at all) at reduced rates, their natural market having been
-destroyed by national law; and (4) it may have made the national money
-in which the bills drawn on it are liable to be paid an inferior
-money, either transiently by mere abundance or permanently by worsened
-quality, which is well illustrated in the instance of Amsterdam as
-cited in a preceding chapter, and which can only be remedied by
-raising the standard of the money to the level of the best.
-
-Very little, if anything, can be inferred as to the prosperity of a
-country or even as to the real condition of its "exchanges" in this
-technical sense of the term, by the transient movements of gold to and
-from the commercial countries, in their present complex relations as
-gold-producing and non-gold-producing countries and as debt-settling
-and non-debt-settling centres. Gold moves back and forth in obedience
-to several other impulses than to settle the balances in an
-international trade of Commodities. Gold-producing countries of course
-export gold just as they would any other native product. If for any
-reason gold becomes relatively more abundant in one country than in
-other commercial countries around it, general prices will rise in that
-country in consequence; which means, that gold is then and there the
-cheapest article that the people of that country can export to pay
-their commercial debts with. Also, the imports which a nation pays for
-in gold, or in bills of exchange bought above par, are often bought
-with a high profit. Creditor nations, nations that have managed to
-make themselves settling-places for the world's commercial debts, and
-nations that welcome imports without impediment from every quarter of
-the earth (and England may serve as a sample for all these three),
-will largely pay for imports in gold or in bills bearing a premium.
-
-It is a thousand pities, that technical terms which are quite
-misleading unless one remembers their origin and exact significance,
-have come to be intrenched in commercial language too strongly to be
-dislodged at this late day, as the common terms to express the state
-of the "exchanges" as between two countries. These terms are
-"_against_" and "_in favor of_." The old Mercantile system, which has
-left other unsavory progeny behind it besides this, in order to keep
-and heap gold and silver in a country, encouraged exports in every way
-and discouraged imports, in order that the "_balance of trade_," as
-the phrase ran, that is, the difference in volume between exports and
-imports, might come back to the country in gold and silver; and this
-foolish and now thoroughly exploded notion gave rise to the terms in
-question; exchanges were then said to be "against" a country when the
-record seemed to show more imports than exports, as if that implied
-that the imports were too great for a "balance" in gold and silver;
-and were said to be "in favor of" a country when its export-line was
-greater than the line of imports, as implying a favorable balance to
-be met by a specie-import in future. The false "System" is gone
-forever, but the "terms" still abide in commercial language, and
-confuse the minds more or less (more rather than less) of everybody
-who tries to make these terms a vehicle of thought. We have now
-described the causes and courses of international bills of exchange
-without resorting to these technicalities, which imply movements of
-gold and silver which do not actually take place under the conditions
-supposed; for example, the exchanges were "in favor" of the United
-States in 1874-77, there being an apparent trade balance of
-$164,000,000 in 1877 and a still larger in 1876 and a larger one in
-the two years preceding, but the import of specie was small in all
-those years, averaging about $25,000,000 a year, and the rest of the
-excess of exports went to pay interest due to foreigners, freights on
-the cargoes both ways, and so on. It is difficult to use without
-abusing the terms "against" and "in favor of" in this connection, and
-the reader is cautioned not to employ them; although "discount" and
-"premium" on international bills of exchange are matters extremely
-important to observe and to know the grounds of. Were there no
-counterworking principle, bills of exchange drawn _on_ capitalist and
-creditor countries, like Great Britain, whose imports are apt to be
-strongly in excess of the exports, and whose public policy is wise
-enough to put no obstacles in the way of the free receipt of imports,
-would be at a _discount_ in countries sending exports thither.
-
-This counterworking principle, already illustrated as to inland
-exchange in the case of New York, is best seen internationally in
-connection with London, which is the settling-place of the world's
-commerce. When the Romans dredged the Thames and made "the pool" just
-below London Bridge, they took the first steps towards making that
-town a commercial centre; since a market for products is products in
-market, the busy exchange of commodities there has quickened in every
-age the accumulation of capital and the increase of population;
-previous to the Dock Laborers' Strike in 1889, about 100 vessels
-entered the port of London every day, which received about one-half of
-the total customs revenue of the United Kingdom, and sent out about
-one-fourth of its exports; the business of out-of-the-way and
-semi-civilized countries has somehow (and it would not be hard to tell
-why) centered in London, as well as the business of originally British
-Colonies everywhere and of all other commercial countries;
-accordingly, debtors and creditors abound there, bills of exchange
-concentre there, and debts due from everywhere are payable _there_;
-and therefore, because bills on London are good all over the world,
-the Demand for them counterworks the natural cheapness of the bills
-drawn on exports _thither_ as compared with the natural dearness of
-the bills drawn there on exports _thence_.
-
-Another thing must be borne in mind in comparing the merchandise
-accounts of any country, namely, that whenever the "exchange" is
-sufficient to cover the cost and risk of the transmission of gold,
-gold itself is likely to go freely from the country, in which bills
-drawn on exports are at a premium, or to use for once the old
-hazardous phrase, "_against_" which the exchanges have turned, and
-bills will be drawn on that gold, as upon common merchandise, and sold
-of course for the sake of the premium; or, if a decidedly higher rate
-of discount prevail in a neighboring country, gold will naturally go
-thither from the lower-rate lands, because lenders in the latter will
-desire to realize the higher rate of current interest on money, and
-bills will be drawn on this gold as well, which will tend to lower the
-premium on bills there; unless, then, the premium _and_ the difference
-in interest abroad will justify the speculation, the gold will not
-stir; although, if the difference in interest abroad were very
-considerable and promised to continue for some time, the bills on the
-gold might sell at a discount and still leave a profit to the senders;
-but the home bankers can always stop a drain of gold of this kind by
-raising their own rates of discount.
-
-This casual mention of bankers leads on to the weighty point, that the
-whole business of foreign exchange is falling more and more into the
-hands of the bankers, because bills drawn _by_ and _upon_ well-known
-bankers naturally have a better credit than ordinary commercial bills,
-the names upon which are less widely and favorably known. Accordingly,
-persons sending cargoes of cotton, say, or of any other valuables,
-from New York to Liverpool, arrange with their bankers in New York to
-have the proceeds of the cargoes put to the _bankers'_ credit in
-London, and then these bankers draw bills on the London bankers, which
-will bring a higher price in New York than a common commercial bill,
-because many remitters and most travellers prefer bankers' bills,
-which, though they cost more, pay better and buy better abroad.
-Commercial bills are still bought and sold in every commercial town,
-but bankers' bills are more and more taking their place; and the
-quotations usually give the current price of each.
-
-London is so prominent as the settling-place of the world's
-transactions by means of bills drawn on and by London bankers, partly
-on account of the commercial predominance of England, partly from
-excellent banking customs there, and mainly because an immense mass of
-cheap loanable capital exists there, which even foreigners may borrow
-at London rates, provided only that they can get credit there, that
-is, leave to draw on a London banker, to whom of course remittances
-must be made as fast as he accepts their bills. Besides, the Bank of
-England, as the principal bank in Great Britain, and as closely
-connected with the Government, acts as a bank of support to the public
-and private Credit of that country. It does a regular business as a
-bank of deposits and discounts, but it means to keep its rate of
-discount somewhat above the rate demanded by the other bankers in
-London, so as not to come into competition with them much in their
-ordinary business, and be able to act as a bank of support to them and
-all others in times of pressure. All banks have about so much credit
-to sell, _and no more_; most banks sell in ordinary times about all
-the credit they have, because their profits depend on that; but if the
-Bank of England did this, it would become useless in periods of panic.
-In point of fact, that Bank just begins to sell its reserve credit,
-when the credit of the bankers below is exhausted. When they are at
-the _end_ of their rope, there is generally an abundance of slack rope
-still in the great Institution above.
-
-Now, as gold can be drawn out of the Bank of England by the cheques of
-depositors as well as by the presentation of its own notes for
-redemption, the Rate of Discount becomes a matter of prime importance
-in the management of the Bank. The whole line of deposits is a line of
-liabilities to pay out gold, if the depositors demand it; and, as
-deposits come largely through discounts, whenever there is a strong
-tendency to draw out gold so as to weaken the reserves of the Bank,
-the directors have an effectual remedy by raising the rate of
-discount. The higher the _price_ the Bank charges for its credit, the
-fewer, so far forth, will be its customers, and the smaller its line
-of deposits, and the less likely a continuous drain of gold from its
-vaults. The Bank of England is managed throughout by so simple a
-manner as the turning back and forth of this magic screw of Discount.
-
-Besides the use of the term "Par of Exchange" in the broad commercial
-sense in which we have now been examining it, as indicating the
-substantial equality of international debts as between two countries
-by the current prices of bills of exchange, there is another and
-subordinate sense in which the phrase is employed, namely, as denoting
-the _relative value_ of the coins of one nation in the coins of
-another. Thus, our present gold dollar contains 23.22 grains of pure
-gold; the English pound sterling contains 113.001 grains;
-consequently, there are $4.8665 to the English pound; and this is the
-"par of exchange" (in the secondary sense) between the United States
-and Great Britain. Between the United States and France the "par" is
-$1 to 5.18 francs, since the franc is 19.29 of our cents. An English
-shilling equals 24.33 of our cents, the new German "mark" is 23.82
-cents, and the new Scandinavian "crown" equals 26.78 cents.
-
-_g._ Bank Cheques. In substance indeed and even in form, Cheques are
-Bills of Exchange, but the two have such differing legal incidents,
-and run so different a course towards extinguishment, that for our
-purposes in this treatise they should be put under a separate
-discussion. Bills of exchange are expressly drawn "at sight" or for a
-day certain, when they become payable by the drawee: cheques _say_
-nothing about "sight" or any future date, though they are _really_
-drawn at sight, and are payable to bearer on demand: they must,
-therefore, be presented for payment within the shortest reasonable
-time (all things considered), in order that the holder may legally
-claim against the drawer should the banker fail meantime: a cheque is
-held as the payment of a debt until it be dishonored on presentation:
-the banker bears the risk of the forgery of the drawer's name, unless
-his mistake be made easier by the drawer's carelessness in drawing: a
-cheque is not payable after the drawer's death. The parties to cheques
-are the Drawer, who is a depositor with some banker; that banker thus
-becomes the Drawee; and the person named in the cheque is the Payee,
-who can indorse his own right over to another person by name or in
-blank to bearer. When a cheque is drawn in this way by one _banker_
-upon another, it is usually called in this country a _Draft_.
-
-Formerly in England, and in other countries as well, each considerable
-dealer kept his own strong box, and when he had occasion to make
-payments, told down the solid cash upon his own counter. Afterwards,
-the goldsmiths of London solicited the honor of keeping in their
-vaults the spare cash of the merchants, and these in their payments
-among each other came to employ orders or cheques drawn on the
-goldsmiths, and at the shops of the latter the principal payments in
-coin were effected. The later introduction of Banks brought along with
-it the custom, now continually widening in commercial countries among
-all classes of the people, of keeping one's funds with some banker,
-and making payments by written orders or cheques upon him. When the
-person making the payment and the person receiving it keep their money
-with the same banker, there is no need of any money at all passing in
-the premises, the sum being merely transferred in the banker's books
-from the credit of the payer to the credit of the receiver. The banker
-is quite willing usually to do this business for nothing, and even
-sometimes to allow the depositors a low rate of interest on all
-balances remaining in his hands, in consideration of the privilege
-involved of loaning such proportion of the aggregate of these sums as
-he deems safe to other parties at a higher rate of interest.
-
-In the larger cities, by an arrangement called the "Clearing-house,"
-substantially the same benefits are secured as if all the depositors
-of the city kept their cash at the same bank; inasmuch as all the
-cheques drawn on each of the different banks, and passing in the
-course of the business day into other banks, are assorted before
-evening at all the banks, and adjusted the next morning through the
-clearing-house, and the credits and debits of each bank are set off as
-far as possible against each other, leaving only small balances to be
-settled in money.
-
-The London Bankers' Clearing-house was established in 1775; in 1864,
-the Bank of England was admitted to it; and since then, the
-Clearing-house itself, and all the bankers and firms using it, keep
-accounts with the Bank of England, and the balances, formerly settled
-by money, are now adjusted by simple transfers of account on the
-books of that great Bank. This carries out the grand principle of the
-Clearing further than it has yet been carried in this Country,
-although the United States Sub-Treasury not very long ago joined the
-New York Clearing-house, while the practical details of the Clearing
-are simpler and better in New York than in London. The average
-clearings in the London house (and there are besides many other
-clearing-houses in the United Kingdom) were £5,218,000,000 a year for
-1875-80, and the amounts cleared frequently rose to £20,000,000 a day;
-which, if paid in gold coin, would weigh about 157 tons and require
-about 80 horses to carry it; and if paid in silver coin would weigh
-more than 2500 tons and require 1275 horses. This is stated on the
-excellent authority of the late Professor Jevons.
-
-The total business of the 23 clearing-houses of the United States in
-1880 was over $50,000,000,000; the New York Clearing-house did 65% of
-that business for that year; and the average daily clearings there for
-the fiscal year 1879 were $76,167,983.
-
-We will now describe mainly from personal observation the New York
-Clearing-house, which was established in 1853, premising that the
-principle is the same, though the details may be different, in all
-other clearing-houses wherever located. Business men in New York, as
-elsewhere, usually pass in to their bankers as a deposit all the
-cheques and current credits received in the course of a business day.
-It is the custom for everybody to draw his own cheque _on_ his banker
-to make payments with, and to pass in _to_ his banker the cheques he
-receives from others. Say there are sixty clearing-banks in New York
-City. Each of these banks sorts out after business hours every day all
-the cheques it has received that day drawn on each of the other banks
-into separate parcels ready for the clearing the next morning. Each
-bank has, then, fifty-nine parcels _to deliver_, which represent the
-property of that bank, and are a _claim_ upon the other banks; and
-also _to receive_ fifty-nine parcels, which represent the property of
-the other banks, and are a claim upon _itself_.
-
-Before ten o'clock in the morning sixty messengers, each having
-fifty-nine parcels to deliver, appear at the clearing-house, each
-reporting to the manager at once for record the amount of "exchange"
-he has brought, which is entered of course as _credit_ to his bank;
-and then all take their positions in order in front of the sixty
-desks, which occupy the floor of the house, behind which sit sixty
-clerks, each representing one of the banks. Each messenger stands
-opposite the desk of his own bank, with his fifty-nine parcels already
-arranged in the exact order of the bank-desks before him. Of course no
-messenger has anything to deliver to the clerk of his own bank. Each
-clerk inside his desk has a sheet of paper containing the names of all
-the other banks arranged in the same order as the desks, with the
-amounts carried out upon it which his messenger has just brought to
-each. All these are entered in his credit column. Each messenger
-carries also a slip of paper ready to be delivered with each parcel to
-each clerk, on which is entered the amount of the cheques he now
-brings to each bank. Of course the amount delivered _to_ each bank is
-_debit_ to that bank, just as the amount brought _by_ each is _credit_
-to that bank.
-
-A signal from the manager, who stands on a raised platform at one end
-of the room with his two or more clerks before him, and each messenger
-steps forward to the next desk in front of him, delivers his parcel
-and also the slip that goes with it, which latter the clerk signs with
-his initials and hands back to the messenger as his voucher for the
-delivery; and then each messenger advances to the next desk,--the
-whole _cue_ moving in order,--at which precisely the same things take
-place as before, and so on, until the circuit of the room is made, and
-each comes opposite again the desk of his own bank, having passed to
-each its "exchange" and taken a receipt for each delivery. This
-process takes about ten minutes; when each clerk, who had on his sheet
-to start with the _credit_ due to his bank, has now the _data_
-(fifty-nine items) by which to calculate the _debit_ of his bank. The
-difference between the aggregate of cheques _received_ and _brought_
-by his bank is the balance due _to_ or _from_ the clearing-house as to
-that bank.
-
-All the clerks report to the manager the amounts _received_ by each,
-and as his proof-sheets hold already the amounts _brought_, if the two
-columns add up alike, no mistake has been made, and the general
-clearing is over. Thirty-five minutes are allowed the clerks to enter,
-report, and prove their work. Fines are imposed for errors discovered
-after that time. The Clearing-house gives tickets of debit or credit
-to all the banks, and the debit ones must pay in lawful money before
-half-past one, and the credit ones will get their due from the manager
-immediately after. The largest sum ever cleared in New York in one day
-was $206,034,920.51 on Nov. 17, 1868, and the smallest $8,357,394.82
-on Oct. 30 of the panic year, 1857.
-
-_h._ Crossed Cheques. About twenty years ago there was instituted in
-London what is called the Cheque-Bank, which is designed to bring the
-benefits of the credit-system in the form of cheques more easily to
-all classes of the people. The cheques issued by this institution are
-so different in character and in course from common bank-cheques, and
-are in some respects so new in principle, that we must give to them a
-separate heading and a full explanation.
-
-The Cheque-Bank is a stock company in London under that style, which
-has entered into relations with nearly all the banks and bankers of
-the United Kingdom, and with many Colonial and foreign banks also, by
-which Cheque-Books are furnished for sale by the Cheque-Bank through
-these associated banks, which also agree to cash the cheques, every
-cheque in which books indicates by printed and indelible perforated
-notices upon the forms what the utmost sum is against which that
-cheque can be drawn; the aggregate of these perforated sums is the
-price for which each book is sold less 1-1/5 penny for each cheque in
-it, of which the penny is for the Government stamp required and the
-one-fifth for the profits of the Cheque-Bank; and all these cheques in
-books of different sizes and amounts are drawn in form _on_ the
-Cheque-Bank, and _Crossed_, that is, _only made payable through a
-banker_. It is one security against fraud that each cheque bears on
-its face the utmost sum for which it can be used, and another is that
-it can only be taken up by a banker and thus settled ultimately
-through the clearing-house. The Crossed Cheques Act of Parliament in
-1876 makes any obliteration of the crossing or essential alteration of
-a cheque _felony_ at law.
-
-Cheque-crossing is of two kinds, _special_ and _general_; when any
-particular banker's name is written between two transverse lines, in
-which form alone crossed cheques differ from ordinary ones, that makes
-that cheque payable by him only; when the words "_and Company_" or
-"_and Co._" are written between these lines, that makes the cheque
-payable only through _some_ banker, that is, the cheque is crossed
-_generally_; and when two parallel transverse lines simply are drawn
-across the face of a cheque, with or without the words "not
-negotiable," that cheque is legally deemed to be _crossed_ and crossed
-_generally_. When a cheque is uncrossed, the lawful holder may cross
-it either generally or specially; when it is crossed generally, he
-may at his option cross it specially; and whether crossed generally or
-specially he may add the words "not negotiable." All this facilitates
-greatly the _collection_ of cheques by set-off through the clearing;
-and has a direct bearing on the fortunes of the Cheque-Bank.
-
-The Cheque-Bank publicly guarantees the payment of all the cheques in
-all its cheque-books to the maximum amount for which each cheque may
-be drawn; and it may well do this, for no cheque-book is sold except
-for money, and the money is ready in the hands of some banker to pay
-every cheque when presented; any banker or other person will give cash
-for them, or take them in payment for goods or other services, or if
-they are drawn for a sum larger than the debt due will give back the
-charge to the bearer; and if the cheques be actually drawn for less
-than the maximum perforated on them, the Bank itself will give
-additional cheques for the balance. The ultimate payment, then, of
-these cheques is as sure as anything in the future can be; the buyer
-of a cheque-book knows, that the money is already in deposit to pay
-them, and that the government-stamps on them have already been paid
-for, while the receiver of an ordinary cheque cannot know beforehand
-that the drawer has money in deposit against it. Moreover, the holder
-of an ordinary cheque must use due diligence in presenting it for
-payment as soon as possible, or delay it at his own risk, while the
-holder of these has no motive whatever for haste,--time does not
-deteriorate them. All money received for cheque-books is left in the
-hands of the bankers who sell them, or transferred to other bankers in
-order to meet the cheques presented elsewhere, and accordingly an
-interest is paid by the bankers to the Cheque-Bank, on the balance of
-deposits thus held, and this interest, together with the one-fifth of
-a penny for each cheque, is the only source of profit to the
-Cheque-Bank. Of course, the longer these cheques remain out before
-presentation, the more profitable to the Cheque-Bank; and their
-average length of life has been heretofore not far from ten days.
-
-Since these cheques are crossed _generally_ (not specially) with the
-words "and Co.," that is to say, since they can ultimately be taken up
-only by some banker, they have a more _generalized_ character than
-common bank-cheques, they are safer to carry and keep than so much
-money would be, there is no difficulty in shopping or paying wages by
-means of them, they are very much the same in their nature as bank
-bills are, and might easily in certain circumstances become _money_
-just as bank bills in some circumstances are money. Each of the
-associated banks keeps an account of course with the Cheque-Bank, but
-is not obliged to keep a separate account with the purchasers of
-cheque-books, which is a great relief to the banks. In this way the
-Cheque-Bank extends the use of cheques in the lieu of money to a great
-multitude of small transactions, and relieves the other banks from
-what would otherwise be a great deal of troublesome accounting and
-collection. The ingenuity and the utility of this comparatively new
-form of Credit cannot be questioned for one moment; the promoters of
-the Bank intended that their cheques should be received by the people
-as a substitute for cash and for Post Office orders, and such has been
-the effect, many railway and other companies having long ago agreed to
-receive them as cash, and the people generally regard them as cheaper
-and more convenient than postal orders and even for many purposes than
-cash.
-
-_i._ Cash Credits. As the Cheque-Bank in the sense as just explained
-has been thus far in the history of Credit peculiar to England, so we
-have now to look to Scotland only for an exemplification of a form of
-Credit hitherto confined to that country. It is a national
-characteristic of the Scotch to be "canny," that is, they _can_, a
-word from the old Teutonic _können, to be able_; and, as a
-consequence, Scotch Banking has long been famous the world over; and
-the one peculiarity of it, with which we are now concerned, goes back
-certainly to 1729, as we happen to know from a minute of the Directors
-of the Bank of Scotland under that date. That bank was chartered by
-the old Scotch Parliament in 1695, one year after the chartering by
-the English Parliament of the Bank of England, and under substantially
-the same title as that, namely, "The Governor and Company of the Bank
-of Scotland." It began to establish branches in different towns of the
-realm in 1696, and began to issue bank notes for £1 (a privilege
-denied to the Bank of England) in 1704; and it began also at a very
-early period to exhibit the two main peculiarities of Scotch banking,
-namely, (1) to receive deposits _on interest_ and (2) _to grant credit
-on cash accounts_, or, as they have come to be called less properly,
-Cash Credits.
-
-This second peculiarity, which has proved extremely beneficial to
-Scotland, is for substance this, to create a drawing account in favor
-of a deserving customer, who has made as yet no deposits in the bank,
-but who draws out money and pays it in from time to time just like an
-ordinary depositor, and instead of receiving interest on the daily
-balance to his _credit_ (old Scotch fashion), he pays interest on the
-daily balance to his _debit_. These accounts are called Cash Credits.
-They are not intended to be dead loans, but quick accounts; and they
-are not granted except to persons in business, or to those who are
-frequently drawing out and paying in money. The individual who has
-obtained such a credit is enabled to draw the whole sum, or any part
-of it, when he pleases, replacing it, or portions of it, when he
-pleases, according as he finds it convenient, interest being charged
-only upon such part as he draws out.
-
-David Hume in his Essay of the Balance of Trade, published in 1752,
-makes this nice point in favor of Cash Credits: "If a man borrows
-£5000 from a private hand, besides that it is not always to be found
-when required, he pays interest for it whether he be using it or not.
-On the other hand, his Cash Credit costs him nothing, except during
-the moment it is of service to him; and this circumstance is of equal
-advantage as if he had borrowed money at a much lower rate of
-interest." The Cash Credit is always for a limited sum, seldom under
-£100, given upon the customer's own security, and that in addition of
-two or three individuals approved by the bank, who become sureties for
-its payment. Of course, only those banks can furnish such credits
-which possess a surplus of credit more than they can sell in the
-ordinary way, and these credits are safe and useful only in small
-communities, in which men are well known to each other. Some friends
-of the parties thus accommodated always guarantee the bank against
-loss; but the losses have proved to be insignificant, the gains to be
-marvellous; and this form of credit issued on the basis of no previous
-transaction in the way of deposits illustrates better than any other
-the radical principle, that Credit is Capital.
-
-The Report of a Committee of the House of Lords made in 1826 on Scotch
-and Irish banking describes very clearly and fully the system of Cash
-Credits: "There is also one part of their system, which is stated by
-all the witnesses to have had the best effects upon the people of
-Scotland, and particularly upon the middling and poorer classes of
-society, in producing and encouraging habits of frugality and
-industry. The practice referred to is that of Cash Credits. Any person
-who applies to a bank for a Cash Credit is called upon to produce two
-or more competent sureties, who are jointly bound; and after a full
-inquiry into the character of the applicant, the nature of his
-business, and the sufficiency of his securities, he is allowed to open
-a credit, and to draw upon the bank for the whole of its amount, or
-for such part of it as his daily transactions may require. To the
-credit of the account he pays in such sums as he may not have occasion
-to use, and interest is charged or credited upon the daily balance, as
-the case may be. From the facility which these Cash Credits give to
-all the small transactions of the country, and from the opportunities
-which they afford to persons who begin business with little or no
-capital but their character to employ profitably the minutest products
-of their industry, it cannot be doubted that the most important
-advantages are derived to the whole community. The advantage to the
-banks that give these Cash Credits arises from the call which they
-continually produce for the issue of their paper, and from the
-opportunity which they afford for the profitable employment of part of
-their deposits. The banks are indeed so sensible that, in order to
-make this part of their business advantageous and secure, it is
-necessary that their Cash Credits should be operated upon, that they
-refuse to continue them unless this implied condition be fulfilled.
-The total amount of their Cash Credits is stated by one witness to be
-£5,000,000, of which the average amount advanced by the banks may be
-one-third."
-
-There are only ten Banks doing business in Scotland, and the Bank of
-Scotland, the oldest of these, had 86 branches in 1875, and the
-average number of branches of the other nine is very nearly the same
-with that.
-
-_j._ Circular Credits. These are a device of bankers to enable
-travellers and merchants of one country to obtain credit and cash in
-foreign countries in sums to suit their convenience, not to exceed in
-the aggregate the limit mentioned in the credits drawn. These credits
-assume different forms and are called by different names, but they are
-all at bottom foreign Bills of Exchange. They are Orders to pay. They
-are drawn by Bankers at home upon Bankers abroad. They are bought by
-travellers and others, because they are safer to carry than so much
-money would be, and much more convenient. In nearly all of those forms
-the credits are available for no one else than the payee, whose name
-is upon the form as well as the names of the bankers who are the
-drawees, and so the credits are not liable to be stolen, although they
-may be temporarily (not ultimately) lost. Purchasers of such credits
-can obtain money on them in all of the principal cities of the world
-in just such sums as they need. They have ultimately to pay for no
-more credit than they actually use, because the drawer will pay back
-to the payee, in case he has bought and paid for the entire credit
-drawn, the cash difference; while on the other hand, arrangements can
-always be made beforehand, by which money need not be deposited with
-the banker at home any faster than it is actually called for abroad;
-and while also a good customer of the bank drawing the credit, one who
-keeps ordinarily a good line of deposits, may pay for whatever credit
-he has used when he returns from his trip.
-
-There is one kind of these foreign credits that deserves separate
-mention, since it has come of late years into quite general use,
-namely, "Circular Notes," as they are called. These are sight bills of
-exchange, each drawn for a relatively small amount, say £10, and
-multiplied in number to the requirements of the buyer, and drawn by
-one domestic banking-house, say Kountze Brothers of New York, on one
-foreign banking-house, say Union Bank of London, the names of drawer
-and drawee only being upon the "notes," the payee or buyer being
-expected to indorse each note in the presence of the Correspondent
-making the payment. The notes, therefore, are not negotiable except by
-the signature of the payee himself from time to time as he needs the
-proceeds. This makes them safer than so much money to carry: if
-stolen, they could do the thief no possible good. At the same time the
-drawer of the notes furnishes the payee a circular letter addressed to
-his banking correspondents all over the world, just as in an ordinary
-Letter of Credit, containing the name and also the personal signature
-of the payee, but unlike the ordinary Letter making no reference to
-the amounts of credit furnished, and there are no indorsements of any
-kind by the correspondents on this circular letter, which the payee is
-cautioned in print on the back _to keep separate_ from the Circular
-Notes covered by it. One of these letters runs as follows, the name of
-the payee being entered in manuscript and also in autograph:--
-
-    "TO OUR CORRESPONDENTS,
-
-        GENTLEMEN,
-
-     THIS LETTER WILL BE PRESENTED TO YOU BY GRACE PERRY, WHO IS
-     RECOMMENDED TO YOUR KIND ATTENTION, AND IS SUPPLIED WITH OUR
-     CIRCULAR NOTES, THE VALUE OF WHICH PLEASE FURNISH AT THE
-     CURRENT RATE FOR SIGHT BILLS ON LONDON, WITHOUT ANY EXPENSE
-     TO US. AFTER YOU HAVE EXAMINED THIS LETTER, PLEASE RETURN IT
-     TO THE BEARER, IN WHOSE HANDS IT WILL REMAIN UNTIL THE
-     EXPIRATION OF THE CIRCULAR NOTES."
-
-These Circular Notes approximate in certain respects in kind towards
-the cheques of the Cheque-Bank of London: both are bought at the
-outset and paid for in full on the spot; and both are drawn _upon one
-Bank_, which is the ultimate Drawee and Payer. In two essential
-respects, however, the notes differ from the cheques: the cheques are
-payable to Bearer without any indorsement by anybody, and so have a
-much more _generalized_ purchasing-power than the notes, which have to
-be indorsed by the payee (not named indeed in the notes but in the
-letter accompanying them), as they are negotiated in a way preliminary
-to their ultimate payment by the single bank on which they are drawn;
-and also the notes, like all other foreign bills of exchange, are
-subject in their value to the fluctuations of International Exchange,
-while the cheques in their value are independent of commercial
-exchanges "in favor" or "against" any country, and entitle the bearer
-to so many pounds sterling in value according to English coinage
-without any possible discount or premium. These London Cheques,
-accordingly, approach much nearer to the character of Money than any
-other form of Credit yet devised, except Bank bills undoubtedly
-convertible; and already take their place as one of the _media_ in the
-international trade, and are sold in New York by authorized agents of
-the Cheque-Bank, as they have long been by such agents in all English
-and Colonial and in many foreign cities.
-
-These _Ten_ are the principle instruments in Credit-Exchanges
-throughout the world; and we pass now, as proposed, to the next
-section of our subject, namely, the Advantages of Credit.
-
-3. As introducing these advantages and also as illustrating them, we
-call attention first to the antiquity of many of the forms of Credit,
-a point upon which much fresh light has been cast by recent
-discoveries in, and ability to decipher the cuneiform writing of, the
-ancient Assyria and Babylonia. It is to the credit of Credit, that the
-earliest of civilized men seem to have perceived its nature, to have
-seized upon its powers, and to have realized for themselves some of
-its advantages. Credit is natural and legitimate. The moderns have
-invented new forms of it, and have tested its capacities to the
-utmost, but the ancients know it well in several of its instruments,
-and vindicate their own insight into the recesses of Exchanges by
-tablets and documents now known and read of all men.
-
-In an earthenware jar found some years ago in the neighborhood of
-Hillah, a few miles from Babylon, were discovered many clay tablets
-inscribed with records relating to banking, and, what is more, to
-banking as carried on for generations by a single family or firm,
-which the cuneiform archæologists have translated as "Egibi & Co."
-These tablets are now deposited in the British Museum. Those who can
-read them say, that the founder of this banking-house, Egibi, probably
-lived in the reign of Sennacherib, about 700 B.C. This family has been
-traced in banking transactions during a century and a half, and
-through five generations down to the reign of Darius. They were the
-Rothschilds in the region of the Euphrates: they acted in a sort as
-the national bank of Babylon.
-
-The Tigris is always associated with the Euphrates and forever will
-be. Nineveh on the former river, like Babylon on the latter, has
-yielded from its tablet-records information as to the use of credit in
-the more northern capital of Assyria. "Within the palace of
-Asshur-bani-pal, the Sardanapalus of the Greeks, who reigned at
-Nineveh from 668 B.C., Layard discovered what is known as the Royal
-Library. There were two chambers, the floors of which were heaped with
-books, like the Chaldean tablets already described. The number of
-books in the collection has been estimated at ten thousand. The
-writing upon some of the tablets is so minute that it cannot be read
-without the aid of a magnifying-glass. We learn from the inscriptions
-that a librarian had charge of the collection. Catalogues of the
-books have been found, made out on clay tablets. The library was open
-to the public, for an inscription of Asshur-bani-pal says, "_I wrote
-upon the tablets_; _I place them in my palace for the instruction of
-my people._" The Assyrian tablets embrace a great variety of subjects;
-the larger part, however, are lexicons and treatises on grammar, and
-various other works intended as text-books for scholars. Perhaps the
-most curious of the tablets yet found are notes issued by the
-Government, and made redeemable in gold and silver on presentation at
-the King's treasury. Tablets of this character have been found bearing
-date as early as 625 B.C. It would seem from this that the Assyrians
-had very correct notions of the promise-character of paper (tablet)
-money" (Myers).
-
-In the Metropolitan Museum of Art in New York are Babylonian tablets
-bearing distinct records of credit transactions that took place in the
-reign of Nebuchadnezzar. The earliest tablet is of the year 601 B.C.
-On it are memoranda of loans of silver made by Kurdurru as follows: "1
-mina of silver to Suta, 1 mina to Balludh, 1/2 mina to Buluepus, 5
-shekels to Nabu-basa-napsate, and 5 shekels to Nergal-dann;--total, 3
-minas, 5 shekels of silver." There are more than 50 similar tablets in
-this collection; the latest dated, "Babylon, 18th day of 14th year of
-Darius," that is, B.C. 505. M. Lenormant, who can read them, divides
-these credit documents into five principal types. 1. Simple
-obligations; 2. Obligations with a penal clause in case of
-non-fulfilment; 3. Obligations with the guarantee to a third party; 4.
-Obligations payable to a third person; and 5. Drafts drawn upon one
-place, payable in another. These last are letters of Credit. They
-contain the names of several witnesses. They are evidently negotiable,
-but from the nature of things could not pass by indorsement, because
-when the clay was once baked nothing new could be added, and under
-these circumstances the name of the payee was often omitted. It seems
-to follow from this peculiarity, that the drawee must have been
-regularly advised by the drawer. One of the credits in this most
-interesting collection had 79 days to run.
-
-The main elements of their civilization came to the Greeks, and
-especially to the Greek cities in Asia Minor demonstrably from the
-Eastward; the Greek West proved itself quick to catch up the thoughts
-and the modes of the East; accordingly, Isocrates in his plea against
-the banker, Pasion, describes a formal bill of Exchange bought by
-Stratocles in Athens, payable in Pontus, and guaranteed principal and
-interest by Pasion; the practical Romans were pupils of the Greeks in
-all such matters, and so it came about in course of time, that Cicero
-wrote as follows in a letter to Atticus,--"Let me know, if the money
-my son needs at Athens can be sent him _by way of exchange_, or if it
-be necessary for it to be taken to him,--_permutarine possit an ipsi
-ferendum sit_"; and after that the Jews and the Lombards carried the
-Letter of Credit all over the world.
-
-It goes without saying, when the most civilized and advanced people of
-the world were the first to adopt and have been since the quickest to
-expand the use of Credit, that there must be pretty obvious and very
-solid advantages from such use and expansion; and we must now note and
-weigh a few of these advantages.
-
-(1) There are young men in every advanced community in the world who
-have integrity and industry and skill, but little or no _Capital_; and
-when such men are enabled to borrow money, as by the Scotch system of
-"cash accounts" or otherwise, to start themselves in business or to
-enlarge a business already in successful operation, the general
-interests of Production as well as their own personal interests, are
-greatly subserved by such credit; because in all probability much
-capital thus passes out of hands which are _less_ into hands which are
-_more_ able to use it _productively_. Those who are best able to make
-capital _tell_ by increase are generally those who are most desirous
-to obtain it, and frequently those who can offer the best security for
-its replacement. Nothing, therefore, is to be said against, but
-everything in favor of, such a loaning of capital as shall bring it
-under safe conditions from the hands of the idle and the aged, from
-those indisposed or incompetent to use it productively, into other
-hands at once competent and honest. Such credits as these are a
-benefit and only a benefit to all the parties concerned, and to
-Society at large. The active operators retain something of profit
-after replacing the capital with current interest upon it; the lenders
-receive more than if their capital remained idle, or they employed it
-themselves; and Society is benefited by a more complete development,
-and rapid circulation, of Services. Despite all the instances of
-broken faith, it is still an honor to human nature, that men do so
-gain by good character the confidence of their fellows, that they are
-and ought to be trusted with capital on their simple word or note; and
-it is the glory of free political institutions, that under their
-influence more than elsewhere, young men do rise by the help of so
-slight a stepping-stone as this, in crowds, to the high places of
-opulence.
-
-In the important point of view, that thus all of the available capital
-of a community is brought out into productive activity, too much can
-scarcely be said of Savings-Banks, which take the surplus earnings of
-the poor, and not only keep them safely, but pay a fair interest on
-each deposit, and loan the aggregate at a higher rate on choice
-securities, thus stimulating frugality in a wide circle of depositors,
-and at the same time aiding Production by opportune loans to the best
-class of borrowers. In the year 1881, there were $443,000,000 invested
-in savings-banks in the State of New York, and $230,000,000 in the
-small State of Massachusetts.
-
-In this first category of the advantages of Credit, come also the
-ordinary bank discounts, made for short periods only, holding the
-debtor to the strictest rules of payment, only professing and only
-enabled to help customers over the transient hard places in their
-business, and _not_ to furnish the funds on which the business is
-mainly conducted. Loans drawn from the banks on interest should never
-be put into the form of fixed capital, and should only be a _part_ of
-the quick or circulating capital, since only the passing necessities
-of a business having an independent basis and movement of its own, can
-safely be met by bank discounts. The cash credits of Scotland are
-quite different both in what they are and in what they imply from the
-short and sharp discounts of the banks of our own country.
-
-So far as the capital stock of banks is made up, as it usually is, of
-a large number of comparatively small subscriptions, there is the
-great advantage just spoken of, of calling a multitude of otherwise
-idle sums into activity in production; and so far as no undue
-privileges, unjust to other corporations and individuals, are accorded
-to banks by law, there is no branch of industry more legitimate and
-beneficial than banking. It is no essential part of the functions of a
-bank, that it manufacture and issue paper money; that feature is
-always rather a source of weakness than a ground of strength; the
-money the bank circulates should always be the national money; and if
-that too, unfortunately, should be credit-money, the element of credit
-in the _money_ should be sharply discriminated in the public mind from
-that other and quite different element of credit by which the bank
-_loans_ it to its customers.
-
-(2) There is another class of advantages in Credit, which do not
-depend so much on the transfer of Capital from less to more productive
-hands, as on the facilities which credit affords in economizing the
-general operations of Exchange. Here the advantages are derived from
-the convenience of _settling accounts_ arising out of exchanges,
-rather than from the _character_ of the exchanges themselves. Look a
-moment, for example, at foreign Bills of Exchange. They serve to
-settle up the accounts arising from the Commerce of two or six
-Continents, with but little transmission of money from any, and with
-but very little loss of time. Commercial bills drawn in New York on
-London have been usually payable at sixty days' sight; the New York
-merchant despatching a ship is able to realize at once the value of
-her cargo, minus interest for the time his bill has to run; since
-bankers' bills have so largely taken the place of "commercial" bills,
-the time is much shortened thereby, and this is one reason why
-bankers' bills bear a higher price in the market; the merchant or
-sender is indeed still liable in part to see that his bill is
-ultimately paid by the drawee; but the commercial integrity of the
-leading houses and leading banks in all countries is with justice so
-firmly believed in and acted on, that on the whole but little anxiety
-springs from this source. It is one of the noble things in
-international commerce, that men trust each other across the oceans,
-and lay millions of value on the faith of a single firm.
-
-Inland bills of exchange equally facilitate settlements within the
-country itself; and cheques, which are of the same essential nature as
-inland bills, contribute to the same end even more simply and surely,
-passing readily in payments wherever the parties are known, and
-through credit and set-off doing the work of money more conveniently
-and economically than, and within certain limits just as safely as,
-money itself could do it. The face of a cheque drawn to the amount of
-his deposit in favor of another depositor in the same bank is
-transferred in the banker's books from the credit of the drawer to
-that of the payee by the stroke of a pen, no money at all passes in
-the premises, while the banker is released from one debt by creating
-another of equal amount, the drawer is released from one debt by
-another to be transferred to the payee, and the payee is paid by the
-drawer by the former's receipt of another debt more acceptable to him.
-
-(3) Besides the two essential functions of all banks, namely, the
-receiving of deposits and the discounting of bills, most of them
-perform a variety of other legitimate operations in Credit, which must
-be classed among the advantages of Credit. They buy and sell debts of
-all sorts. They make collection of debts for their customers. They
-sell their own drafts on distant places. Since 1863, our national
-banks have done an immense business in handling the debt of the United
-States: they were instrumental in diffusing the national bonds among
-all classes of the people: they collect for their customers the
-coupons at maturity: they have been and still are the factors of the
-government in exchanging, for those who desire it, one species of bond
-for another; and the entire debt of the United States has been several
-times changed, mainly through the agency of the banks, from bonds at
-high rates of interest and for short times of maturity to bonds at
-lower rates and for longer times.
-
-(4) The fourth, and probably the chief, advantage of Credit is the
-fact, that a new purchasing-power is created by means of it, a new
-Valuable, something additional to all existing before in the world of
-Values. One can buy other things with Credit, as well as with material
-Commodities and personal Services. Credit, therefore, becomes a
-Salable under the two peculiar limitations already explained, those of
-future Time and personal Confidence, just as Commodities become a
-Salable under the peculiar limitations belonging to _them_; and, what
-is more to the present purpose, just as some Commodities (all of them
-salable) become Capital under the action of the abstinence of their
-owners, so some Credits (all of them salable) become Capital under the
-action of the Abstinence of their owners. Some commodities and some
-credits are expended, that is, sold, for the immediate gratification
-of their owners, without ever a thought of a future increase to
-accrue; but also, some commodities and credits are reserved by their
-owners for use in further production, that is, for future buying and
-selling; and the motive in all such cases is the same that creates all
-Capital everywhere, namely, the increase to accrue as the result of
-such abstinence; and, consequently, we lay down the postulate with all
-confidence, and enumerate it as one of the main advantages of Credit,
-that some Credits are CAPITAL, with all the powers in production of
-that potent agent already exemplified.
-
-It is only fair to apprise the reader right here, that almost all
-Economists deny that any new capital is created through Credit. These
-deny _in toto_ that the relation of debtor and creditor involves
-anything more than the exchange between the two parties of certain
-_titles to tangible goods_. Let the reader now hear, and then judge
-for himself. Bonamy Price of Oxford University, a professed Economist
-and a teacher of acknowledged ability, writes as follows:[8]
-"_Omitting the capital which a joint stock company puts into a bank,
-the banker possesses no capital, except his premises and any coin that
-may be in them, however much commercial and monetary literature may
-ascribe capital to banks. Lines and names in ledgers, cheques at the
-Clearing-house, debts due to depositors, debts due upon bills by
-borrowers, are neither wealth nor capital. They are words and nothing
-more. Incorporeal property, under which these kinds of written words
-are summed up, is not wealth; it is merely a collection of
-title-deeds, but from which the reality is absent. The corpus is not
-in those deeds, but the right to acquire that property, even before
-possession is obtained, is itself a property. If a title-deed or a
-mortgage is declared to be actual wealth by Political Economy, then
-the sooner it is consigned to the waste-basket, the better._"
-
-This passage shows how the word, "wealth," tangles men up
-inextricably, who, by discarding it utterly, might have become clear
-thinkers and useful expositors. It also shows, that Professor Price
-never analyzed Valuables into their three kinds, never thoroughly
-mastered in a preliminary way the Idea that underlies Economics, never
-precisely understood what Money is, and certainly never found out the
-radical nature of Credit. Nevertheless, the passage just quoted really
-concedes the whole matter in the present dispute,--"the right to
-acquire that property, even before possession is obtained, is itself a
-property,"--that is all that we claim, namely, that rights are
-property, and that new rights (which are property) are created by
-Credit, and that some of these new property-rights thus created may
-become and do become a new Capital. These new rights, however, this
-new and acknowledged "property," are not "_titles_" to any specific
-valuables whatever, as Price supposed; "_a title-deed or a mortgage_"
-is a totally different thing from a Credit, since the one always
-describes and gives a qualified title to _some specific and tangible
-thing_, while a credit-right is always a claim against _a person_; the
-Roman law drew this distinction perfectly, a credit-right was a _jus
-in personam_, while a title-right was a _jus in re_; the common Latin
-language as spoken and written marked the difference by separate
-words, a credit-right or true debt was a _Mutuum_, while a title-right
-or thing loaned was a _Commodatum_; and the Law of our present
-national banks explicitly recognizes this universal and fundamental
-distinction, by requiring the banks to loan money _on personal
-security only_, that is to say, no tangible things whatever, not even
-real estate, are allowed to be taken as _original_ security for any
-loan. Banks deal only in true debts,--_mutua_,--and when they keep
-custody of concrete valuables--_commodata_--for their customers, it is
-as trustees or bailees and not at all as debtors.
-
-Our late Oxford friend was far too well informed in general to
-contend, that a cheque, for example, is "the right to acquire
-possession" of any _specific_ property anywhere; the drawer has indeed
-deposited money with the banker on whom the cheque is drawn, but that
-money became the banker's money the moment it was deposited and no
-longer his own; the cheque, accordingly, is a general claim on the
-banker, and not at all on any special fund in the banker's hands; it
-follows, therefore, that the excess of the banker's average deposits
-over his average reserves to secure them, is a new creation of Credit,
-a new resource of Production, a new Purchasing-power now available to
-the banker not previously and practically available to anybody, a new
-Valuable which he proposes to use and does use for the sake of profits
-accruing, consequently a new Capital.
-
-Now let us listen to the objections to this view by a practical
-banker, J. H. Walker, of Worcester, Mass., in a little book of his on
-Banking published in 1882: "_A man always borrows something of
-intrinsic value. What he borrows is not a piece of paper, whatever may
-be on it, but a farm, a house, a factory, or a part of them; a store,
-a mine, or goods. No man can borrow or lend anything else. The
-borrower gets from the lender what puts him in possession of the
-things he seeks, and it must be some one of these things. So of all
-money (except coin). It has no value in itself. It adds nothing to the
-capital of the world. It purports to be and is only a title to
-property, a convenient device for transferring the ownership of
-property._"
-
-This author is led astray by the worse than useless adjective
-"intrinsic," having never yet learned that there is only one kind of
-value in the world of Economics, namely, purchasing-power; he sees men
-as trees walking through the haze cast over paper-money by John Law in
-the last century, as if paper-money must be "_based_" on something
-tangible and specific; he makes a narrow and false assumption that the
-only objects ever bought or borrowed are corporeal "things," denying
-that the debts in which alone he deals as a banker are _realities_ as
-much as any "thing" can be; and it all comes in his case, as in the
-case of hundreds of others, from a totally inadequate analysis of
-Valuables into their three separate and virtually independent kinds,
-namely, Commodities and Services and Promises. Mr. Walker, although he
-writes a book on purpose to do this, can not explain at all under his
-view the Deposits and Discounts of his own bank, and would be as dumb
-as an oyster when confronted with the "Cash Credits" of Scotland.
-
-(5) The fifth advantage of the use of Credit, and the last one to be
-mentioned in this connection, is, that it dispenses with the use and
-wear of large amounts of expensive Money. It is perfectly certain that
-Credit answers many of the purposes of Money. Suppose A has bought of
-B $100 worth of goods, and B has bought of A $125 worth of goods.
-Three ways are open to close up these transactions. A may pay B and B
-may pay A _in money_. This would take $225. A may pay B in money, and
-B may send that back with $25 more. This would take $125. Or A and B
-may mutually balance their credit-books, and B pay the difference in
-account. This would take but $25. It is clear then, that, as one or
-other of these general methods prevails in practice, the quantity of
-expensive money required to do the business of a country is very
-different. Just so in international trade. Foreign bills of exchange
-lessen enormously the quantity of metallic money that would otherwise
-have to be transported.
-
-It is not strange that some thinkers and writers, seeing these
-unquestionable benefits of Credit even within the peculiar sphere of
-Money itself, have come, like Herbert Spencer and many more, to think
-and teach that Credit might answer _all_ the purposes of money. Credit
-_does_ take the place of money in part. Can it take the place of money
-entirely? Let us see. We have defined Credit as _a right to demand
-something of somebody_, and Debt as _an obligation to render something
-to somebody_; the denominations of Money are certainly needful in
-order _to measure_ this right or obligation; and how can the
-denominations of money be established or maintained at all separate
-from the use of _some_ money itself as a circulating medium? Moreover,
-great as is the undoubted power of Credit, vast as are these five
-advantages from its current use, still, each particular piece or form
-of Credit waits for something beyond itself; it waits for its own
-_extinction_ in future time; which can only come about in one of three
-ways, (a) by _set-off_ against another debt with or without a balance,
-(b) by _renewal_ which creates a new debt and extinguishes the old,
-(c) by its _payment_ in money; and now how can these extinctions come
-about without the current use of some money, at least to settle the
-balances at the clearing-house?
-
-Furthermore, there have always been heretofore in all commercial
-countries longer or shorter periods, called "crises" or "panics,"
-during which there was a popular reluctance to accept in exchange the
-ordinary instruments of Credit. Money, and much of it, was then found
-to be indispensable. Indeed the very advantages of Credit itself,
-which have now been explained at length, are dependent on this, that
-there be alongside of it to sustain and limit it, _a current and legal
-measure of Services in metallic form_, in whose denominations Values
-may be reckoned, in whose coins the balances of Credit may be struck,
-and whose presence secured everywhere by natural laws alone may enable
-_fulfilment_ to join hand in hand with _promise_. If ever Credit
-should try to usurp the whole domain of Money, a tolerable standard of
-Value or measure of Services would be no longer possible, Credit
-itself would lose its foothold, and the vast balloon of Promise,
-sailing for awhile through the blue, the joy of projectors and the
-wonder of credulous spectators, would of a sudden descend to the earth
-collapsed and ruined.
-
-4. There are too some disadvantages inhering in Credit. This admitted
-fact makes no valid argument against the use and extension of it;
-because there are disadvantages connected with all human devices
-whatever,--with all means contrived to reach earthly ends--and even a
-child may discover many of these; some objections lie against
-everything, and against everybody, and the practical question always
-is, Which preponderates, the good or the evil? In respect to Credit
-there can be no doubt, that the good outweighs the evil many fold;
-still, in accordance with the purpose in this book of both writer and
-readers to look on both sides of each significant point in Economics,
-we will now give attention to the chief disadvantages inhering in the
-nature of Credit.
-
-(1) In the first place, when credit is much given by dealers to
-ordinary retail buyers, the reverse results take place from those but
-just now characterized as happening under bank credits, namely,
-capital passes out from the hands of productive operators into hands
-less able and less willing to use it in further production. Indeed, in
-most such cases it ceases to be capital, and is expended in immediate
-gratification. It is much easier for the average man of fair character
-within the present customs of Society to "get trusted" than to pay "as
-he goes." Such a man is even called "easy-going." He almost always
-over-estimates his resources for the future, and under-estimates his
-obligations at the present. It is always a disadvantage in the long
-outlook for both parties when such men easily and largely "get
-trusted." Let us take a sample case: when an industrious artisan or
-efficient merchant has given credit for six months or a year to
-dilatory customers, it is so much withdrawn for so long a time from
-his active capital; and in order to make up his consequent loss of
-profit to the average and expected rate, there must be an addition to
-the prices of his wares sold to other parties; and, besides, some bad
-debts belong to such a system, and there must be additional prices
-somewhere to compensate for this; and thus the customers who pay
-promptly bear a part of the burden of the delinquents, who at least do
-not wholly escape, inasmuch as they ultimately (if they pay at all)
-pay a price enhanced by their own delay. Thus, if the current and
-expected profit on his capital be 12%, and the artisan or merchant
-sells and gets returns four times a year on the average, something
-less than 3% profit may be charged to each article on the average;
-while if he only gets returns at the end of the year, at best 12% must
-be put on everything at the average, and in reality considerably more,
-because of the bad debts that stick like a burr to that way of doing
-business. Hence the excellent maxim, "Quick sales and small profits."
-
-(2) There is a greater inherent _uncertainty_ in values connected with
-credits than in those connected with commodities, or than with those
-connected with personal services. We have already seen repeatedly that
-Value has its sphere of operations in the Past, in the Present, and in
-the Future. There is some uncertainty connected with what _has been
-done_ in reference to value, since the market may prove to have been
-miscalculated, and the commodities to have become unsuitable; there is
-perhaps more uncertainty connected with what _is now being done_ in
-reference to value, because the services bargained and being paid for
-may prove to be less steady and skilful than was supposed; but in the
-very nature of the case there is still greater uncertainty connected
-with what _is to be done_ in relation to its value, because in the
-first two cases some at least of the conditions are already fixed,
-while in the last one all of them are at least open to hazard. There
-is sufficient certainty in all three of the grand divisions of Time to
-justify, and probably to reward, operations in each in reference to
-value under the peculiar limitations and conditions of each, but
-credits are naturally more sensitive in the law of their value than
-either commodities or services.
-
-(3) Largely in consequence of what has just been expressed under the
-last head, credit-exchanges are more likely than commodities-exchanges
-or than services-exchanges to become unduly multiplied and
-consequently to fail of ultimate realization. The majority of men are
-sanguine in relation to the future. Unless they are in actual contact
-with their limitations, they are apt to belittle the rigidity and
-inevitableness of such limitations. As the outcome of this, promises
-are apt to overpass the powers of fulfilment. No more bales of cotton
-of any one year's crop can be actually delivered to buyers, than have
-been actually grown and marketed; the services of no more men in any
-capacity can be contracted for and rendered, than there are men able
-and willing to work; here are impassable limits; but the field of the
-future is buoyant with possibilities; and hence credits, whose sphere
-is the future, though legitimate and potent under the proper
-conditions, lie in a field whose limits are invisible, and within
-which _Hope_ is ever a tempter to overdoing.
-
-Is speculation proper? Certainly; if by the word "speculation" is
-meant the buying of anything with an expectation based on rational
-probabilities of being able to sell it again under different
-conditions at a higher price. Speculation in this sense is both proper
-and beneficial to the immediate parties to it, and to the general
-public as well, because the values of things thus bought and sold
-neither fall so low nor rise so high as they otherwise would do, which
-is a public gain. Speculators as a rule buy on a falling market,
-_which tends to lift it_, and sell on a rising market, _which tends to
-lower it_. It is better for all concerned, that the necessaries and
-conveniencies of life should bear as steady a market as is possible in
-the nature of things, summer and winter, year in and year out; and the
-ports of every nation should be open with the slightest possible
-hindrance in the way of tax to the corresponding necessaries and
-conveniencies from abroad, whenever combinations and "corners" attempt
-to lift their prices beyond the level determined by a natural and free
-Supply in contact with the current Demand.
-
-Credits occupy the field of Probabilities; that is to say,
-probabilities seeming to be such to men of sharp insight and
-cultivated forecast. When such men _on such grounds_ buy and sell
-"futures" in cotton or corn; when they buy and sell stocks either
-"short" or "long"; when they seem to themselves to perceive a sound
-reason for lurching over from the "bulls" to the "bears," or _vice
-versa_; and when they really think that what they are wont to deal in
-has touched bottom in price, and they buy now in view of a rise,
-Economics has nothing to say in blame of any or all of these
-operations, for they are the same in substance and motive as all other
-buying and selling; but nevertheless, it has this to say, that all
-these operations in credit-futures lie adjoining to and in dangerous
-proximity with another field, for operations within which it has
-nothing _but_ blame to utter. Gambling occupies the field of Chance.
-There is a great difference between chances and probabilities.
-Political Economy has no trouble in drawing a fast and hard line
-between them.
-
-But practically the operators in credit-futures experience an immense
-difficulty in keeping within this line of rational probabilities. The
-coolest heads are apt to become heated, and to lose sight of
-distinctions, in the close air of the Stock Exchange and the offices
-circumjacent. Some operators openly confess they know nothing which
-way the index of reason points, by buying "straddles," as they are
-significantly called. A friend and old-time pupil, who has for years
-been accustomed to these excitements in New York, said recently to the
-writer,--"_The Stock Exchange is a great gambling hell, and that's all
-there is of it!_" In buying and selling of all kinds, both sides gain:
-in gambling of all kinds, what one side gains the other side loses:
-therefore, under a sound money, healthful public opinion, and good
-law, gambling never can become formidable. In every lottery scheme, no
-matter how honestly managed, the sum of the _prices_ of the tickets is
-greater than the sum of the _prizes_ offered, otherwise nothing would
-be left for the profits of the managers; therefore, he would be a very
-foolish man, who should buy all the tickets of a given lottery with
-the certainty of drawing all the prizes; and _he_ is a still more
-foolish man, who should take his _chance_ of drawing all the prizes by
-buying two or ten tickets.
-
-(4) Another and a principal Disadvantage of Credit is seen in its
-usual action on _prices_ through increased Demand, and its consequent
-tendency to bring about Commercial Crises. Any man's whole
-purchasing-power is made up of three items: first, the property in his
-possession; secondly, the values that are owed to him; and thirdly,
-his credit. He can buy services of the three kinds with these three
-valuables; and the sum of his power to buy is exactly measured by the
-aggregate of these three valuables under his control. But while the
-first two, his property and debts due, are limited and ascertainable,
-the third (his credit) is indefinite and undeterminable beforehand.
-Being based upon _confidence_, which is itself sensitive and variable,
-a man's credit at one time may be vastly greater than at another,
-compared with his other two means of purchase; and if he have the
-reputation of doing a safe and regular business, and is favored by
-circumstances, he will find himself able sometimes to buy on credit to
-an extent out of all expected proportion to his other capital. When,
-therefore, credit is offered and received for commodities, it has the
-same influence upon their prices as when money is offered and received
-for them. It follows, consequently, that there is likely to be a
-general rise of prices whenever there is an extension of credit for
-the purpose of purchasing; indeed, when money only is used to buy
-with, there can not be a _general_ rise of prices, because while more
-money may be spent on some things, and they rise in price, there would
-be less money for other things, and _they_ would rather fall in price;
-but when credit is used freely in addition, and increased purchases go
-on in all departments at once, there is apt to be a rise of prices as
-to all commodities and a universal spirit of speculation.
-
-At such times, and while prices are still rising, men _seem_ to be
-making great gains; everybody wishes to extend his operations by
-means of all his money and all his credit; and forms of indebtedness
-are multiplied on every hand. By and by it begins to be perceived in
-certain quarters that the matter has been overdone; speculative
-purchases cease; banks become particular whose paper they discount;
-men find it difficult to sell their debts due in order to provide for
-their debts owed; they fall back on the sale of their commodities, but
-when holders are anxious to sell, prices always fall; a panic now sets
-in, more irrational, if possible, than the previous overconfidence;
-their inflated credits and commodities collapse in the hands of their
-holders; sales at great sacrifices are inadequate to meet the mass of
-maturing debts contracted when confidence was high; men fail, and must
-fail; the banks cannot help them, or think they cannot; and so
-wide-spread commercial disaster comes in.
-
-Such commercial crises swept over the United States in 1837, 1857, and
-1873; and will doubtless recur in the time to come. They always arise
-from disordered credits, and though not necessarily connected with
-credit-money, are much more likely to come in connection with that.
-The more strong and conservative the Banks maintain their ordinary
-condition, the more powerfully can they operate to prevent or abate a
-panic. They ought always to be on the shore and never in the stream.
-From the very nature of banks and of the motives that create and
-operate them, they are apt to sell for a profit in ordinary times
-about all of the credit they safely can; unless, then, they foresee a
-stringency some time ahead, and curtail their loans, and otherwise
-keep their position strong in reserves and deposits, they will be
-powerless to help even their most deserving customers when the panic
-sets in; even then by a special association with other banks in the
-same city for reciprocal support during a crisis, as was happily
-brought about in New York some years ago, something may be done for
-their common constituency and good customers to help them out of
-trouble by discounts continued to them; especially as it is not money
-so much that is needed to allay a panic, nor even credit actually
-given, as it is a general knowledge that abundant credit can and will
-be given either by some pre-eminent bank, like the Bank of England in
-London, or by an association of banks for that special purpose, like
-the agreement just referred to as entered into temporarily by the
-banks of New York city. As a panic becomes imminent anywhere, some
-Bank or banks there ought to be in a position to extend their
-discounts freely, at a high rate of interest indeed, so as to
-discriminate between customers urgent for and deserving of discounts,
-and another class whose need of accommodation is not so sore, and a
-third class who are sure to fail if the Panic stalks forward.
-
-A permission given of the Government to the Bank of England to
-overpass under these circumstances the Discount-limits laid down by
-the Bank Act of 1844, has on three several occasions acted like a
-charm to still the ragings of a commercial storm. On each of these
-occasions, 1847, 1857, and 1866, the Bank was forbidden by the Privy
-Council to discount for less than 10%.
-
-As the inclined plane of rising prices is slowly ascended before a
-Crisis, so the fall of general prices afterwards seems to be rather
-gradual also till the lowest point of them is reached, from which
-another ascent is apt to commence. The following table taken from the
-_New York Public_ of the first week of November, 1881, is instructive
-on both these points. Taking the prices in 1860 of 43 articles of
-prime necessity, which constituted then and afterwards about 3/4 of
-the commerce of the country, as the normal standard or 100, the table
-gives the comparative gold prices of the same for four years previous
-to 1873 and for seven years subsequent, as follows:--
-
-    1869      116
-    1870      118
-    1871      120
-    1872      122
-    1873      113
-    1874      115
-    1875      107
-    1876      100
-    1878       81
-    1879       98
-    1880      103
-    1881      111
-
-(5) A penultimate Disadvantage of Credit may be noted in the facility
-which it offers for contracting great national Debts. There are
-certain aspects, under which a Nation may be properly regarded as a
-moral person, and as such person may pledge the public faith for the
-present and the future, becoming a debtor to its own people or to
-foreigners, and thus a public debt may be made a sort of mortgage on
-the national property and income. Now, it cannot be fairly denied,
-that incidental advantages may spring up in connection with such a
-national debt: for example, the bonds, which are its evidences, may
-open up to the people a convenient form of investment for presently
-inactive capital, and for trust funds of all kinds; there can be
-little doubt that certain classes of persons holding these national
-obligations are won thereby to a stronger patriotism and become better
-friends to stability in government, although this consideration
-applies mainly to new governments and to those temporarily endangered;
-both England and the United States now make a portion of their public
-debt the basis of a national system of Banking, but it is perhaps
-questionable whether this can be justly put among the incidental
-benefits of the Debts; and again "a moderate debt adds to the credit
-of a Nation, and its ability to raise money in an emergency, for
-bankers and capitalists are more ready to take such securities as they
-are in the habit of dealing in" (Sidney Homer).
-
-On the other hand, the burdens of a National Debt are very apparent:
-for example, the annual _interest_ charge to the Union at the close of
-our late civil war was $150,000,000, which gradually declined by the
-lowering of the interest-rate and by the paying off of principal to
-$61,368,912 for the fiscal year ending June 30, 1881; between March,
-1869, and August, 1873, the United States paid $378,015,065 on the
-principal of its public debt; the collection of the Internal Revenue
-alone of the national government cost for the fiscal year 1867,
-$7,712,089; and in each of the two years, 1870 and 1881, a little over
-$101,500,000 was paid out to reduce the principal of the Debt. All
-those vast sums came out of the industry and income of individuals;
-and taxation to any degree as all this implies is a mighty disturbance
-to industry, and gives rise to an army of officials who eat out a
-considerable percentage of all they collect. Moreover, the various
-expedients of taxation, which are always practically unequal in their
-operation, are apt to give rise to irritation and political agitation,
-and even sometimes to threats of repudiation, especially when the
-occasion has gone by under which the debt was contracted, and another
-generation is called upon to pay off a debt it had no agency in
-creating.
-
-Here the vexed question arises, how far has one generation _the right_
-to throw upon succeeding ones the burdens of a National Debt? The true
-answer to this question is, _it has a very limited right indeed_. The
-opposite doctrine implies tacitly when not openly, that the succeeding
-generations will have no occasion for extraordinary expenses of their
-own, and, therefore, may rightfully be made to contribute to the
-extraordinary expenditures of this generation. But it is pure
-assumption to take for granted, that the next generations will not
-have, of some kind or other, as much occasion for an extraordinary
-effort in the way of defence or of improvement as the present
-generation has had. It is a common but harmful illusion to estimate
-what has now to be done as of much more importance than what will have
-to be done. Therefore, to throw the present burden forward on another
-generation of men, who are likely to have to make their own special
-exertion, just as great and just as imperatively called for, is a
-procedure unwarranted by past experience. The view that has long
-prevailed in practice, that a great War-debt, for example, might be
-easily and justly cast upon posterity, has again and again given rise
-to needless and expensive wars; _those_ have been called upon to pay
-the piper, who perceived the utter inutility of the expenditure; and
-thus bitterness has been added to burden.
-
-Besides, the men to fight the battles, and the capital by which to
-feed, clothe, and furnish them the munitions of war, _must come from
-that generation_; and there is always great injustice in the
-manipulations of a great debt ostensibly incurred to obtain this
-capital, and the debt itself is usually in large part rather a
-memorial of the war than of the means by which its expenses were
-actually defrayed.
-
-The generation of American citizens not yet wholly passed off the
-stage was called on in the Providence of God to suppress a Civil War
-of enormous proportions, and to eradicate a social institution that
-was thoroughly bad; the expense of doing this was many fold enhanced
-by timorous counsels in the field, by class legislation in Congress,
-and by wretched financiering in the Cabinet; but the Debt, vast as it
-was, and needlessly incurred as a large portion of it was, has already
-in good part been paid off and must be entirely paid off by the
-generation that incurred it. That this great task may be thus
-completed, will require (1) an economical administration of the
-national Government; (2) an avoidance of intervention in the affairs
-of our Neighbors, and of entangling alliances with Foreigners; (3) a
-free Commercial System, under which the taxes shall be adjusted only
-towards the most productive revenue; and (4) a constant and onerous
-home Taxation.
-
-(6) The final Disadvantage of Credit is this, that it is apt to
-confuse the minds of men as to its own nature, from its apparent
-resemblance to something else, which is at bottom wholly unlike it.
-The people of the United States have suffered greatly from this
-confusion, and are likely to suffer from it still more in the time to
-come, both in their property and progress at home and in their good
-name abroad; and it becomes all good citizens, and especially all
-those called upon to pronounce on the Law of the Land, to know
-thoroughly the radical difference between a _Credit_ and a
-_Quittance_, and so to escape the contagious confusion that has
-entered and stirred up the popular, and even the judicial, mind of
-this country. All through the present chapter has been insisted on and
-illustrated the point, perhaps to the weariness of the reader, that
-Credit is always essentially the _Promise_ of one person to another,
-and that whatever is thus _Promised_ is necessarily and fundamentally
-different from the Promise itself. To confound those two things as if
-they were or could be made one and the same thing, is in thought
-illogical and in practice execrable.
-
-And yet it must be allowed, that there is somewhat in the nature of
-Credit, that makes this confusion plausible, or else it never would
-prevail; and also that there is something more still to make it
-plausible in the nature of Money, which last point can only be cleared
-up in the next following chapter under that title.
-
-Mr. E. G. Spaulding of Buffalo, in his copious and excellent History
-of the Legal Tender Act, "all of which he saw and part of which he
-was," as the chairman of the subcommittee of the Ways and Means at
-the time the Act was passed, demonstrates the extreme reluctance of
-everybody concerned to give a forced circulation, that is, a
-compulsory legal-tender quality, to the first batch of Treasury Notes
-to the amount of $150,000,000 in February, 1862. We have already noted
-in another place in this chapter, that two successive batches of
-similar Notes, each to the same amount as the first, were issued
-within less than a year. These Notes then and since called Greenbacks,
-bore at the time four essential features: first, they were both in
-terms and in reality _national Promises_ to pay to the bearer gold
-dollars of the then and present standard of weight and fineness,
-because there is no other possible meaning to the words "THE UNITED
-STATES WILL PAY TO THE BEARER FIVE DOLLARS"; second, in addition to
-their being a forced loan from the people to the amount of notes
-authorized, they were given a _forced circulation_ as money by means
-of the clause, "_and shall also be lawful money and a legal tender in
-payment of all debts public and private within the United States
-except duties on imports and interest on the national bonds_," which
-clause still recognizes gold dollars as the only universal and
-standard money; third, the notes were made _fundable_ in sums of fifty
-dollars, "or some multiple of fifty dollars," in six-per-centum gold
-bearing bonds of the United States, then called 5-20's, again in this
-clause recognizing the radical difference between the legal-tender
-paper promises as money and the gold dollars promised in them, in
-which gold money the interest and principal of the bonded debt must
-still be paid; and fourth, these notes were publicly known and
-acknowledged by the Issuer and the receivers to be presently
-_irredeemable_, since the Government did not have, and did not pretend
-to have, any coin with which to redeem them, and everybody knew that
-they were made a legal-tender _because_ they were irredeemable.
-
-These prompt recognitions of the impassable gulf between a Promise and
-what is Promised, were confirmed by all that happened afterwards. The
-notes, notwithstanding they were legal tender and all bonds of the
-United States could at first be bought with them at par, almost
-immediately began to droop as compared with gold. The daily quotations
-showed a pretty steady decline for two years. On Jan. 15, '64, gold in
-greenbacks was 100:155; April 15, 100:178; June 15, 100:197; June 29,
-100:250, that is, 40 cents to the dollar; and July 11, 100:285, or 35
-cents to the dollar in gold, their lowest point. From this depth they
-slowly rose with many fluctuations back and forth from many causes for
-14 years. Jan. 1, 1879, they became redeemable in gold, and have so
-continued till the present time.
-
-When the Civil War was all over, and these startling vicissitudes of
-the paper money were measurably forgotten; though no prominent man,
-when they were passed, thought the Legal-Tender Acts constitutional;
-the paper money began to be popular; the distinction between a promise
-and its fulfilment began to fade out of the minds of the people; there
-had always been bank bills circulating as money in the country; these
-had been called "dollars" equally with the coin; and in December,
-1869, a test case, Hepburn _versus_ Griswold, was decided by the
-Supreme Court on the question, whether Congress had the constitutional
-authority to make anything but gold and silver lawful money in
-satisfaction of _contracts entered into before the first legal-tender
-Act was passed_. The question, Can Congress make such notes a legal
-tender for contracts made _after_ the passage of the Act? was not
-involved in this case; but it was very clear from the Opinion of the
-court delivered by Chief Justice Chase, that the majority of the
-justices regarded the Act as being unconstitutional in its
-application to contracts made _after_ as well as _before_ the Act was
-passed. Upon the special question before the Court, the justices were
-divided in opinion; five, including the Chief Justice, agreed that the
-Act was invalid so far as it made the notes a legal tender on
-_contracts executed prior to its enactment_; and the three other
-judges were of the opinion that it was valid. Of course, the Decision
-of the Court was rendered by a majority of two, that the Act was
-unconstitutional. Chase, Nelson, Grier, Clifford, and Field
-constituted the majority; Miller, Swayne, and Davis, the minority.
-
-Salmon P. Chase was one of the greatest men of the great period of the
-Civil War. He was Secretary of the Treasury at the time the greenbacks
-were issued, and they were issued at his instance and advice, but he
-was opposed to the clause that made the notes a legal tender. He never
-expressed the opinion that the Legal-Tender Acts were constitutional,
-nor did he expect that the notes, of which these authorized the issue,
-would ever become a permanent national money. This is evident from the
-fact that the notes were made _fundable_ at his instance, not so much
-with the view of keeping up the value of the notes by giving them a
-present market in bonds, as with the view that they would help the
-sale of the bonds and would be absorbed by them as soon as the price
-of the bonds was above par in greenbacks. Afterwards Mr. Chase thought
-that this _fundability_ of the notes into bonds would so far take up
-the notes as to stand in the way of the negotiation of further
-necessary loans to the Government, and at his instance this provision
-of the law was repealed. Consequently, there was nothing inconsistent
-between his position as Secretary and his later position as Chief
-Justice. He was undoubtedly right in both of these positions. The
-making the greenbacks legal tender did not probably add one particle
-to their purchasing-power, but rather the reverse, because that
-feature implied a doubt on the part of Congress itself as to the
-validity and currency of such national promises-to-pay. That he was
-also right in his judicial opinion and decision, however subsequently
-overruled in his own Court, may be safely left to the inevitable
-future appeal to common sense and to the common principles of
-constitutional interpretation.
-
-This judgment in Hepburn _versus_ Griswold was favorably received by
-the country at large, as being just in the line of the great decisions
-of Chief Justice Marshall, and as being exactly in accordance with
-Amendment X of the Constitution, namely, "THE POWERS NOT DELEGATED TO
-THE UNITED STATES BY THE CONSTITUTION, NOR PROHIBITED BY IT TO THE
-STATES, ARE RESERVED TO THE STATES RESPECTIVELY, OR TO THE PEOPLE."
-The State of Massachusetts particularly, which has always maintained
-and still maintains a strong doctrine of State Rights as over against,
-though in harmony with, the Rights of the United States under the
-Constitution, applauded this judgment as sound in law and politics,
-and as righteous altogether. But the then administration of General
-Grant, inexperienced alike in law and politics, and linked in
-entangling alliances with the great corporations of the country,
-received the Decision with marked dissatisfaction; and it was
-especially offensive to the huge railroad companies, whose bonds had
-been executed prior to Feb. 25, 1862, inasmuch as it made the
-principal and interest of these bonds payable in coin, which they had
-hoped to pay off in the depreciated greenbacks, made legal tender for
-all debts.
-
-The Administration lost no time in trying to bring about by fair means
-or foul, a reversal of this unwelcome decision. E. R. Hoar of
-Massachusetts, at that time attorney-general in Grant's Cabinet, was
-the principal agent in accomplishing this end by means so
-discreditable that he lost in consequence his popularity in
-Massachusetts and all chance of further political preferment. The
-means chosen and put into effect was the appointment by the President
-of two new judges, Strong and Bradley, the first to take the place of
-Grier, resigned, and the second appointed under a law increasing the
-number of judges to nine, whose opinions on the point at issue were
-known beforehand, and who were selected to serve on that very account.
-"_It was no secret, indeed it was a matter of public notoriety, that
-these justices were appointed in order that the decision of 1869
-might be reversed. Their opinions in regard to the constitutionality
-of the Legal-Tender Acts had been clearly and publicly expressed. It
-was therefore pretty well known what the decision would be when the
-question was again presented._" (Hugh McCulloch.)
-
-The second Legal-Tender case, accordingly, that of Knox _versus_ Lee,
-decided in December, 1870, reversed the judgment of a year before, _no
-new points therefor being raised either by the new judges or by
-counsel in the new trial_, the Chief Justice and his three former
-associates still adhering to their original opinions. It was then five
-judges to four, the special question being, Is it constitutional to
-make promises-to-pay a legal tender on contracts executed before the
-promises were issued? The judicial answer was in this case, Yes;
-provided Congress regarded such action as a necessary means of
-preserving the Government in time of War, or any other period of
-extraordinary emergency. That is to say, _bona fide_ creditors were
-constitutionally bound to receive depreciated notes as legal tender in
-satisfaction of contracts entered into when no notes were in
-existence; to receive on contracts specifically calling for
-"_dollars_" the depreciated notes of the Government merely promising
-to pay "_dollars_," but on which the "_dollars_" could not be
-obtained! What is that, but the monstrous incongruity that _a promise_
-is the same thing legally as its _fulfilment_? What is that but
-judicial blindness as to the _nature_ of Credit? What is it but the
-old confusion between _names_ and _things_? What is it, finally, but
-the dazed and hazy vision, pardonable perhaps in the popular mind but
-half-opened to radical distinctions, but unpardonable in learned men
-professing to lay down the law in a civilized country?
-
-It is scarcely needful to add, that the Supreme Court of the United
-States suffered in the judgment of good citizens by that transaction;
-that the best legal and financial opinion of the country yielded
-little respect to a decision _thus secured_; and that intelligent
-people do not believe that constitutional law _can_ sanction what
-contravenes at once common sense and common morality.
-
-Judge Field (and his memory the country will not willingly let die),
-one of the majority in the first decision, and writing the opinion of
-the dissenting minority in the second, used this strong but just
-language, "_It follows, then, logically, from the doctrine advanced by
-the majority of the Court as to the power of Congress over the subject
-of legal tender, that Congress may borrow gold coin upon a pledge to
-repay gold at the maturity of its obligations, and yet in direct
-disregard of its pledge, in open violation of faith, may compel the
-lender to take, in place of the gold stipulated, its own promises; and
-that legislation of this character would not be in violation of the
-Constitution, but in harmony with its letter and spirit. What is this
-but declaring that repudiation by the Government of the United States
-of its solemn obligations would be Constitutional?_"
-
-FOOTNOTES:
-
-[7] John Jay Knox's United States Notes.
-
-[8] Practical Political Economy, 1877, p. 452.
-
-
-
-
-CHAPTER V.
-
-MONEY.
-
-
-The subject of Money presents few difficulties, or rather none of any
-depth, to one who has thoroughly mastered the subject of Value. To all
-others the difficulties are insuperable. Essay after essay and volume
-after volume has been written in this country upon Money, by men who
-would have become good economists and good monetaries, if they had
-only begun their inquiries at the right place and followed them in the
-right direction. As we saw in the last chapter that it is impossible
-for anybody to understand the subject of Credit without first
-comprehending the matter of Value, so we shall see in this chapter
-that in the order of Nature Value precedes Money, and that the latter
-can only be learned in the light of the former. The logical reason for
-this in general is, that Money itself is always a Valuable, and comes
-to its function as money only through a comparison of itself with
-other Valuables.
-
-The thin difficulties that confront the student of Money, who has
-reached the topic along the proper highway cast up for economical
-inquiries, arise apparently from two sources; and we will begin our
-present discussion by first looking at these in their order.
-
-In the first place, Money is the only Valuable that may belong to two
-out of the three possible categories into which Valuables may be
-scientifically thrown. All Valuables are either Commodities, or
-Services, or Credits. These categories never change places. Once a
-Commodity always a commodity, so long as value can be predicate of it;
-a personal Service can never take on any other valuable form; and a
-Credit is ever a credit, and nothing else, until it is annihilated by
-Fulfilment. Now Money is the only Valuable that ever appears in two of
-these forms. The same Dollar indeed cannot be both a Commodity and a
-Credit; but some Dollars are a Commodity cut out from gold and silver,
-and some other Dollars (so-called) are a Credit issued by Government
-or parties responsible to government; while Money as a general term
-properly enough covers both kinds of Dollars, the Commodity-Dollar and
-the Credit-Dollar. In other words, Money is of two kinds, and only two
-kinds, either a Piece of valuable metal stamped as to weight and
-fineness by the image and inscription of Cæsar,--a Commodity; or a
-Promise to pay to somebody some of these pieces,--a Credit. This
-unique peculiarity of Money, by which, always a Valuable, it may
-appear and does appear in two out of three possible predicaments of
-Valuables, makes a little difficulty at the outset of its discussion,
-and requires continued care in formulating its scientific
-propositions.
-
-In the second place, a more considerable difficulty, and yet a slight
-one still, is found in the fact that the choices and the legislations
-of men have more to do in shaping the propositions of Money than in
-most other economical propositions. It is true, that Nature and men
-coöperate in the determination of every case of Value whatsoever;
-while there is a difference in the cases, though perhaps not a
-distinction, in respect to the fixedness and universality of the
-natural laws involved, in contrariety to the purely human impulses
-concerned. The Providential elements in Economics, both the social and
-the physical, are of course relatively fixed and unchangeable,
-otherwise Science could not grapple with and classify them; and so
-also are those principles of Human Nature related to exchanges, which
-may be said to be _universal_ in their character,--such as, for
-example, the preference to receive a larger rather than a less
-return-service, and to render a smaller rather than a larger effort;
-and at the same time there are other principles of human nature
-related to exchanges much more _variable_ in their character than
-these, such, for instance, as the nation's choice of the kind of Money
-it will use, or the kind of Taxation it will impose. It certainly
-follows from this, that some Economical laws must be more _general_
-than others, owing to a less variation in the human impulses concerned
-in them: it follows, for example, that the law of landed rents, or the
-law of the approach of the price of raw materials to that of the
-finished products, is more universal in its terms of generalization
-than most of the propositions of Money and Taxation can be.
-
-It seems like a paradox, that those parts of Economics in which the
-human elements of variable choice may predominate over the relatively
-fixed laws of nature and of mind, should be just the parts hardest for
-men to catch clearly and hold firmly; because, we naturally think,
-that difficulty and mystery are rather to be found in those
-departments in which an Infinite Mind has been at work upon an
-infinite plan, and that there is no such profundity in the works of
-men; but after all, even those natural laws like Gravitation, which
-are clear and universal as laws, if they be such as the devices of men
-have to do with, such as may be modified and in a certain sense
-controlled by human actions, become from that very circumstance liable
-to some difficulty and perhaps to some mystery. Now all the truths of
-Money, and as we shall see in the final chapter all the truths of
-Taxation also, belong to this class of less general generalizations;
-still, it is scarcely less than foolish to say, that Money is such an
-elusive and ideal agent that nobody can understand it. That is the
-language of indolence and lack of penetration. Money is wholly a
-matter of man's device, though it comes into constant contact with
-something greater and more fixed than itself; it was invented, just as
-any other instrument is invented, to accomplish a certain economical
-purpose; and it would be strange indeed if men by taking pains could
-not perfectly comprehend what men themselves have wholly devised. We
-hope, accordingly, in the following paragraphs to clear up completely
-to all intelligent readers the whole doctrine of Money. The key to
-unlock all the superficial difficulties (and there are no others) is
-this: Money is always a Valuable before it becomes money, and
-continues a valuable independently of the fact that it _is_ money;
-and, it is always one or other of two kinds, either itself a Commodity
-or a Promise to pay a commodity. In this chapter, we will not begin
-with definitions and justify them afterwards, but will come up to them
-step by step, and, as it were, justify them beforehand.
-
-1. Economical Exchanges may begin, be profitable to both parties, and
-go forward to a certain extent, without the use of any money at all.
-As a matter of fact and probably for a long time, while the
-Civilizations were gathering their inchoate forces for a further
-progress, men exchanged one Service directly for another without the
-intervention of any medium. This form of trade is called Barter. King
-Hiram of Tyre furnished to King Solomon of Judea a certain quantity of
-cedars from Mt. Lebanon for the building of the new Temple at
-Jerusalem, and Solomon in return furnished to the Tyrians a certain
-quantity of wheat and oil, Judea being a fertile agricultural country
-with no forests, and Tyre a wooded country with no farms. This may
-well serve us as an instance of Barter, although Money had been in
-current use in those regions a thousand years before, as is seen in
-the purchase by Abraham of the cave and field of Machpelah, for which
-he weighed out "_four hundred shekels of silver, current money with
-the merchants_."
-
-It is obvious, however, that while Barter is a good deal better than
-no exchanges at all, there are inherent and immense difficulties in
-that form of trade.
-
-(a) Under Barter trade is extremely limited in its _personnel_. Only
-those parties can engage in it, each of whom is in position to render
-to the other just such a Service as the other is in direct and
-immediate need of, and each of whom also wants another Service in kind
-and quantity exactly what the second man has to render. It is not
-enough under these conditions, that a man should have some Service to
-sell, but he must also find some other man, who not only wants that
-specific service but who also has some service to render in return
-just such as the first man wants. If A has wheat which he wishes to
-exchange for a coat, he must first find a party desiring wheat and
-also having a coat to sell, and moreover who wants just as much wheat
-as will pay for a coat, no more and no less; if he wants more, he may
-have nothing to render for the excess which A is willing to accept; if
-less, A may have nothing besides wheat with which to help pay for the
-coat. Even in the simpler states of Society the inconveniences of thus
-hunting up a specific market for each specific service are very great,
-and in more advanced states of civilization would become intolerable,
-if it were possible (as it is not) for Society to become advanced
-under such conditions.
-
-(b) Barter presents insuperable obstacles to trade in point of
-_place_. While men still exchanged in kind, as it is called, and knew
-no other mode, the purchasing-power of any Service was necessarily
-confined to that locality, and would not be parted with except in view
-of a return service actually there present in the same place. There
-could be no commercial contact without a local contact. The ultimate
-parties to every exchange must come together face to face. There could
-be no middle-men or distributors. The market was circumscribed to the
-hamlet.
-
-(c) Buying and selling under the scheme of Barter is also wretchedly
-limited in point of _time_. The fruit-dealer, for example, must
-dispose of his product quickly, or it perishes on his hands. So of
-many other commodities. If they are to be sold at all, they must be
-sold quick. The ultimate buyer must be on hand in time. As the result
-of these three concomitants of Barter, ten thousand things that are
-now bought and sold to profit never came to a market or thought of a
-market, exchanges were so limited in time and place and variety, human
-associations were so hampered, and the development of all peculiar
-talents so impeded, that one of the initial steps in the progress of
-all Civilization has been to hit upon some expedient to lessen these
-intrinsic difficulties, and so to facilitate Exchanges.
-
-2. The Invention of Money was nothing in the world but the tentative
-selection by certain people in a certain locality of some Commodity
-then and there _valuable_, that is, capable of buying _some_ things
-then and there, and gradually giving to that commodity by general
-consent the capacity of buying _all_ things then and there salable.
-The commodity thus slowly becoming money, whatever it was, had and
-must have had a _limited_ purchasing-power to start with, because no
-instance to the contrary has ever been shown, and still more because
-that peculiar comparison between _two_ things that lies at the bottom
-in each single case of Value is exactly the same kind of comparison
-that holds between money and the _many_ things which money purchases;
-given a _valuable_ in common use as a starting-point, and the
-transition is easy and natural to a _generalized_ valuable, that is,
-to a recognized money; the relation of mutual purchase between the
-commodity and _some_ other things was a common fact to begin with, the
-making it money was merely the common consent that thereafter it
-should have a general purchasing-power within the circuit; so that as
-a simple result, whenever anybody had anything to exchange, he might
-first exchange it for this selected product, which was valuable before
-but is now generally valuable, and then with this money-product in
-hand he could buy whatever he might want at any time or place within
-the circuit.
-
-It is impossible from the very nature of Value, impossible from that
-comparison of two distinct Services, that precedes every Exchange, as
-well under Money as under Barter, that anything except a valuable
-anterior to and independent of its becoming money, could ever have
-become money at all. Money makes no alteration in any law of Value,
-but only substitutes for convenience' sake in every transaction in
-which it plays a part, a general for a specific purchasing-power; a
-book, for example, has a specific purchasing-power, since there is
-somebody who wants it, and is willing to give a sum of money for it;
-and the owner of the book by the sale of it parts with a product which
-has only the power to purchase something from a few persons, and
-receives a product in return which has the power to purchase something
-from all persons; it is not true to say that the money is worth more
-than the book, because they are just worth each other, as is
-demonstrated by the sale; but it _is_ true to say that the seller of
-the book has substituted in the place of a limited purchasing-power,
-of which he was proprietor, a general purchasing-power, of which he
-has now become proprietor; that is, that the command of the money,
-which has no larger value than the book had, does carry along with it
-a superior command over purchasable articles generally. In one word,
-Value in the form of money is in a more available shape for general
-buying and selling than value in any other form. This is the exact and
-ultimate expression for all the truth there is in the common vague
-remark, namely, that Money is something different from all other
-Valuables; it _is_ different from them in just one respect, namely,
-while they have the power of buying some things from some persons, it
-has the power derived from the _consensus_ of Society to buy all sorts
-of things from all sorts of persons.
-
-This simple change or substitution, which seems in itself so little
-and easy and natural, has changed in its ever-enlarging results the
-face of the world! It makes the valuable now selected to be money seem
-to the minds of men to be a very different thing from what it was
-before, although the change in itself is slight indeed. It removes
-most of the inconveniences of Barter as by a stroke of the hand. So
-soon as a commodity selected to become money by one people comes to be
-acceptable as such to all other peoples, as is the case with gold, the
-advantages of its use are vastly multiplied to all. Experience has
-shown many times over, and reflection will explain to any one, how
-that there is no other machine that has economized labor like money;
-no other instrument that plays so deep and broad a part in Production;
-no invention whatever, unless it be the invention of letters, which
-has contributed more to the civilization of mankind. Money makes vast
-distances relatively indifferent; for it is sufficient to constitute a
-market for any valuable that it is practically wanted anywhere on the
-round globe, the middle-man paying the seller for it in money
-transports it thither, and receives back his investment with a profit
-from the ultimate buyer. So, also, money generalizes any
-purchasing-power in point of time. The dealer, exchanging his
-perishable products for money, may keep its power of purchase locked
-in this form as long as he lists, putting an interval at his own
-pleasure between selling and buying, and with this generalized power
-in his pocket he may buy when he will and what he will and where he
-will. Money, too, makes any purchasing-power portable, divisible, and
-loanable. A man may carry the value of his farm in his purse, and may
-divide it up for a thousand different purchases, and especially is
-able to loan it in this form in order to receive it back again with
-interest at a future day.
-
-3. It is important to notice in the next place, that, whatever made
-the commodity selected as money originally desirable and valuable, it
-has now become desirable and valuable for other and wider reasons. The
-tobacco of Virginia, for example, in the early days of that Colony,
-became valuable at first on account of the demand for it as a narcotic
-both there and in England; but as soon as it was made a legal money in
-the Colony by the general consent already described, its value
-depended in part upon another set of causes. Of course Demand and
-Supply still controlled its value just as before, only certain parties
-who had not desired it before as a mere _commodity_ thereafter desired
-it as a current _money_. Its convenience and necessity as money
-widened the circle of those parties willing to receive it and glad to
-render a return for it. It is true, that many now received it only
-because they could pay it out again to buy something else with; but
-that made no difference so far as Value is concerned; it was valuable
-before under a certain limited demand, and continued valuable under an
-additional and broader demand; we cannot certainly say, that it became
-_more_ valuable under this new and wider demand, because we do not
-know how the then combined demand affected the Supply. We may probably
-say, that the value became _steadier_ if not _larger_, under the
-double demand than under the previous single one; and the vital point
-to mark and remember is, that the _value of money_, previously
-valuable as a commodity only, is still maintained under the law of
-Demand and Supply, just as all other values are, the only peculiarity
-being this, namely, as a generalized valuable and consequently a
-potent social agent money is in demand by everybody who has anything
-else to sell.
-
-It follows from this in necessary sequence, that Money as such,
-whatever may have been the ground of its original value as a
-commodity, _is always received as money in order to be parted with_.
-It is not bought for its own sake to be used and enjoyed, as most
-other things are, but is only bought to be sold again. Men will sell
-everything to buy it, with the sole intent to sell it again to buy
-something else; and the odd thing about it is, that everybody buys it
-to sell again, not at all as the speculator buys grain to sell it
-again at a higher price by the bushel or centner, but, the money
-remaining constant in their minds, they sell for it something they
-care less about in order to buy with it something they care more
-about. Money, therefore, becomes a _medium_ in men's exchanges. The
-word "medium" in this proposition is to be taken in its etymological
-and strict sense, as something that comes between two extremes and
-serves also to relate them to each other. This is not the ultimate
-characteristic of Money, as we shall see, nor can a final definition
-be founded here, but it is a good step towards ultimates to see that
-money is exchanged for other things as a means and not as an end, that
-it is a great help in exchanging all other valuables but is never
-exchanged for itself in an ultimate transaction.
-
-Small boys, indeed, sometimes swop cents; but men, the miser excepted,
-who is under a deplorable fallacy of the senses, use and estimate
-money mainly as the _medium_ that facilitates the real exchanges of
-Society. What is actually and ultimately exchanged is the wheat, the
-cloth, the lumber, the furniture, the commercial service of every
-kind, and Money is but the instrument making those exchanges easy,
-which might perhaps go on in part without it, though with difficulty
-and loss. In short, money is somewhat like a railroad ticket.
-Transportation to a given place is what is really bought when one pays
-for a railroad ticket. The proof of the purchase is the bit of paper
-exhibited. That comes in as a _medium_ between the traveller and the
-railroad company; and while it facilitates the real exchange, it also
-partly disguises it. This comparison holds good in the main feature,
-but in two respects the resemblance fails: Money is not a specific
-ticket for a single purpose, as the pasteboard is, but is a general
-ticket (so far as it goes), for all purposes of purchase; and
-secondly, Money really stands as a value in its own right (so far as
-any single thing can so stand) at the same time it is serving as a
-_medium_, while the railroad ticket does not. Still, we are all
-desirous to get money, not for the sake of the money itself, but for
-the sake of those things which the money will buy. We part with money
-freely and constantly for those things which we care more about. What
-we exactly care for is what our money will buy, is the conscious
-command over all services and commodities which the possession of
-money insures to us. If we could give our own commodity or service or
-claim, whatever it may be, and receive directly in return the claim or
-commodity or service which we want, whatever that might be, there
-would be no need of money at all; but this is always inconvenient, and
-generally impossible; and, therefore, we introduce a middle term, and
-money is found to be a good mean to help exchange the two extremes.
-
-4. We are now getting on towards a just conception and a true
-definition of Money, though two or three more points must still be
-noted as preparatory to that consummation. As a result of the fact
-already reached, that money serves as a _medium_ in men's exchanges,
-it follows of course that the power of money as such a medium is
-multiplied by what has been called _rapidity of circulation_, that is,
-a brisker use of the volume already in circulation will reach the same
-end as the increase of its volume. As in mechanics, so in money, the
-whole power is the product of mass and velocity. Money also is like
-any other tool, the more constant its use the more profitable its
-agency. The quick movement of a small mass, accordingly, is better
-than the torpid movement of a large mass, both in what it saves of
-expense, and in what it presupposes of the general conditions of
-exchange. The value of the money-volume of any country is a small
-fraction of the aggregate value of those products which the money
-helps directly to exchange; and a very small fraction indeed of the
-aggregate value of all the products which it helps indirectly to
-exchange through Credit by means of its _denominations_. We shall see
-better a little farther on, that Money works not only as a medium
-direct, itself exchanged against other Services, but also as
-furnishing those denominations of Value, like the _dollar_, which are
-always used in bargaining; and also used in all cases of Credit, in
-which settlement is not made by money but by offsetting one piece of
-indebtedness against another, and these denominations can arise only
-from the use of money as a direct medium. Therefore, we may say that
-the hub and the spokes and the rim of the wheel of exchange consist of
-personal services and commercial credits and all material commodities
-except money, while, to borrow the famous comparison of Hume, "Money
-is but the grease which makes the wheel turn easier." It would be a
-vast mistake to suppose, as some of the ancients did, that the grease
-is really the wheel.
-
-While Money thus facilitates the revolution of the wheel of Exchange,
-it follows too from its nature as a medium, that the dimensions of the
-wheel as a whole are vastly greater than they would have been but for
-the Money. Money indeed helped to exchange the products that already
-existed and were coming into existence at its first invention, but by
-far the largest part of products since have come into existence
-largely through the agency of Money. We get quite too low a view of
-the functions of this potent agent, if we think of it merely as an aid
-in circulating products, that would have existed whether or no; some
-products would certainly have existed whether or no, and money would
-surely be of great use and convenience in helping bring these to the
-ultimate consumers; but this is a partial and wholly inadequate view
-of the function of Money as a medium of exchange. The fact that such a
-medium is in universal circulation, and that the present holders of it
-are ready to exchange it against any sort of Services adapted to
-gratify their desires, exercises a kind of creative power, and brings
-a thousand products to the market which would otherwise never have
-come into existence. Since money will buy anything, men are on the
-alert to bring forward something which will buy money; and since
-Money is divisible into small pieces, an incredible number and variety
-of small services are brought forward to be exchanged against these
-pieces, for example, into railroad cars and fares of all sorts, which
-services we have no reason to suppose would ever be brought forward at
-all were it not for the strong attraction of the money.
-
-5. From this last point of view we may gain another closely connected
-with it, namely, that Money must be a very important part of the
-_Capital_ of the world. We have already thoroughly learned that
-Capital is any product outside of man himself from whose use springs a
-pecuniary increase. Now any one may see that the monetary medium of
-any country is the most active and the most essential and the most
-profitable of all those instruments reserved in aid of further
-production. The axe, the plough, the spindle, the loom, the wheel, the
-engine, are all instruments, are all Capital, and they each aid
-respectively some part or parts of the processes of Production; but
-Money is a form of Capital which stimulates and facilitates all the
-processes of Production without exception. Just as we have seen that
-Money is a form of Value generalized, so is it also a form of
-generalized Capital, that is to say, it is an instrument capable of
-aiding all processes of Production in every department, while every
-other capitalized instrument is capable of aiding but few processes in
-one department. Without Money, for instance, there could be no
-thorough Division of Labor, because there would be no adequate means
-of estimating or rewarding each one's share in a complicated process.
-By means of Money all services small or great contributing towards a
-common product are neatly measured, and may be paid for by some one,
-who thereby becomes proprietor of the whole product; or, if the
-contributors choose, they may wait till the product itself is sold,
-and then the money received is divisible without loss to each
-contributor, according to the service rendered. Thus the influence of
-Money as Capital pervades the whole field of Exchange from centre to
-circumference, facilitating every transfer and stimulating new
-transfers.
-
-Now then, if Money be, as it is, a peculiar kind of Capital, since it
-is a Medium in all Exchanges, the question becomes pertinent, How much
-of it is wanted? Clearly, only _so much_ as will serve the _purposes_
-which such a medium is fitted to subserve; there should be enough
-fairly to mediate between the Services actually ready to be exchanged
-then and there, and also enough fairly to call out other Services
-proper and profitable in the then circumstances of Society, and whose
-only obstacle to a profitable exchange then and there _is a lack of a
-facilitating medium_. All increase of the volume of money beyond this
-point, which the very nature of Money itself marks out as the
-boundary, leads to a diminution of Value of every part of it, to a
-consequent disturbance of all existing monetary contracts, to a
-universal rise of prices which are illusory and gainless, to
-unsteadiness and derangement in all legitimate business, and to a
-spirit of restless enterprise and speculation which seeks to draw off
-the excess of money in untried and reckless experiments. The only real
-subjects of Exchange are mutual efforts, mutual services, as these are
-expressed in Commodities and Services and Credits, and money is the
-instrument merely that comes in between the real exchanges to
-facilitate them; and, therefore, it seems to be perfectly conclusive
-on this point to remark that the quantity of money needed in any
-country or the whole world is limited by the number of the services
-ready to be exchanged, to make easy the exchange of which is the good
-purpose and sole end of Money.
-
-The physical and mental powers of man, which alone can give birth to
-commercial services, when considered as they must be in this
-connection as belonging to a given number of men at a given time and
-place, are strictly limited of course; and although the presence of
-money then and there is both a stimulus and an aid to all these men to
-bring forward services of all sorts to the market, there are obvious
-restrictions both in their powers and in their circumstances; and the
-quantity of money needed among them is just that quantity which will
-fairly act as a medium in exchanging the services which they are able
-and willing to render to each other. All increase in the quantity of
-money beyond that point would have, and could have, the only effect of
-increasing the nominal Prices of Services, without making the services
-themselves any greater in number or better in quality.
-
-It is with Money exactly as it is with any other form of Capital,
-allowance being made for the fact that Money is a kind of generalized
-capital. To illustrate, How many ships does a commercial nation need
-to employ? As many as will fairly take off its exports and bring in
-its imports. Ships are wanted for one definite purpose; and when
-enough are secured to answer that purpose, all additions will lessen
-the Value, that is, the purchasing-power, of ships generally. So of
-all instruments whatever. Enough is as good as a feast. Enough is
-better than more. In regard to every form of Capital, and consequently
-in regard to Money as such, the point of sufficiency is determined by
-the quantity of work to be done. And as no law of Congress is required
-to determine how many ships are best to do the transportation for the
-people of the United States, so no legislation is needed to fix the
-amount of Money that is best for the same people, or for any people.
-As the people find out for themselves how many steam-engines they want
-to do their work of the year, so they find out without any aid from
-their legislators how much money they want to make their exchanges of
-the year. The less Law and the more Liberty on all such points the
-better for all concerned.
-
-Let the reader notice in passing, as a corollary from what has just
-been shown, that when forms of Credit like bank cheques come into
-growing use to make payments with and settle balances, they displace
-to a large extent commodity-moneys, like gold and silver, which would
-otherwise have to be employed. Speculations, and even scientific
-discussions, over the needful amounts of gold and silver for money in
-the United States, have usually overlooked this essential
-consideration of displacement; and one result of this has doubtless
-been too large a coinage of the precious metals, to the hazard of
-their stable value, and especially to the hazard of the permanent
-maintenance of the gold standard. Men forget in their zeal for Money
-that it is nothing but a Tool, and that the multiplication of tools
-beyond the amount of work to be done by means of them always makes the
-tools a drug; and they are apt to forget also that the cheaper and
-more convenient substitutes for metallic moneys, namely, forms of
-Credit, are all the time and more and more taking the place of the
-older moneys, which, nevertheless, must still be kept at the
-foundation, though a lessened quantity of them be needful for
-circulation.
-
-6. We must now carefully sink our analysis one grade deeper, in order
-to reach the bottom characteristic of Money, and so to formulate an
-ultimate definition of it.
-
-The only quality common to all valuable things is the fact that they
-are all _salable_; and if these various and multitudinous valuables
-are ever to be made in any way commensurable with each other, it must
-be by means of one of their number assumed as a _standard of
-comparison_ with the rest. Comparisons can only turn on points of
-_likeness._ The single respect in which all valuables whatsoever
-resemble each other is their common possession of purchasing-power, be
-it more or less. Therefore, as a yardstick, itself possessed of
-length, _and because it is possessed of length_, if assumed as a
-standard of comparison with other objects that have length, may be
-used to measure all such objects whatsoever, and may accurately
-express in units or fractions of itself the simple length of anything
-and everything; so, any valuable may be selected as a _standard_ with
-which to compare all other valuables, and by means of the terms of
-which to express numerically the reciprocal relations between all
-valuables whatsoever. This is just what is done whenever any valuable
-is selected as Money; and this is the exact and single purpose of such
-selection.
-
-What is the precise change, then, in the valuable chosen as Money when
-it becomes money? This: it was a valuable before, else it could not by
-any possibility serve the present purpose, but now it has become a
-_standard_ valuable, with which other valuable things may be compared
-in the single point of their _value_. Valuables are now commensurable.
-That is all. But that is a great deal. As we have already learned to
-the nail, Valuables are all Services; and now some one Service has
-been selected from the rest, capable in its very nature of _measuring_
-all the rest, and so capable of becoming immensely _useful_ to
-mankind.
-
-What, accordingly, is the bottom characteristic of Money? And where
-shall we find the terms for an immutable definition of it? _The core
-of Money is this quality of being a Measure of Services, taken on in
-addition to the usual and universal qualities constituting anything a
-Valuable._ This additional quality arises under the choices and action
-of men, just as the ordinary qualities constituting anything a
-valuable arise under the choices and action of men. But it is an
-_additional_ quality, distinctly conferred, and vastly important. The
-valuable chosen as Money was a Service to start with, was constantly
-rendered as such then and there, and was consequently fitted by
-qualities already possessed to assume a further and a _unique_
-quality, namely, the capacity to measure and express relatively to
-itself all other valuable Services whatever.
-
-As each and every Valuable is the outcome of a _comparison_ instituted
-by two persons as between two things, as is thoroughly unfolded in the
-first Chapter, it is not at all strange, rather it is natural and
-inevitable, that there should arise in connection with Valuables as a
-whole class some such further _comparative_ measure, as Money is now
-shown to be; because, without some such common measure of Services in
-general, itself a Service of the same kind, it would be inconvenient,
-not to say impossible, to carry on any considerable traffic anywhere.
-For instance: a baker has only loaves of bread, and wishes to buy a
-hat, a horse, a house. How many loaves shall he give for each? Unless
-there be some common Service, in the terms of which these differing
-Valuables can be expressed, and by means of which they can be brought
-into commercial relations with each other, it would be an awkward
-piece of business to effect even the _three_ exchanges; and every time
-the baker wished to buy another article, there must be a rude and slow
-calculation from independent data, in order to decide upon the terms
-of the exchange. Let now some Common Service be introduced, in the
-terms of which each of these values can express itself independently,
-and the difficulty disappears in an instant. "My loaves are worth ten
-cents each," says the baker. "My hat is worth ten dollars," says the
-hatter. Their saying so does not indeed _make_ it so; that matter is a
-preliminary; but each has come to that approximate conclusion by a
-relatively easy comparison of two Services, his own and another common
-one; and if the loaves will duly bring ten cents and the hat ten
-dollars, the terms of their own exchange are one hundred for one, and
-there is no need of parleying. So of the rest; so of everything that
-is ever bought and sold. Money becomes by common consent a Measure of
-them; because it measures them, it makes the interchange of them a
-very facile matter; because it measures them, it easily becomes a
-medium between them; and, accordingly, because the money rendered is
-itself a Service, it is a natural and universal measure of all other
-Services.
-
-MONEY IS A CURRENT AND LEGAL MEASURE OF SERVICES. With this final
-definition of "Money" the writer is more than willing to take all the
-risks. It was new when propounded many years ago in one of the
-editions of his earlier book. All subsequent testings of it in form
-and substance have but confirmed the original confidence in it. The
-word "legal" in this definition is not always to be pressed to its
-utmost signification, but denotes anything sanctioned by law or usage
-_equivalent to law_. The other words are to be taken in their full and
-technical meaning. It is believed that, while this definition is short
-and simple, it just covers the whole ground and no more. It is not
-enough that a certain valuable be "legal" as Money; it must also be
-"current" in order to be a true money. In the United States between
-1862 and 1879, to take an example, gold coins, though legal tender all
-the time for all debts public and private, were not "current" in the
-full sense of that term, and hence were _not_ the Money of the
-country. Till the last-mentioned date, the gold dollar of 25-4/5
-grains standard fine was required by law to pay customs-taxes with and
-the interest on the public debt, and was used to a small extent in a
-few branches of private business, and was not otherwise in the hands
-of the people. These dollars, accordingly, were not strictly money,
-but bore a premium over the "current" money of the country. To be
-Money, then, a Valuable must be recognized as money by law or custom
-as strong as law, and also circulate among all classes of the people
-as a medium in their exchanges.
-
-But we are bound to observe that Money becomes a _medium_ in men's
-exchanges, because it first became a _measure_ in their Services. Some
-economists think that these two functions are separate, and are of
-equal rank; but it is easy to see that one only is original, and that
-the other is derived from that. Even Aristotle perceived that Money is
-a Measure, inasmuch as he defined property "_anything that can be
-measured by money_." We may be pretty sure, in opposition to Professor
-Jevons, in his Money and the Mechanism of Exchange at page 13, who
-thinks there are _four_ characteristics of Money, that Money as such
-has but _one_ primary characteristic difference from other forms of
-Value, namely, this _measure_-quality, this _standard_-quality, this
-publicly recognized function as a _common measure_ to which all other
-valuables are constantly referred. This additional attribute put upon
-a money-valuable by law or custom is not what _makes_ it valuable,
-since an ounce of uncoined gold standard fine is worth within a very
-small fraction as much as an ounce of gold coins, but it makes the
-money a far more convenient instrument to purchase with, inasmuch as
-money, having now the attribute of making all other valuables easily
-commensurable with itself, becomes at once something which everybody
-is ready to receive, because everybody knows in general what its power
-will be to purchase all other things. In other words, Money becomes a
-_medium_ in exchanges just because it has already become a _measure_
-of Services in general; and there are not consequently two prime
-functions of Money, still less four, but only one. This view seems to
-simplify the whole subject of Money very much; and we may be sure that
-it will be found to be scientifically correct, and that we shall find
-many means of testing its accuracy as we go on.
-
-To maintain, as we do, that "Money is a measure of Services," is much
-better than to say, in connection with many economists, that "Money is
-a Measure of Value." That phrase is objectionable because Value is
-always relative to two Services exchanged for each other; and to say
-that money is a measure of that _relation_ is neither so simple nor so
-ultimate as to say that it is a measure of each of the Services
-entering _into_ that relation. The Services may be conceived of and
-spoken of separate from the Value into which they merge, although they
-come into existence solely for the sake of that resultant Value, and
-it is more exact and final to propound that Money, itself a Service,
-is a measure of all other Services considered as constituent elements
-of the Values into which they fall. We are not without strong hopes,
-accordingly, that competent economists will concede, that here is a
-radical improvement in the nomenclature of our Science.
-
-In the place of our expression and definition, and the foregoing
-explanation consequent upon its use, President Walker in his Money,
-pages 280 _et seq._, prefers the mathematical and excellent phrase,
-"_the common denominator in exchange_"; Professor Bonamy Price, in his
-Practical Political Economy, page 363, shows his fondness for the
-formula (and it is a good one), "_the tool of exchange_"; and Henry
-Dunning Macleod, in his Elements of Banking, page 17, insists with
-much less reason, that "_Money is the representative of Debt_." He
-says: "The quantity of money in any country represents the amount of
-Debt which there would be if there was no money; and consequently
-when there is no debt there can be no money." The unfortunate use by
-some countries of a paper money, which is indeed a form of debt, gives
-some plausibility to the notion that Money is a representative of
-Debt; and perhaps the fact that Money is often used to pay debts
-previously contracted, and that debts are almost always contracted in
-the terms of Money, may give some additional plausibility to this
-view; but as Macleod himself goes on to say that "no substance
-possesses so many advantages as a metal for money," and that "all
-civilized nations therefore have agreed to adopt a metal as money, and
-of metals, gold, silver, and copper have been chiefly used," we do not
-see how he can logically hold that a gold dollar, or a gold sovereign,
-whose value is as substantive and independent as that of any Valuable
-in the world can be, becomes through coinage and circulation "a
-representative of Debt." Instead of saying as he does, "where there is
-no debt there can be no money," it may be confidently asserted on the
-other hand, where all transactions are settled at once in solid money
-there can be no debt.
-
-7. Having thus looked into the nature of Money, and seen what is its
-one essential characteristic, and its one obvious and universal
-function as the result of that, it will help us now in our further
-discussion, to examine some of the material commodities that have
-served as Money at different times and places.
-
-_Cattle_ appear to have been the earliest money of which there remains
-any record. Homer, near the middle of the sixth book of the Iliad,
-indicates in the following lines that oxen were an incipient money in
-the Heroic age:--
-
-    "Then did the son of Saturn take away
-    The judging mind of Glaucus, when he gave
-    His arms of gold away for arms of brass
-    Worn by Tydides Diomed,--the worth
-    Of fivescore oxen for the worth of nine."
-
-We cannot certainly infer, when it is said in Genesis that "Abraham
-departed out of Egypt very rich in _cattle_ and silver and gold," that
-any of these were anything more than articles of valuable merchandise;
-but on the other hand it is certain from the Latin name of Money,
-_Pecunia_, which is derived from the root _pecus_, which means
-"_cattle_," that Cattle were the Money of the early Romans; and Pliny
-writes expressly that King Servius Tullius stamped the first bronze
-money of Rome with the _image of cattle_, undoubtedly indicating by
-that some equivalence in current value between the two. At any rate
-cattle have been used as Money among pastoral peoples very widely in
-place and in time, and are still so used in various parts of Africa.
-
-In the region of the Euphrates and Tigris the precious metals became
-money in very remote antiquity; for the art of coining, and all other
-arts, came thence westward to the Greek cities of Asia Minor, and to
-Greece itself, and we learn that Pheidon, King of Argos, coined silver
-money on a scale derived from the East in 869 B.C.; and a better proof
-still is the fact that burnt clay tablets are found in the Royal
-Library at Nineveh, discovered by Layard, which are really
-credit-money, notes issued by the Government, and made redeemable in
-gold and silver money on presentation at the king's treasury. Tablets
-of this character are extant bearing date as early as 625 B.C. But the
-gold and silver money must have been circulating a long time in their
-own right as valuables, before such a credit-money, such a
-promise-money, as those tablets are, could have originated in
-connection with them. Abraham, who himself migrated from "Ur of the
-Chaldees" about 2000 years B.C., not long after reaching the
-Mediterranean, "weighed unto Ephron the silver which he had named in
-the audience of the sons of Heth, four hundred shekels of silver,
-current money with the merchant." This is expressly said to be "money"
-and "current money." Perhaps it was coined money. At any rate, it was
-cut and piece money. It was indeed weighed out, and not counted out.
-This is still the more accurate and speedy manner, when the facilities
-for the weighing are present. The Bank of England at this day weighs,
-and not counts, the coins received and paid out. The Romans first
-coined silver money in 269 B.C., and gold money in 207 B.C., and gold
-coins were stamped in Greece about the time of Alexander the Great,
-say 333 B.C.
-
-Other metals than those called precious were also early used as money.
-Long before Pheidon's silver coinage in Greece, _copper skewers_ were
-used as money in that country, of which six made up a _drachm_, which
-was afterwards both a coin and a unit of weight, the coin being worth
-about 17 cents of our money, and the weight being about 66 grains
-avoirdupois. The word drachm is derived from ~dragma~, _a handful_;
-and the sixth part of it, called an _obol_, from the Greek word
-meaning a _spit_, became also both a coin and a weight, all which
-makes it evident that these were used in connection with roasting
-meat, and that one skewer or obol was originally a unit both of value
-and of weight. In Adam Smith's day, in certain districts in Scotland,
-_nails_ were still used as small money, which is a forcible reminder
-of these old Greek skewers. Iron became money in Sparta; money of lead
-was known to the ancients, and is still current in the Burman empire;
-the earliest Roman coins were of copper, which were cast rather than
-stamped, for no die would have sufficed for pieces so large and heavy,
-and the _denarius_ was the unit divided into ten _asses_, the
-_denarius_ being nearly the equivalent of the Greek _drachma_ whether
-of copper or silver, because the Romans reckoned from the first the
-ratio of copper to silver as 250:1; bronze is a mixture of copper and
-tin, and brass of copper and zinc, and copper coins with both these
-admixtures--used for the purpose of hardening the copper, it being a
-general law of metals that a mixture of two is harder than
-either--have been very common in ancient and modern times; Sicilian,
-Roman, and old British coins of tin alone are known to have been
-struck; and Herodotus makes the statement that the Lydians of Asia
-Minor were the first to make a coinage of _electrum_, which, as some
-claim, was a mixture of gold and silver, and of which ancient
-specimens are still existing.
-
-Cowry _shells_ are still used in the East Indies, and also in Africa
-in the place of small coins, and have sometimes been imported into
-England from India to be exported in trade to the coast of Africa,
-being reckoned in Bengal at about 3200 to a silver rupee, which is
-about 46 of our cents. The New England Indians also used beads or
-shells of periwinkles (white) and of clams (black), of which 360 made
-up a belt of _wampum_, as they called it, the black being counted
-worth twice as much as the white; and the English colonists accepted
-the wampum in their exchanges with the Indians, regarding a string of
-white as equal to five shillings, and a string of black to ten
-shillings, and afterwards made it legal tender among themselves for
-small sums, and even counterfeited it. Cakes of _tea_ have passed as
-money in India, and elsewhere; and it is said, that at the great
-annual fair at Novgorod, in Russia, the price of tea has first to be
-determined before the prices of other things can be settled upon,
-since that is a kind of standard of Values in that great mart. _Salt_
-has been current money in Abyssinia; _cod-fish_ in Ireland and
-Newfoundland; and _beaver-skins_ in New Netherlands, New England, and
-the western parts of America.
-
-We do not here try at all to give a full list of the things that are
-known to have been used in the early states of society as money; and
-there would be no ground for surprise in any list, however large and
-varied, when we remember how great is the need of some such form of
-value generalized in order that exchanges may grow to any considerable
-size and vigor. Two points only need now to be noted, (1) that the
-tendency everywhere has been sooner or later to come to the metals as
-the best form of money, and among the metals to reach gold and silver
-as the only ultimately satisfactory materials for Money; and (2) that
-no instance has ever been found in the whole stretch of inquiry over
-all the earth, of anything becoming a Money that had not been
-previously a Valuable. We might be perfectly sure of this beforehand,
-without any search at all among the moneys of primitive times and
-states of civilization, because, from the _very nature of the case_
-nothing could ever serve the purpose of Money except what was already
-a valuable to make the comparison with,--nothing could ever possibly
-serve as a measure of services except a service. It has several times
-been claimed, that actual exceptions to this law have been
-historically discovered, but when the alleged exceptions have been
-closely scrutinized they have been found to be apparent only. To take
-two or three of the most plausible examples: the Carthaginians had a
-kind of leather money, which originally enclosed bits of the precious
-metals, and circulated in virtue of them, though they afterwards came
-to circulate as bits of leather only, as counters and pledges, in a
-way that will be explained later. According to the Venetian traveller,
-Polo, China had in the thirteenth century a money made of the bark of
-the mulberry tree, cut into round pieces and stamped with the name of
-the sovereign, which money it was death to counterfeit or to refuse to
-take in any part of the empire. If we had the whole history of this
-money, it would surely ally itself either with the other
-commodity-moneys now being treated, or with the modern credit-moneys
-made legal tender to be treated hereafter. It is just as certain as
-anything can be, that these circles of stamped bark did not start out
-as money in their own right. The French writer, Montesquieu, asserted
-that there was in use in the last century among the people of the
-coast of Africa, what he called "an ideal money," "a sign of value
-without money," the unit of which was called a _macoute_, which was
-subdivided in ideal tenths, called _pieces_. This statement was
-startling, as implying a denomination without the thing denominated,
-as implying a standard of value which had no basis in a valuable
-thing. It was afterwards discovered, however, that this money of
-account had its origin, just as we should suppose it must have had, in
-an actual _macoute_, a piece of stuff, a fabric, which they had used
-first as a commodity-money, and afterwards its _name_ as a money of
-account. A valuable thing may become money, and then its name may
-become a _denomination_ of value, and still later a bit of leather or
-a bit of paper may be called by the same name, and in a certain sense
-take the place of the same thing. All this will be as clear as day
-pretty soon.
-
-8. Contrary to what has often been affirmed by Economists, the real
-measure of Services is the service itself, the _thing_-dollar and not
-the _denomination_-dollar. The denominations are used in bargainings
-and calculations as representatives of the money itself, and thus
-indeed in a secondary sense serve as _measures_; but the subtle
-connection between the thing and its name, between money and its
-denominations, and the differences between the two, need to be clearly
-unfolded, because most of the current fallacies about money take their
-rise just at this point. An illustration will best serve us here. The
-original measure of Services in France and England and Scotland was
-the pound weight of silver. No coin of that weight was ever struck;
-but the pound of silver was cut into 240 coins called pence. Twelve of
-these pence were called a _solidus_ or shilling. Thus, as applied to
-silver, the symbols lb. and £ denoted equivalent weights, the former
-of uncoined metal, the latter of metal coined. But in course of time,
-more "pence" than 240, and at last in Elizabeth's reign 744 "pence
-were coined out of a lb. of silver." Yet all the while 240 of these
-pence were called a £. £ and lb., both a contraction of the Latin
-_libra_, were no longer equivalent. The lb. of weight continued
-stable; the £ of money had dwindled to less than one-third. Yet the
-_name_ pound continued to attach to 240 pence, although the pence
-embodied a less and less quantity of silver. Each actual penny had
-less silver in it, and though it was still called a penny as before,
-the _denomination_, though spelled and sounded as before, represented
-less silver, and therefore less _value_, than before. The
-denominations, then, always follow the fortunes of the coins, whose
-names they are, to the frequent loss and shame of the unthinking, who
-suppose the same _name_ must represent the same _thing_. Unfortunately
-it does not.
-
-Take another illustration. In 1834 the gold eagle of the United States
-was reduced in weight from 270 to 258 grains troy, and the alloy
-increased from one part in 12 to one part in 10. These changes took
-out more than 6 parts of gold from every 100 parts in all the gold
-coins of the country. Yet all these coins bore the same names as
-before. The things denominated changed, but the denominations changed
-not. Other things remaining equal, the coins lost six _per centum_ of
-their purchasing-power, or in other words, general prices rose in that
-proportion; the _measure_ became so much smaller; and the names,
-_eagle_, _dollar_, outwardly unchanged, varied simultaneously and
-equally with the change in the coins.
-
-Also, coins are liable to change in their function as a measure of
-general Services from unavoidable changes in the general
-purchasing-power of the precious metals themselves. If for any reason
-an ounce of gold will buy less of general Services than formerly, of
-course the coins cut from that gold will buy less than formerly; and
-this change in the _measure_ is followed instantly and inevitably by a
-corresponding change in the meaning, though not in the spelling, of
-the _denomination_. Not so with all other tables of denominations.
-These have a _basis_ independent of the things which they help to
-measure. The French _metre_, for example, is not variable by the
-lengths or breadths or heights of the things it measures, but is an
-invariable unit of length the world over; so is one of Troughton's
-inches; but this feature does not hold at all of the denominations of
-Money; because _sovereigns_, _dollars_, _marks_, _francs_, are
-denominations of _Value_, which is itself a variable relation. Such
-denominations, consequently, are _not_ an independent standard to
-which values themselves can be referred, as lengths are referred to
-metres and inches, but vary with the varying purchasing-power of the
-coins themselves. The "_dollar_," as a denomination, means more or
-less, just according as the "DOLLAR," as a coin, buys, that is,
-measures, more or less.
-
-Still, essential as is the point now made to any just understanding of
-the subject of Money, it is vastly important for all the interests of
-Exchange that the accepted measure of Services be as little liable to
-fluctuations as possible, especially in all cases in which lapse of
-time is involved before the exchange is fully consummated. An
-inflexible standard there cannot be from the very nature of the
-measuring, but also from the very nature of all measuring, the
-money-standard should be and should be kept as nearly inflexible as it
-possibly can be. For the same reason in kind, only multiplied a
-thousand-fold in force, that the bushel-measure should be of the same
-capacity in sowing-time and in harvest-time, to sell and buy by,
-always a bushel, no more and no less; and the yard-stick an inflexible
-measure of length, always 36 of Troughton's inches, no more and no
-less; so, as far as it is possible in the nature of Values, ought the
-current measure of Services, and hence its denominations, to
-represent, year in and year out, a uniform degree of purchasing-power.
-
-9. This brings us logically to the historical fact, that, no matter
-what measure of services any people may have adopted in their
-primitive times, there has always been a steady force at work tending
-to displace these in favor of gold and silver. This has become the
-universal result the world over among all advanced peoples. Governor
-Bradford in his History of Plymouth Colony gives a quaint account of
-the origin of money among the Pilgrims, and in connection with that of
-the fee-simple in lands: "_The Pilgrims began now highly to prize corn
-as more precious than silver, and those that had some to spare began
-to trade one with another for small things, by the quart bottle and
-peck; for money they had none, and if any had, corn was preferred
-before it. That they might, therefore, increase their tillage to
-better advantage, they made suit to the governor to have some portion
-of land given them for continuance and not by yearly lot, for by that
-means that which the more industrious had brought into good culture
-(by such pains) one year came to leave it the next and often another
-might enjoy it; so as the dressing of their lands were the more
-sleighted over and to less profit; which, being well considered, their
-request was granted._"
-
-The neighboring Colony of Massachusetts, settled about ten years
-later, used Bullets for small change, reckoning them at a farthing
-apiece, and made them legal tender for debts of less than one
-shilling; for larger exchanges Wampum and Beaver-skins were long used;
-but the steady force just spoken of induced Massachusetts in 1652 to
-supplant these with a silver coinage of her own, called the Pine-tree
-shillings and sixpences and threepences and twopences. This mint
-existed (sometimes idle) for over 30 years, but all the pieces coined
-bore the dates of 1652 or 1662. In 1691, the two Colonies were forced
-into one government through a new charter granted by William and Mary;
-and after lengthened trials of inferior moneys, not needful to be
-described now, Massachusetts determined in 1749 to have no other than
-silver money circulate in the Colony, and became thereafter till the
-Revolution the so-called "Silver Colony," and business rapidly and
-steadily revived and enlarged in consequence of the change, and in
-contrast with the rest of New England.
-
-Gold and silver, thus ever urging their way in to take the place of
-tentative and transient standards, and ever coming back again to stay
-if displaced for a time by cheaper and changeable moneys, have never
-been anywhere of equal value, weight for weight. An ounce of gold has
-always been more valuable than an ounce of silver. Probably in the
-Euphrates country where coinage began, and certainly in Asia Minor
-deriving thence its weights and measures, gold was strictly the
-standard with silver as subsidiary to that; in Greece, when Philip's
-victories established a double standard there, gold was reckoned
-relatively to silver as 1:12-1/2; in the Roman world, where silver had
-been the standard after 217 B.C., Augustus Cæsar legalized gold as a
-co-standard in the ratio of 1:12; in 1717 a double standard was
-established in Great Britain, gold being rated in the coinage as
-1:15-1/5 of silver, but in 1816 by a law still in force, gold was made
-the sole standard for the United Kingdom, the legal use of silver
-being limited to 40s. in any one payment; in France the legal relation
-of gold to silver was fixed in 1803 as 1:15-1/2, and so continued till
-1876; in the United States the ratio first established, in accordance
-with the recommendation of Alexander Hamilton as Secretary of the
-Treasury, was 1:15, but in 1834 this was changed to the relation of
-1:15.98, and so it remains to this day; in 1871, the new German Empire
-adopted the sole gold standard, and limited silver to the amount of 20
-_marks_ in any one forced payment, still allowing the old silver
-_thaler_ to circulate at the rate of three marks to a thaler; and
-since 1875, the Scandinavian Union permits gold alone to be coined for
-private persons, and limits the debt-paying power of silver to 20
-_crowns_. A crown is 26.78, and a mark 23.82, of our standard cents.
-
-Moreover, the relative value of gold in silver never continues the
-same for any great length of time, even after the law has sought to
-ascertain and fix it. Indeed, any law fixing the ratio between the two
-has very little, if any, effect towards maintaining the ratio. Demand
-and Supply determine the value of the precious metals each in each at
-any one time as absolutely as they decree the value of Hindoo rice in
-silver. France managed to maintain her legal ratio at 1:15-1/2 for 73
-years, because all the conditions were on the whole favorable; but
-when the Germans threw a portion of their silver on the world's market
-in hopes to reach the single gold standard, and the mines of Nevada
-poured forth on the same market their millions of silver, the ratio
-could no longer stand, the right of private individuals to have silver
-coined for them was taken away in behalf of the government, and only
-the five-franc silver pieces continued to be legal-tender to all
-amounts, the other silver coins becoming then (1876) only legal to pay
-debts to the amount of fifty francs. A franc is 19.29 of our standard
-cents.
-
-And this brings us to notice what are called _subsidiary coins_.
-France, England, Germany, and the United States have debased their
-smaller silver coins in weight, so that the _nominal_ value of these
-coins is from 7 to 15% above their _bullion_ value. For example, two
-halves, four quarters, ten dimes, of our silver since 1875 weigh 385.8
-grains, which is also the exact weight of the French five-franc piece,
-while our standard silver dollar weighs 412-1/2 grains, both 9/10
-fine, so that our "subsidiary" silver is debased in weight 6.48%.
-There are three advantages in thus treating the smaller silver: (1)
-there is so much clear profit to the Government minting them, thus
-lessening taxation; (2) a security to the peoples that they shall not
-lose their convenient small change by export to neighboring countries;
-and (3) this scheme allows a very considerable rise in the market
-value of silver without tending to throw the subsidiaries out of
-circulation. As these are never legal-tender except to very small
-amounts in domestic trade, there are no serious objections to their
-use in limited quantities. The English can pay debts in their silver
-to the amount of £2, and we in ours to the extent of $5. Coins of
-copper and of other inferior metals are also _subsidiary_ in principle
-and motive. Our 5-cent and 3-cent nickel pieces are 75 parts copper
-and 25 parts nickel, and the 1-cent piece is 95 parts copper and 5
-parts tin-zinc; and debts of 4 cents can be paid in 1-cent pieces, of
-60 cents in 3-cent pieces, and of 100 cents in 5-cent pieces.
-
-10. The steady experience of civilized men for two milleniums and a
-half seems to demonstrate, that gold and silver constitute the best
-Money; and we must now investigate the reasons, one by one, _why_
-they are the best money. The reasons appear to be three. Of these the
-first is by much the most important.
-
-(1) The first and main reason why gold and silver make the best money
-is to be found _in their comparatively steady general Value_. Since
-Money is a Measure of all other valuables, its success as a measure
-must depend on its own _steadiness_ of value, and gold and silver meet
-this test better than anything else. Money is a valuable, and not in
-any sense a _representative_ of value; except as to the subsidiaries,
-a coin does not owe its value at all to the _stamp_ impressed upon it
-or to the _law_ authorizing it, since the metal in it is worth as much
-out of the coinage as in it; coin-values arise under the same
-conditions as all other values, and are variable by any change in any
-one of the four elements which alone can vary the value of anything;
-and it would seem that nothing more is needed in order to remove the
-last vestiges of the dark cloud which has so long overhung this
-subject of Money, than to familiarize ourselves first of all, as we
-have already done, with the true doctrine of Value in general, and
-then to hold fast the truth exemplified on every hand, that the value
-of Money is just like every other value. Let us examine then, first,
-why the value of gold and silver is so steady.
-
-(a) On account of the comparatively steady Demand for these metals.
-Gold and silver are wanted for two general purposes: first, to be used
-as money, and second, to be used in the arts; and the usual estimate
-is, that about 2/5 of the aggregate quantity in the world is in the
-form of money, and the other 3/5 in the form of plate and utensils and
-ornaments. Now, so far as the element of Desire controls Value, the
-purpose for which any article is desired is a matter of indifference.
-The aggregate desire for it for all purposes, accompanied with the
-offer of something with which to buy it, constitutes the Demand; and
-the more universal the desire, no matter for what use, the steadier
-the Demand and so far forth the steadier the Value. It is a point
-still too little noticed, that the combined demand for the precious
-metals for all uses is what helps determine their general value, and
-not the demand for them as coin alone; just as the value of barley is
-regulated partly by the demand for it for food, and partly by the
-demand for it for malting purposes. Hence an ounce of bullion of the
-standard fineness destined for the smelting-pot of the artisan is
-worth within a very trifle as much as an ounce of coined money.
-
-For example, by the law of the Bank of England an ounce of standard
-gold (11/12 fine) is coined into £3 17s. 10-1/2d., and the Bank is
-obliged to buy all bullion and foreign coins of the standard fineness
-offered to it at £3 17s. 9d. per ounce,--a difference of only three
-half-pennies. Now, gold and silver are so indispensable in the form of
-money, so beautiful in the form of ornaments, so well adapted to serve
-the purposes of luxury and love of distinction, and so really useful
-in the arts, that the Demand for them is constant and well-nigh
-universal; and should there be in the progress of civilization a
-lessened demand for them for purposes of personal ornamentation and
-luxury, and a less quantity be required for coins on account of the
-multiplied use of cheques and other credit-forms, as seems likely in
-both cases, a greater quantity will doubtless be required for all the
-other uses old and new, and so, as the Demand in the past has been
-steady, and probably steadily increasing, there is every reason to
-expect the same course of things for the time to come. Moreover, it
-contributes to the steadiness in value of the gold and silver coin,
-that there is at hand at all times, in the form of plate, a reservoir
-from which a chance chasm in the coin may be replenished, or an extra
-demand for it answered.
-
-(b) On account of their tolerably uniform Cost of Production. Not
-Desires only but Efforts as well determine Value. Supply is the
-correlative of Demand; and when to a steady demand there answers a
-steady supply realized under conditions of pretty uniform difficulty,
-there will be as a matter of course a pretty steady Value. Nature
-herself, that is to say, God himself, has indicated in a manner not to
-be mistaken the intention, that these precious metals should be the
-Money of the nations. They are scattered all over the earth, and so
-scattered that the cost of their production has been on the whole
-pretty steady ever since civilization and commerce began in earnest.
-God is a God of order throughout all His works. Corresponding to the
-nature and necessities of men is the whole structure of the outward
-world. Science builds only on these predetermined lines of Order.
-Induction is only possible where original Resemblances run through
-great departments of phenomena. To be enabled to buy and sell to any
-considerable extent in order to meet their subjective wants, men must
-have an objective measure of mutual Services, and this measure must be
-a valuable steady in its purchasing-power: very well; such a possible
-measure was all provided for beforehand, when the foundations of the
-earth were laid.
-
-The precious metals have always been obtained in one or other of two
-ways: by surface diggings and washings, and by rock-mining. Both were
-employed in the very beginnings of Civilization. There is a
-description in the book of Job (chapter xxviii) of the way in which
-the ancient mines were wrought, and of the worth of the ores:
-
-    "Truly there is a vein for silver,
-    And a place for gold, which men refine.
-    Iron is obtained from earth,
-    And stone is melted into copper.
-    Man putteth an end to darkness;
-    He searcheth to the lowest depths
-    For the stone of darkness and the shadow of death,
-    From the place where they dwell they open a shaft.
-    Forgotten by the feet
-    They hang down, they swing away from men.
-    The earth, out of which cometh bread,
-    Is torn up underneath, as it were by fire.
-    Her stones are the place of sapphires,
-    And she hath clods of gold for man.
-    The path thereto no bird knoweth,
-    And the vulture's eye hath not seen it;
-    The fierce wild beast hath not trodden it;
-    The lion hath not passed over it.
-    Man layeth his hand upon the rock;
-    He upturneth mountains from their roots;
-    He cleaveth out streams in the rocks,
-    And his eye seeth every precious thing;
-    He bindeth up the streams, that they trickle not,
-    And bringeth hidden things to light."
-
-These methods and difficulties in rock-mining, thus poetically and
-beautifully delineated, have been substantially the same from that
-early day to the present time; and, consequently, there have been but
-two or three striking changes in the general value of gold and silver
-in the commercial world during the last 500 years, at least changes
-owing to easier and larger Supply. The discovery of the mines of
-Potosi in 1545, and the large influx of silver into Europe from those
-and other American sources, together with the irrational stimulus
-thereby given to the working of European mines under the false
-impression not even yet wholly dissipated that Value can be clutched
-bodily in mining, so increased the stock of silver, that its value as
-measured in grain or other commodities declined in Europe in 70 years
-after 1570 to about 25% of its previous purchasing-power. Adam Smith
-expresses the opinion in his Wealth of Nations, that silver did not
-perceptibly fall before 1570, nor continue to fall further after 1640.
-The discovery of gold deposits on the Pacific coast of the United
-States in 1848, and a similar discovery in Australia in 1851, enlarged
-the annual supply of gold for the world from $40,000,000 in 1848
-(_Chevalier_), to an average of $136,000,000 for the five years ending
-in 1859 (_Jevons_); and the latter writer estimated the fall of gold
-in general commodities from 1845 to 1862 at about 15%. But with
-exceptions like these, and similar ones are perhaps not likely to
-recur, the precious metals have always maintained and seem likely to
-maintain in the future a considerable uniformity of Value, as
-estimated by their power to purchase other valuables, so far forth as
-Cost of Production goes to determine their value. Even the great
-changes just noted in the cost of the metals issued only gradually in
-a rise of Prices, which many were able to foresee and thus to provide
-for, but by which many more were caught and brought into distress and
-even pauperism. The two classes that suffer the most under a fall in
-the Value of Money are the wages-receivers and the holders of long
-annuities and other similar obligations.
-
-(c) On account of their Quantity. The amount of gold and silver in
-circulation in the commercial world, to say nothing of the quantity so
-easily brought into circulation from the reservoir of plate, is so
-vast, that it receives the annual contributions from the mines much as
-the ocean receives the waters of the rivers, without sensible increase
-of its volume, and parts with the annual loss by detrition and
-shipwreck, as the sea yields its waters to evaporation, without
-sensible diminution of volume. The yearly supply and the yearly waste
-are small in comparison with the accumulations of ages; and,
-therefore, the relation of the whole mass to the uses of the world,
-and the purchasing-power of any given portion, remain comparatively
-steady. It is probable, that production at the mines might cease
-altogether for a considerable interval without very sensibly enhancing
-throughout the commercial world the value of gold, as it is certain,
-from experience, that a production very largely augmented only very
-gradually and after a considerable interval of time diminishes its
-value. The mass of the precious metals has been aptly compared with
-the heavy balance-wheel in mechanics, which preserves an equable and
-working condition of the machinery under any sudden increase of the
-power, and even when the power is for a moment withdrawn.
-
-Just at this point a caution is needful. Because it is affirmed that
-the great amount of the precious metals is a ground of their firm
-value, it must not be supposed that we are going beyond our general
-doctrine, and introducing another element, namely, Quantity, besides
-the four elements, which, as we have so often alleged, can alone vary
-the value of any Service. Quantity, in itself, is not an element
-capable of varying the value of anything, but taken in connection with
-durability, it is an element of what might, perhaps, be called with
-propriety the _Inertia_ of Value, and tends to keep the
-purchasing-power of gold and silver where it is. _Value and Steadiness
-of Value are two distinct ideas._ The present value of an ounce of
-gold is decided by four things alone, two Desires and two Efforts; but
-other elements besides these may help determine that that ounce of
-gold shall have ten years from now a purchasing-power approximately
-the same as now. It will depend of course in the last analysis upon
-the relation of the then Demand to the then Supply; yet the vast
-quantity of the precious metals in existence, combined with their
-durability, prevents those fluctuations in the Supply which are so
-destructive to a steady value. It is not with them as with the fruits
-and the cereals, whose value varies perpetually with the seasons, and
-which are so perishable that they must be sold quick or never. Gold
-and silver are almost indestructible, and the existing mass is not
-liable to be lessened except by wear and accident, and in so far as
-the annual production from the mines exceeds the yearly waste there is
-a natural provision made for the natural increase of Demand to supply
-the wants of the world for money and for the arts without much
-disturbing the relation of the Demand and the Supply; and so Quantity
-in connection with durability helps preserve to them a tolerably
-steady value from generation to generation.
-
-(d) On account of their Fluency. Gold and silver are in demand the
-world over. Having great value in comparatively small bulk, they are
-easily transported from Continent to Continent; and whenever from any
-cause they become relatively in excess in any country, and so lose
-there a portion of their previous purchasing-power, there is an
-immediate motive in profits to export them to other countries, in
-which their power in exchange is greater, and thus the equilibrium
-tends to restore itself. The proposition is, The value of gold and
-silver is kept pretty steady throughout the commercial world by the
-facility with which they are carried from points where they are
-relatively in excess to points where they are relatively in
-deficiency. In any country or place where the precious metals are
-temporarily in excess, the prices of general commodities as measured
-in them will rise of necessity, because the unit of measure is smaller
-than it was; and for the same general reason, the country temporarily
-lacking in these will experience in consequence a fall of general
-prices. There is, therefore, a private gain in carrying these metals
-to those countries in which their power of purchase is the greatest
-owing to the lack of them, because more commodities can be obtained
-in exchange for them than at home; and private motives here coincide,
-as indeed they generally do, with public welfare, since what the
-traders do in carrying gold and silver abroad with an eye to their own
-interest only, helps maintain at home and abroad the steady value of
-these commodities.
-
-This law of the distribution of the precious metals by Commerce, and
-the equilibrium of their general value resulting therefrom, is as
-natural and beautiful as the law which preserves the level of the
-ocean, or that which balances the bodies of the planetary system. This
-has come at length to be recognized by the nations, and the laws which
-used to forbid by heavy penalties the exportation of gold and silver
-are all swept away, and these metals are now free to go and do
-actually go wherever they can obtain the most in exchange. It is
-absurd to suppose that their owners would carry them out of a country
-unless they were worth more abroad than at home; and, therefore, the
-prejudice which still exists in this country (the relics of itself) is
-a senseless prejudice. The gold is not given away, it is _sold_, and
-sold for more than it will buy at home; otherwise nothing in the world
-could start on its foreign travels. There is the same kind of gain in
-this as in all other exchanges of commodities, with this great
-incidental advantage in addition, that its general value is by this
-means kept pretty uniform throughout the commercial world.
-
-Unluckily for the darker and middle Ages, so far as they took their
-cue and thought from the Romans, the latter, in the teeth of the sound
-view of Aristotle, looked upon Money as something quite different from
-other forms of salable things, looked upon it in short as an _end_ in
-itself, as something to be gained and not readily to be parted with.
-If this were the right view of Money, as it is not, then the policy to
-spring from it might well be,--Get all the money possible into the
-country, and let as little as possible out! Just this came to be the
-policy of the Romans. In one of his Orations, Cicero says, "_The
-Senate solemnly decreed both many times previously, and again when I
-was consul, that gold and silver ought not to be exported._" The other
-and the true opinion, that money is bought and sold like any other
-valuable, and that its sole peculiar function is as a _means_ to
-further sales, was indeed held and argued at Rome, as we learn
-incidentally from a passage in the Institutes of Justinian; but the
-false though plausible opinion, that money is _ultimate_, and not
-_mediate_, is said in the same passage "to _have prevailed_"; and
-accordingly this superficial view of money, and that it "_ought not to
-be exported_," constitute what may be called the Bullion Theory, and
-it is the first general theory of Sales ever promulgated. The Romans
-brought it forth, and other nations took it from them. It could never
-stand in the light of Reason, and still less amid the exigencies of
-practical Commerce.
-
-It is an illustration of the continuity of human thinking as well in
-wrong as in right directions, that the second main theory of Sales,
-which has long been styled the Mercantile Theory, is a prolongation
-and expansion of the first. _That_ gave an undue weight to gold and
-silver over other goods in trade, and forbade their export: _this_ did
-the same thing too, but also tried to swell the exports of other goods
-beyond the worth of current imports, _so as to get back a balance in
-gold and silver_: both alike interfered with the international fluency
-of the precious metals, to the constant detriment of all parties to
-the restrictions. The common principles of both Theories may be thus
-expressed: _Gold and silver are the things to get; they are worth
-more than what they will buy; therefore let us get all of these in
-that we can, and let as little of them out as we can; and let us work
-all our trade so, that others shall have to give us a balance back in
-gold and silver._ These false postulates and inferences wrought
-centuries of woe in the world of commerce, because all the leading
-nations became devotees simultaneously to this scheme of each shrewdly
-plundering the rest. The germs of this Mercantile Theory appear first
-in France, when Phillippe le Bel, in ordinances of 1303 and 1304, put
-his hand in as king to mend the movement of trade, to forbid the
-export of gold and silver, to fix the price of wheat and to forbid its
-export, and to lessen imports by prohibitions of them. "_Considering
-that our enemies might profit by our provisions, and that it is
-important to leave them their merchandise, we have ordered that the
-former should not be exported nor the latter imported._" The famous
-Colbert, who laid down many financial maxims that are good, thought
-nevertheless, that he could so manage the foreign trade of France that
-she should get the better of her neighbors, and embodied his plan in
-the tariff of 1664. We will let him state his plan in his own words:
-"_To reduce export duties on provisions and manufactures of the
-Kingdom; to diminish import duties on everything which is of use in
-manufactures; and to repel the products of foreign manufactures by
-raising the duties._" The principle of the Mercantile Theory was never
-better or briefer expressed than by Ustariz, a Spaniard, in 1740: "_It
-is necessary rigorously to employ all the means that can lead us to
-sell to foreigners more of our productions than they will sell us of
-theirs, as that is the whole secret and the sole advantage of trade._"
-Too many nations knew the "whole secret" at the same time, and
-accordingly the "sole advantage" to any became exceedingly small.
-England was as deep in the sloughs and wars and losses of this false
-system as any of the rest.
-
-It may be laid down as an axiom, that no country will ever export for
-the sake of buying other things those things which are more needful
-for its own welfare at home. So long as human nature continues what it
-is, what it always was, what it always will be, no persons in any
-nation will ever export gold and silver except to buy therewith other
-valuables then and there more important to them and consequently to
-their country. There need not be the slightest fear that any nation
-which cultivates its own commercial advantages under freedom will ever
-lack for a day a sufficient _quantum_ of the precious metals; because
-under freedom these metals will always go, and go in just the right
-proportions, to and from those countries which produce and offer in
-exchange those desirable Services which other countries want. The
-greater the enterprise and skill, the keener the development of all
-peculiar and presently available resources, the more honorable and
-free the commercial system, so much the surer is any nation whether it
-be a gold-bearing country or not, of securing all the gold and silver
-which it needs. This is so, because _there_ will be a good market to
-buy in, an abundance of good and cheap goods will be there, and they
-who have gold will resort thither to buy. But such a free and
-enterprising nation will also want to buy other things besides gold
-and silver, and other things than those itself can make or grow to
-advantage, and when enough of the precious metals is secured for money
-and the arts, the residue will be exported, perhaps to the very
-countries from which it originally came, in payment for some products
-which _those_ countries have an advantage in producing.
-
-The United States, for example, is a gold- and silver-bearing country,
-and exported in the years 1850-60, both inclusive, $502,789,759 in
-coin and bullion, according to the official Report on the Finances,
-1863; and during the same period imported from other countries
-$81,270,571 in coin and bullion. Where was the famous and fallacious
-"balance of trade" in that case? The United Kingdom, on the other
-hand, is not a gold- and silver-producing country at all, but it is
-the central market of the world for the precious metals all the same,
-its imports and exports of them are immense in all directions, because
-it is an enterprising country within the lines of Nature in
-agriculture and manufactures and commerce, and is not afraid to allow
-its people to buy and sell freely with all the world. Where lies in
-the technical sense the "balance of trade" between Great Britain and
-the rest of the world? Who can tell? All that is known, and all that
-is worth knowing, is, that all that trade is immensely profitable to
-all the parties to it wherever situated.
-
-Now, there is always a double advantage in these free movements of
-coin and bullion in exportation and importation. In the first place,
-more and better commodities are secured to the countries exporting,
-whether they be gold-bearing or not, than the gold could have bought
-in those countries, otherwise it would not have been carried abroad,
-that being the sole motive that stirs it from its present haunts; and
-in the second place, the benefit to the countries importing is the
-market for their own commodities created by the gold brought in, for
-we must never forget that a market for products is products in market,
-is a benefit also in naturally and easily filling up a chance
-deficiency in the quantum of coin there, and incidentally too a
-benefit to the world as tending to keep _in equilibrio_ the
-purchasing-power of the metals everywhere. This last is especially
-seen when new and pregnant sources of supply are opened in any
-country. For example, in the United States about the middle of the
-century the stock of gold was more than doubled in ten years' time;
-unless by much the larger part of this had been carried abroad in
-commerce, it would have inevitably depreciated the whole mass and
-disturbed the prices of everything; but by causing the new gold to
-impinge on the whole world's stock, the shock of the new production on
-the measure of Services, though perceptible, was reduced and deadened.
-The world's mass of the precious metals is comparatively torpid
-beneath the action of an accretion which would break down by its
-weight the metals of a single nation. Therefore, in conclusion on this
-topic, the Fluency of gold and silver, by which they pass easily in
-commerce to those places where their present value in exchange is
-greatest, or to such countries as India and China which have shown for
-centuries a wonderful power to absorb the metals of the West, and
-return as easily when the conditions are reversed, or when a larger
-use of paper-credits releases some portion of the coin, tends
-powerfully to make their general value uniform throughout the world,
-and consequently to make them the best medium of Exchange and the best
-measure of Services.
-
-(e) On account of this Circumstance, that every general rise or fall
-in the value of gold and silver tends quickly to check itself. This
-principle, indeed, is applicable more or less to the value of all
-commodities, but owing to their quantity and durability and fluency
-pre-eminently applicable to the value of the precious metals. The
-check is double in either direction. First, let us suppose that the
-purchasing-power of an ounce of gold or silver be rising: then,
-production will be stimulated at all the mines, and the more
-stimulated as the rise is more; and this new and enlarged Supply will
-tend to check a farther rise, and unless the permanent Demand has been
-in the meantime intensified, to bring back the value to the old point;
-moreover, when there is a rise in the value of the coin, a less
-quantity is required to do the same amount of business; and the demand
-for gold which causes the rise tends to be checked by the rise itself,
-because a lessened quantity is needed for money-use in consequence of
-the rise. If the exchanges mediated by money have become permanently
-greater than before, then of course the Demand will continue greater
-than before, and the rise in value may be maintained.
-
-And just so, _mutatis mutandis_, of a fall in the purchasing-power of
-the coin. The production of the metals is thereby slackened at the
-mines, and the lessened Supply tends naturally to enhance the value;
-and if the same amount of business is to be done as before, there is a
-stronger demand for money while the fall continues, and this new
-Demand helps also to bring back the old value. All this is in the
-interest of a steady value.
-
-(f) On account, lastly, of this Circumstance, that a stronger Demand
-for Money is met in either one of two ways, by increasing the stock of
-coin, or by an increased rapidity of circulation of that on hand. It
-is exceedingly fortunate that a brisker demand for money, especially
-if it be but temporary, does not necessarily enlarge the Supply or
-alter the value, but only hurries round the existing money.
-Oscillations in the Demand are responded to by a slower or a more
-rapid circulation. This tends admirably to keep the value of the
-existing-stock of money steady within certain limits. Ignorance of
-this principle, or indifference to it, has caused mighty mischiefs in
-the United States. In General Grant's administration, for instance,
-the cry that a larger _volume_ of money was needed "_to move the
-crops_" was disastrous in its results. The truth is, that the volume
-of Money in the United States was then, and has been ever since, by
-much too great, considering its character, as we shall see by and by.
-The multiplying and fructifying nature of Rapidity of Circulation has
-never been understood by our national financiers. When, however,
-enterprises are multiplying and Exchanges are being permanently
-increased in number and variety, then there must be a larger volume of
-money, and this larger amount is secured in the ways already
-indicated, with perhaps slight disturbances of value, but the
-temporary ebbs and flows of business should have no effect at all on
-the mass of money, but only on its movement, and its value
-consequently would scarcely be disturbed.
-
-These Six grounds appear to be satisfactory and sufficient to account
-for the superior steadiness of the value of gold and silver, so far as
-their value is determined by considerations relating to these metals
-themselves. We now proceed to the two reasons additional to this why
-gold and silver constitute the best Money.
-
-(2) The second general reason why gold and silver make the best money
-is found in the fact _that Governments have little to say or do about
-the Value and Quantity and Mode of Circulation of such Money_. In
-respect to Credit-Moneys, like our own Greenbacks and national
-Bank-Bills, the Government has everything to say. When we remember how
-governments are constituted, that they are only a transient Committee
-of the citizens for special purposes; of what sort of persons they
-commonly consist; the variety of subjects they are obliged to consider
-during short periods of office; the absence for the most part of
-expert knowledge among them; the enormous blunders they have made in
-the past in all financial measures; and that those who know the most
-about their action in the past and present in such matters have the
-least confidence in their ability to act wisely; the better we shall
-see the strength of the grounds of this second reason. In all
-essential respects money of gold and silver regulates itself. These
-metals came to be money and continue to be money in the main sense
-independent of the enactments of any Government. The people chose
-them: they choose them still. As we have seen, coins do not owe their
-value to the stamp of the Government, since the metal in them is worth
-within a trifle as much before coinage as after. Coinage publicly
-attests the quantity and quality of the metal in the coin, and that is
-all. Of the value of their coins governments say nothing. They can say
-nothing. That depends on men's judgments, and not on edicts at all. No
-law of the United States can add directly an appreciable fraction to
-the value of a gold dollar. The law makes it consist of 25-4/5 grains
-troy of gold 9/10 fine, the mint so stamps and attests it, and
-thereafter it takes its own chance as to value.
-
-Some Governments charge a little something for coining for their
-People, and some do not. What is charged is called _seignorage_.
-England coins gold for all comers at a seignorage of .032%, which is
-practically a free coinage. France charges for gold .216%; and by the
-law of 1874, the United States charge nothing for coining gold. It is
-left to the People to say _how much_ money they will have coined; and,
-having received it back from the mint, they may do just what they
-please with it; they may hoard it, they may melt it, they may sell it
-at home in purchase, and they may export it in foreign trade, at will.
-Now, it is a great gain, an immense relief, to have a Money with which
-the Government has nothing to do except to mint it; a money that asks
-no favors, needs no puffing, never deceives anybody, knows how to take
-care of itself, is always respectable and everywhere respected.
-
-(3) The last general reason why gold and silver make the best Money is
-to be found in their physical peculiarities, in accordance with which
-they are (a) _uniform in quality_, (b) _conveniently portable_, (c)
-_divisible without loss_, (d) _easily impressible_, and (e) _always
-beautiful_.
-
-Pure gold and pure silver, no matter where they are mined, are exactly
-of the same _quality_ all over the earth. Not so with iron and coal
-and copper. Gold is gold, and silver is silver. The gold mined to-day
-in California differs in no essential respect from the gold used by
-Solomon in the construction of the Temple, and the silver out of the
-Nevada mines is the same thing as the silver paid by Abraham for the
-cave of Machpelah. Nature with her wise finger has thus stamped them
-for the universal money; and a universal coinage, that is, coins of
-the same degree of fineness, and brought into easy numerical relations
-with each other in respect to weight, and current everywhere by virtue
-of universal confidence in them, though bearing the symbols preferred
-by the nation that mints them, is one of the dreams and hopes of
-economists, that will be realized in some
-
-                "Fair future day
-    Which Fate shall brightly gild."
-
-Gold and silver are sufficiently _portable_ for all the purposes of
-modern Money. Their weight is little relatively to their value. A
-thousand dollars in gold are not indeed carried so easily as a Bill of
-Exchange or a Bank-note; and expedients are easily adopted, and have
-been in use since the days of the Romans (really since the later days
-of the Assyrians), by which the transfer in place of large masses of
-coin is for the most part obviated; and these expedients have all been
-explained at length in the foregoing chapter on Commercial Credits.
-But for the ordinary exchanges for which they are designed, gold and
-silver coins are portable enough. The writer has carried across the
-ocean, incased in a glove-finger and borne in a vest-pocket, a troy
-pound of English sovereigns, worth about $230, scarcely conscious of
-their weight though easily reassured of their presence by a touch of
-the hand. The experience of those countries, like France and Germany,
-in which the Money has been and is still mostly metallic, has not
-pronounced it onerous on account of its weight; and, at any rate, it
-is better to accept all the other immense advantages of gold and
-silver money, together with some inconvenience as to weight, if one
-chooses to insist on that, than to adopt substitutes every way
-inferior as money, except that they are lighter in our purses. They
-are unfortunately "lighter" in other respects also.
-
-Moreover, gold and silver differ from jewels and most other precious
-things, in that they are _divisible_ without any loss of value into
-pieces of any required size. The aggregate of pieces is worth as much
-as the mass and the mass as much as the pieces. This is a great
-advantage in Money, because for the convenience of business a
-considerable variety of coins is required, and the proper proportion
-of each kind to the rest is a matter of trial, and if any kind be
-minted in excess of the demand nothing more is required than to remint
-in other denominations, and the whole value is thus saved to the
-country in the most convenient form.
-
-Then, gold and silver are easily _impressible_ by any stamp which the
-Government chooses to put upon them. Indeed in their natural state
-they are too soft to retain long the impress of the die. Accordingly
-for coinage purposes they are always alloyed with another metal,
-chiefly copper, since by a chemical law whenever two such metals are
-mixed together the compound is harder than either of the two
-ingredients. Most of the Nations now use in their gold and silver
-coins 1/10 alloy, but England still adheres to her ancient rule of
-1/12 only. So compounded coins receive readily and retain for a long
-time with sharp distinctness the legend and other devices chosen for
-them to bear. In monarchical countries the head of the reigning
-sovereign is usually stamped upon the current coins; in all countries
-national emblems of some sort; quite recently some of the coins of the
-United States have been made to bear the appropriate legend "In God we
-trust"; so that patriotic and even religious associations are
-connected with the national Money. Although the alloys harden the
-coins, yet after long usage they will lose a part of their weight by
-abrasion, and Governments usually indicate a short weight, after
-coming to which the coins are no longer a legal tender for debts. Thus
-an English sovereign weighs 5 pennyweights 3-171/623 grains,
-containing 113-1/623 grains of fine gold, and when it falls below 5
-pennyweights 2-3/4 grains, it loses its legal-tender character.
-
-Lastly, gold and silver when coined into Money are objects of great
-_beauty_. This is no slight recommendation of these metals for the
-money of the world. They are clean. They are beautiful. People like to
-see them, and to handle them, and to have them. Their perfectly
-circular form, the device covering the whole piece, the milled and
-fluted edges, the patriotic emblem, whatever it be, the religious or
-other legend, and their bright color, are all elements in their
-beauty. The educating power over the young of a good coinage well kept
-up, æsthetically, historically, and commercially, is a matter of
-consequence to any country. A whole people handling constantly such
-money cannot fail to receive a wholesome development thereby. The new
-German coinage, for example, in contrast with the old moneys of the
-German States, furnishes a good illustration of all this. The new
-German coins from highest to lowest are very beautiful, and have
-already tended and will tend more and more, other things being equal,
-to a true German nationality.
-
-11. Silver is much inferior to gold as a metal for Money, for this
-main reason, that it has proved itself much less steady in its general
-_value_; and its value is less steady, because it is subject to
-greater changes in its Supply and greater variations in its Demand. As
-an example touching Supply, we cite the fact, that the annual silver
-product of the world _doubled_ in the third quarter of this Century,
-rising from an average of $40,000,000 yearly, 1851-61, to $80,000,000
-in 1875; and that Nevada alone yielded in 1876 as much as the whole
-world yielded twenty years before. Then, too, Demand, that is,
-effective public opinion, does not hold to silver as it does to gold
-for a standard of Values. The action of England in 1816, of the United
-States in 1853, of Germany in 1871, of Scandinavia in 1874, and of the
-Latin Union in 1876, _in legally making gold the sole standard of
-Services and silver subsidiary to that_, of course affected more or
-less the Demand for silver as Money, and thus varied its value. We
-have at hand the data to demonstrate the effect of these two causes
-combined: the average price of silver in gold from 1833 to 1874, in
-the London market, which is the bullion market of the world, was for
-the 40 years just about 60 pence per ounce, never falling below 58-1/2
-and never rising to 63. At 60 pence per ounce (444 grains of pure
-silver, standard English silver being .925 fine) the ratio of gold to
-silver is 1:15.716. But between May, 1875, and July, 1876, when both
-the above causes had come into full action, silver dropped in the
-London market to 47 pence per ounce, a fall of 21%, and a ratio of
-gold to silver of 1:20. The price gradually rose again to about 53
-pence per ounce, and remained in that general neighborhood till 1882,
-between which date and 1890 the _sagging_ process went on to the
-general result of 25% discount as compared with the old average of 60
-pence in gold per ounce of silver.
-
-These facts settle the question adversely to the fitness of silver to
-become an independent Measure of Values. When, however, it is designed
-that gold and silver shall circulate together in some numerical
-relation to each other as Money, it becomes needful that Government
-shall fix as well as it can, not the general value of either but the
-relative value each in each for the time being. But this specific
-value, too, goes on to regulate itself independently of government
-edicts. No matter how well the work is done at first by ascertaining
-the actual ratio in which they are exchanging in a free market, it
-will certainly require revision from time to time. This is what is
-called _Bimetallism_. The reader will now perceive the fundamental and
-ineradicable difficulty with the bimetallic system, which has led by
-bitter experience nearly all the European nations to abandon it. It
-especially becomes us to understand how the United States have fared
-in a century's attempt to keep _in equilibrio_ as a conjoint and legal
-Measure of Services both gold and silver in a fixed numerical
-relation.
-
-Alexander Hamilton as the first Secretary of the National Treasury,
-entering upon excellent preparatory work done both by Robert Morris
-and Thomas Jefferson, guided the action of Congress in establishing
-the Mint in 1792, and really determined the weight and fineness of the
-first federal coins and their relative value each in each, the silver
-coins being struck in 1794 and the gold ones in 1795. The silver
-dollar was copied from the Spanish milled dollar of commerce, which
-contained 371.25 grains of pure silver, and that has been the exact
-content of our national silver dollar from that day to this. The
-halves and quarters and dimes were exactly proportioned in weight and
-fineness to their units. Hamilton supposed that gold was then worth in
-Europe 15 times as much as silver, and advised consequently that the
-gold dollar should contain 24.75 grains pure, and that both dollars
-should be alloyed at the English rate of 1/12, thus making the silver
-dollar weigh 405 grains and the gold dollar 27 grains; but Congress,
-while enacting the gold dollar just as the Secretary recommended,
-preferred to _alloy_ the silver dollar by 44.75 grains instead of
-33.75, thus making its weight 416 grains. Alloy is of no account in
-value.
-
-From the ratio of 1:15 fixed by the act of Congress in accord with
-Hamilton's opinion as to the relative value of gold in silver to be
-maintained in the coins, unforeseen and important consequences
-followed, since that was not the true ratio of their value at the time
-in the markets of the world; an ounce of gold was worth more at that
-time than 15 ounces of silver, and, accordingly, was worth more out of
-the coinage than in it, and was therefore exported in preference to
-silver in payment of foreign balances, especially after France had
-changed the relative legal value to 1:15-1/2, which happened in 1803;
-and of course the gold refused to circulate here under those
-circumstances, being _undervalued_ in the coinage, thus giving a neat
-illustration of the economical law to be unfolded under the next
-numerical heading, namely, that the cheaper money will always push the
-dearer out of the circulation. Not till 1834 was the attention of
-Congress so strongly drawn to this fact and consequence, as to secure
-an enactment to remedy it; and this coinage law of 1834 rated gold to
-silver as 1:15.98. The weight of the gold dollar was at the same time
-reduced from 27 to 25.8 grains, and the alloy increased from 1/12 to
-1/10. These changes of 1834 increased the relative legal valuation of
-gold in silver 6.53%. But this in turn was going too far in the
-opposite direction; gold was not worth 1:15.98 in the bullion markets
-of Europe; France was holding steady her ratio of 1:15.50; and,
-consequently, the commercial current of the metals was now reversed,
-silver passing in preference to Europe to liquidate the balances of
-trade, and gold beginning to come to the United States, where it would
-buy more than 3% more silver than in Europe.
-
-Three years after the above changes, that is, in 1837, the standard of
-9/10 fine instead of 11/12 was applied by law to silver also, and this
-altered fineness made a change in the weight of the silver coins
-necessary, if the ratio of 1:15.98 was to be maintained between the
-gold and silver. Accordingly, the weight of the silver dollar, and of
-two halves, four quarters, and so on, was reduced from 416 grains to
-412-1/2, that is to say, less alloy was put into the silver coins, but
-the fine silver to the dollar was kept just as it was, namely, 371.25
-grains. Since 1834 there has been no change in the gold dollar and its
-multiples, and since 1837 there has been no change in the silver
-_dollar-piece_, and the legal ratio of value between gold and silver
-in our coins is still 1:15.98, since the silver dollar of 1878 and
-onwards to 1890 corresponds in weight and fineness with the dollar of
-1837.
-
-Still, notwithstanding the pains taken and the changes made from time
-to time to keep the two metals in legal _equilibrio_, there never has
-been any considerable period in the century now drawing to a close,
-during which gold dollars and silver dollars have circulated freely
-and indifferently in the United States. Sometimes it has been the one
-kind, and sometimes the other kind, but never both kinds at the same
-time. The present writing is in the spring-time of 1890: both kinds of
-dollars are legal tender for all debts public and private in the
-old-time ratio; the national Government professes to be indifferent
-whether it pay out gold or silver in redemption of its paper-moneys,
-but after all, with the exception of the Pacific States and a few
-special branches of business in the cities of the East and of the
-Middle, gold coins are not now in common circulation, the bank drawers
-crowded with silver dollars feel little of the weight and see little
-of the shine of the gold coins, and if any of these chance to be paid
-out to ordinary bank-customers they are pretty certain to return in
-speedy deposit. The theoretical bimetallism of the United States has
-been a practical though alternate monometallism with various
-incidental and concurrent disadvantages and losses.
-
-By 1853 these disadvantages of a long-attempted double Measure of
-Services made legal tender for all debts had become plain enough to
-everybody, for experience had demonstrated that the Value of gold and
-silver each in each was not constant but constantly variable; and
-Congress then wisely determined to make Gold alone the legal tender,
-except in sums below $5. In connection with this great change in the
-coinage, a lesser one was introduced at the same time, namely, to
-reduce the weight of the silver half-dollar and its subdivisions, so
-that their nominal value in the coinage should be considerably above
-their metallic value, and their exportations be thus prevented.
-Accordingly, the half-dollar was reduced in weight from 206-1/4 to 192
-grains, and the smaller coins proportionally. This was in imitation of
-the English legislation of 1816, and brought into this country a
-_subsidiary_ silver coinage, which still continues, and of which a
-nominal dollar's worth weighed 6.91% less than the Silver Dollar,
-which was not mentioned one way or the other in the law of 1853, but
-which was then worth about three cents more than the gold dollar, and
-was of course wholly out of circulation.
-
-Through the influence of the late Samuel B. Ruggles, these subsidiary
-silver coins were brought in 1875 into harmony with the silver-system
-of France and the Latin Union. Their five-franc silver piece which is
-also 9/10 fine, weighs just 25 _grams_ or 385.8 _grains_; a dollar's
-worth of our subsidiary silver, as we have just seen, weighed 384
-grains; and it was, therefore, needful to add only a slight fraction
-of weight to our smaller silver coins in order to knit a real
-connection between them and much of the European silver. Two halves,
-four quarters, ten dimes of our silver since 1875, are debased in
-weight (not in fineness) 6.47% as compared with the standard silver
-dollar. A more important coinage connection with Europe was knit
-through our first five-cent nickel pieces, each of which weighs just
-five _grams_, and five of which laid along in order measure exactly a
-_decimetre_ in length. These were the first official applications of
-the Metric System on the part of the United States. The nickel pieces,
-both the five-cent and the three-cent, are 75 parts copper and 25
-parts nickel; and the one-cent piece is 95 parts copper and 5 parts
-tin-zinc. Debts of 4 cents can be legally paid in one-cent pieces, of
-60 cents in three-cent pieces, of 100 cents in five-cent pieces, of
-500 cents in _subsidiary_ silver, and of any amount in gold coins or
-in silver _dollars_.
-
-12. _A money inferior in general value will, so long as it circulates
-locally, drive a superior money out of the circulation._ This
-proposition is a fundamental and universal one in monetary Science.
-The only exception to it is found in _token-coins_, and in subsidiary
-silver so far as that has the _token_-quality, that is, so far as its
-_nominal_ is above its _bullion_ Value. The main motive in coining
-tokens is to make sure for its own local uses of a nation's small
-change. Token-money is worthless for export, is only designed for the
-smaller exchanges, is legal tender only for very small sums, and is
-acceptable only on local and conventional grounds. The exception
-aside, the above proposition is a pervading and controlling Law of
-Finance and has been illustrated over and over again in every Age and
-Nation. It is as solid as the substance of truth can make it, although
-it looks at first sight like a paradox. We naturally think that what
-is excellent all round tends rather to displace what is inferior in
-spots, but with Money the exact reverse is the law; and the perfect
-coin of full weight, instead of driving out the light and the debased
-pieces, is always itself driven out of the circulation by them.
-
-The reason for this becomes obvious the moment we ponder the nature of
-Money. Money is always a Valuable, taking on in addition under Law or
-Custom the function of serving as an instrument of Exchange. As money,
-nobody wants it except to buy with, and so long as the Government and
-the community treat light coin and full coin as of equal value,
-receiving them indifferently in payment of debts and of taxes, it is
-clear that nobody will give in payment of debts and of taxes that
-which is really worth more so long as that which is really worth less
-will go just as far. The inferior pieces will abide in a market where
-they will fetch just as much as the superior pieces, while the
-superior pieces will take on a form or migrate to a place in which
-some advantage can be gained from their superiority. Thrown into the
-crucible, or exported in commerce, this superiority immediately
-manifests itself; and therefore into the crucible or into the channels
-of foreign trade it might be confidently predicted beforehand that
-such money would be thrown, and all experience testifies with one
-voice that exactly those are the destinations of such money.
-
-Aristophanes, the Greek comic poet, in the 5th century before Christ,
-seems to have been the first writer who noticed that good coins of
-full weight are apt to be crowded out of the circulation by the
-lighter and poorer pieces, and he, mistaking the cause of this,
-satirized his countrymen unmercifully for preferring bad coins to
-good, and demagogues, like Cleon, to honorable citizens for rulers.
-The following are the verses:--
-
-    "Oftentimes have we reflected on a similar abuse,
-    In the choice of men for office, and of coins for common use;
-    For your old and standard pieces, valued and approved and tried,
-    Here among the Grecian nations, and in all the world beside,
-    Recognised in every realm for trusty stamp and pure assay,
-    Are rejected and abandoned for the trash of yesterday;
-    For a vile, adulterate issue, drossy, counterfeit, and base,
-    Which the traffic of the city passes current in their place!
-    And the men that stood for office, noted for acknowledged worth,
-    And for manly deeds of honor, and for honorable birth;
-    Trained in exercise and art, in sacred dances and in song,
-    All are ousted and supplanted by a base, ignoble throng;
-    Paltry stamp and vulgar metal raise them to command and place,
-    Brazen counterfeit pretenders, scoundrels of a scoundrel race,
-    Whom the State in former ages scarce would have allowed to stand
-    At the sacrifice of outcasts, as the scapegoats of the land."
-
-Sir Thomas Gresham, financier of Queen Elizabeth and founder of the
-Royal Exchange and of Gresham College in London, was the first thinker
-to understand fully and explain scientifically what Aristophanes and
-others had noticed as a fact, and what in its explanation may hence
-properly be called "_Gresham's Law_." We will append a few historical
-illustrations of the fact and the law as instructive in many ways.
-
-(a) The City of Amsterdam founded its famous Bank in 1609, because no
-other way seemed to open of preventing the clipped and worn foreign
-coins then and for a long time circulating in that great Mart of Trade
-from driving out completely the good money of full weight, which the
-Mint of the City had been constantly pouring in. The Bank was devised
-as a municipal Institution with this intent; it was a Bank of Deposit
-only; it took in all the old coins at their _bullion_ value only; and
-then had them reminted at full weight; it gave the depositors credit
-on its books in the terms of the _new_ money for all of the _old_ they
-chose to bring in; it then adjusted accounts between merchants and all
-other of its customers by mere transfers on its books; the City
-required all debts falling due in Amsterdam to be paid in the new
-"bank-money," which took away all uncertainty from Bills of Exchange
-drawn on Amsterdam, which were previously liable to be paid in the
-clipped and worn coin, and were therefore sometimes at as much as 10%
-discount in other cities; this simple requirement brought these
-foreign bills to par, and kept them there; the full-weighted money now
-stamped by the city Mint abode in the circulation, being now the sole
-Measure of Services there; and thus it became the interest and
-convenience of every business man in Amsterdam to have these simple
-dealings with the Bank, which in turn enjoyed unlimited credit in the
-commercial world for almost two hundred years.
-
-(b) The great English Recoinage of 1696 was completed under the
-imperatives of Gresham's Law. Graphically does Macaulay describe the
-causes and the effects of this in his 21st Chapter. The old silver
-coins had been stamped under the hammer; few of them were perfectly
-circular; the edges were neither milled nor fluted; the legend was not
-so near the edge as that the letters were impaired by a little
-clipping; it was easy to pare off a pennyworth or two, and then pass
-the coins along; it was profitable to do it, and in vain that
-Elizabeth enacted that the clipper must suffer the penalties of high
-treason; nearly all the coin of the realm became mutilated, and about
-1660 a new process of coinage was brought in. A mill worked by horses
-fabricated the new coins on better principles. They were exactly
-round, and the edges were inscribed with a legend, and they were all
-of just and equal weight. They were thrown out to pass current with
-the hammered money, and it seems to have been expected that they would
-soon come to displace it. But they did not. Both were received at
-first without distinction by the individual traders and by the public
-tax-gatherers. But the milled money soon came to be scarce, and the
-old money grew constantly worse. The lighter the old coins became, the
-scarcer became the new ones; for who would pay two ounces of silver
-when one ounce was legal tender? The new money was melted, was
-exported, was hoarded, but circulate it would not. At length the
-lightest pieces began to be refused by some people, and other people
-demanded that their silver should be paid to them by weight and not by
-tale, and there was wrangling over every counter, and a dispute at
-every settlement, and the coin was really so diverse in its value that
-there was no longer any measure of value in the kingdom; business was
-in utmost confusion, society was by the ears, poor people were
-unmercifully fleeced, and shrewd ones grew enormously rich; and the
-Jacobites secretly exulted in the hope of being able to avail
-themselves of the prevailing discontent to overthrow the scarcely
-established revolutionary government of William and Mary; when, by the
-joint counsels of two such philosophers as Locke and Newton, and two
-such statesmen as Somers and Montague, the government took the bold
-resolution of recoining all the silver of the kingdom. An early day
-was fixed by Parliament after which no clipped money could pass except
-in payments to Government, and a later day after which it could not
-pass at all.
-
-(c) Gresham's Law has had beautiful illustrations in the monetary
-history of the United States. We have already seen the reason why the
-first silver dollars of 1794 could not compete in currency with the
-gold coins of 1795,--the silver was under-valued in the legal ratio
-1:15,--it would have been much nearer the European market at 1:15.5.
-There was another reason operative in the same direction from the
-beginning, which did not, however, come to the notice of the
-Government till ten years later. Only 321 silver dollar-pieces were
-coined in the year 1805; and May 1, 1806, there stands an order from
-President Jefferson to the Director of the Mint,--"_that all the
-silver to be coined at the Mint shall be of small denominations, so
-that the value of the largest pieces shall not exceed half a dollar_."
-The presidential reason given for this order is,--"_that considerable
-purchases have been made of dollars coined at the Mint for the purpose
-of exporting them, and that it is probable that further purchases and
-exportations will be made_." The coinage of silver dollars thus
-suspended was not resumed for 30 years. What was the matter with these
-dollars? Nothing, only they were too valuable. Hamilton had adopted
-for his new dollar the exact weight in fine silver of the normal
-Spanish-Mexican dollar, then and for a long time the unit of the
-thriving West India commerce; clipped and worn coins of this popular
-stamp had slipped into circulation in large numbers throughout the
-United States, and driven out the new and good pieces in accordance
-with a principle much better understood now than then; the President's
-order itself was not very intelligent, inasmuch as two halves, four
-quarters, or ten dimes, were then equal in weight and purity with the
-dollar-pieces, and as a matter of fact were almost (if not quite)
-equally driven out by the smaller Spanish-Mexican coins. The
-"four-pences" and "nine-pences" ("York shilling") of that coinage were
-almost exclusively the small change of New York and New England during
-the first half of this century. The "dimes" and "half-dimes" of our
-own mintage, though long legalized, were but slowly naturalized. The
-coin-changes of 1853, already described, gave a fair chance for the
-first time to our smaller silver coins.
-
-The last native illustration of Gresham's Law will force us to
-anticipate here the discussion under the next numerical heading, so
-far as to assume that there is such a thing as paper money, and that
-the Law now in hand works in connection with that as well as with
-diverse forms of metallic money. In 1862, Treasury notes, commonly
-called Greenbacks, made a legal tender for debts though not bearing
-interest, were issued by the national Government to the amount of
-$450,000,000. Of course, under these circumstances they depreciated in
-value as compared with the gold dollars, which gold dollars _they were
-unfulfilled promises to pay_. Just so soon as the greenback dollars
-fell fairly below the gold dollars in value, the latter left the
-channels of trade in a very few days' time. Down sank the greenbacks
-gradually below the _subsidiary_ silver coins in value, and the latter
-obediently and utterly abandoned the commercial field. At last the
-greenbacks went down even below the level of the copper cents, which
-at that time cost the government about half a cent each, and this
-invariable law of money swept the circulation bare of coppers, and the
-people had to resort for their smallest change to postage-stamps and
-shin-plasters and other abominations. Happily, the country survived to
-see these processes exactly reversed, and the old law confirmed on its
-other side. When, after a considerable interval, the paper dollar
-appreciated to the proper height, it was interesting to watch the
-copper cents put in a prompt re-appearance; after a still larger
-appreciation of the paper, back came in abundance the subsidiary
-silver; and as the day of the redemption of the paper drew near,
-silver dollars and gold dollars greeted smilingly their old
-acquaintances of the street.
-
-13. So far we have treated only of Coin-Money in its two forms,
-_substantive_ and _subsidiary_. The latter may now be dismissed as of
-little consequence in itself, and as already elucidated fully: the
-latter is the only Money that stands in its own right as a
-_commodity_, and the only Money that can give birth to the
-_Denominations_ of Value, such as sovereigns, dollars, marks, and
-francs. _What is a Dollar?_ A dollar is 25-4/5 grains of a metal
-compound coined, of which nine parts are pure gold and one part a
-hardening alloy. It is a definite _quantity_ of a thing definitely and
-legally described. It is a visible and tangible and well-known
-_commodity_. Government is competent, if it pleases, to alter the
-quantity of gold that shall constitute a dollar, although the People
-will quickly and roughly readjust the prices of Services to a changed
-measure of them; it is competent even to make a dollar out of silver,
-as our Government has tried to do (for the most part vainly) for a
-century, though it is _not_ competent to cause both dollars to
-circulate as such at the same time; but civilized and advanced
-Governments are not practically competent to make a Dollar out of
-anything else than gold and silver.
-
-Money is a current and legal Measure of Services; for the end and in
-the way in which Money alone originates and becomes current its
-material must be a valuable commodity; and after centuries of
-experiments and exclusions no civilized People now tolerate any other
-commodity in this relation than gold or silver. Such a selected
-commodity becoming in the manner already explained an actual medium
-passing from hand to hand in Exchanges, impresses its _name_ on the
-minds of men as an ideal _measure_ of services, which measure they can
-use, and do constantly use, without handling at the time the commodity
-itself. But these ideal-dollars, these denomination-dollars, need to
-be kept in check by a constant recurrence to actual, palpable
-thing-dollars. The denomination only comes into existence in
-connection with the use of the thing, cannot possibly exist
-independently of it, and needs constantly to be reduced to it (as it
-were by actual contact) in order to be useful as a measure. Just as
-men talk about inches, and calculate by inches, in thousands of cases
-in which no actual inch is used as a measure, and in every case of
-doubt, dispute, or difficulty have recourse to the actual inch, and
-thus the ideal inch is kept steady in the minds of men by frequent
-reference to the outward standard; so the mental measure of services,
-which men insensibly acquire from the use of the objective measure,
-needs to be kept true by actual and frequent contact with that
-measure.
-
-But besides this Thing-Dollar and its Denomination, which always go
-together like a man and his shadow, there is one other kind of Money,
-namely, the Promise-Dollar. We must now attend to this. What is a
-Dollar-Bill? How does it read? It is always a Promise of some Issuer
-to pay to bearer One Dollar, that is to say, this legal and definite
-quantity of a precious metal. There is no mystery here. There can be
-none. A Dollar is a tangible and weighable commodity. A Dollar-Bill is
-a Promise to render this commodity to bearer on demand. The difference
-is the same in kind as that between a bushel of corn and a man's
-promise to his poor neighbor to give him a bushel if he will come for
-it. It depends on the _man_, on his ability and character, how much
-the corn-promise is worth; and so it depends on the _issuer_, on his
-ability and character, how much the coin-promise is worth. The Issuer
-may be of such standing as to be able to secure for his promises that
-they become "a current and legal measure of Services"; and if so, they
-become Money under the definition.
-
-There is, then, such a thing as Paper-Money, though many high
-authorities are reluctant to concede, that any mere promises can be
-money at all. For ourselves we cannot refuse the courtesy of the term
-"money" to paper-promises-to-pay-coin, which our Country makes a legal
-tender for all debts, public and private. The making them legal
-tender, however, does not alter their nature one particle. They are
-still promises,--and nothing more. Their _Value_ depends in all cases
-upon the character and resources of the Issuer; their _Currency_ may
-be quickened (at some rate of value) by their being made a legal
-tender. Nothing can by any possibility become a Money unless it first
-be a Valuable. The essential characteristic of Money is its possession
-of a _generalized_ purchasing-power. The Value of a promise depends on
-one set of causes, with which we are now very familiar,--the same
-causes on which the value of everything depends; the Generalization of
-any purchasing-power into money depends upon another set of causes, of
-which the action of a Government in legislation may be one.
-
-Paper-Money, as now defined, may be issued by Banks with or without an
-indirect government sanction, or through the direct action of
-Government. The Bank of England has been issuing since 1694
-paper-money under a series of Charters granted by the Government,
-which becomes thereby in a manner responsible to the bearers for the
-redemption, that is, the fulfilment, of the direct promises of "The
-Governor and Company of the Bank of England"; since 1863 the so-called
-National Banks of the United States have issued promises-to-pay,
-designed to circulate as money, under the direct authority and
-quasi-endorsement of the national Government; and since 1862 that
-Government has been putting out directly its own promises commonly
-called "greenbacks." These last have rested and now rest for their
-value solely on the good faith of the People as between themselves.
-By a separate and additional act of legislation, which it is
-mischievous as well as unscientific to confound with the original
-promise-legislation, this particular paper-money was and is legal
-tender for debts, which collateral circumstance whether wise or unwise
-neither changes the nature nor lessens the obligation of the original
-promise to pay coin. No so-called Decision of the Supreme Court can
-abolish or abridge a natural and scientific distinction. Money is at
-bottom of two kinds only: the first kind is an intermediate and
-equivalent merchandise, COIN; and the second kind is Promises to pay
-this to a bearer on demand, PAPER MONEY.
-
-The only way to make any promise respectable is to fulfil it in due
-time. The only way to make Paper Money a decency is to hold sacred in
-action the promise that distends it. The United States undertook in
-1862 and onwards to make its own plain promises respectable by a
-different method, namely, by legally asserting in substance that the
-_promise_ is its own _fulfilment_, and needs no other; and in this
-persistent undertaking encountered a miserable failure throughout;
-because the People also persisted in _estimating_ the promise solely
-in the light of the _prospect_ of its literal fulfilment. The
-greenbacks at one time lost two-thirds of their normal value under the
-working of such estimation. This question of the relation of two kinds
-of Money to each other is a question of Economics, and not of
-Constitutional Law; or rather, it is a question of common sense and
-common honesty, and the judgment upon it of nine men learned in the
-Law is no whit better than the judgment of nine other intelligent men.
-
-As Money is analyzable into two varieties only, Coin and Paper, so
-Paper Money falls into two classes, Convertible and Inconvertible. A
-convertible paper money consists of promises that are always _kept_
-by the issuer according to their terms, that is to say, that are paid
-in specie at the will of the holder. An inconvertible paper money is
-only another name for unfulfilled promises. Is it any wonder that
-unfulfilled promises to pay invariably become less valuable than
-_that_ which they promise to pay? They are valuable to start with,
-else they could not become money, and they are valuable because men
-suppose the promise will be kept: they are commonly valueless to end
-with, because men lose faith in the fulfilment of a promise long
-delayed. This is the simple secret of the depreciation of
-inconvertible money so soon as the amount of it passes a certain
-limit, and so soon as a certain time has elapsed after its issue and
-the issuer shows no signs of keeping his word. As money is only a
-measure of Services, and as possible Services are limited at any one
-time and place, and consequently as the amount of money needed for
-healthful business is limited also, a steadily convertible paper
-money, provided the limit of quantity be not overpassed, will
-constitute a tolerable money. But this limit of quantity is apt to be
-overpassed, whether the paper money be convertible or inconvertible,
-and especially in the latter case, because the temptation to issue
-promises to pay in excess of the means of promptly redeeming them
-always besets the issuer on account of the _gain_ to him in such issue
-at least for a time. This temptation has been yielded to first or last
-by every nation, and probably by every corporation, that has ever
-issued paper money. The Bank of England has been on the whole the best
-managed Bank of Issue in the world, and its Bills (Promises) have
-gained the most confidence and the widest circulation. This is because
-they have been kept by the Issuers _convertible_ from the beginning,
-with the exception of two comparatively brief intervals of time. As
-already related under the last general proposition, the silver coins
-of the realm were much worn and clipped when the Bank was established
-in 1694, the Bank, however, had received them on deposit of customers
-at their full nominal value; but after the Recoinage began in 1696, it
-was obliged under the law to redeem its Bills in new coin of full
-weight, that is, for perhaps 9 ounces of silver received, it was now
-bound to pay 12. Consequently its enemies, the Jacobites, made a "run"
-upon the Bank by collecting up its Bills to a large amount and
-presenting them for payment. The Bank was obliged to suspend payment,
-at first partially, and then generally. In February, 1697, the Bills
-were 24% below par. The Promises could not be kept, and therefore they
-drooped in value according to man's estimation of the probability of
-their becoming again _convertible_, which happened in the course of
-that year under a new charter and privileges from Government to the
-Bank.
-
-Just 100 years after the first suspension of specie payments, in 1797,
-when the War of the French Revolution made such demands upon the
-English for money, the Bank broke its solemn promises the second time,
-and did not formally resume payments until 1821. Government and the
-business men of London did their best to hold up the credit of the
-notes during the suspension, _but they were not made a legal tender
-for debts_. Government received them at par for taxes, and provided
-that business payments in notes would be held as payments in cash if
-offered and accepted as such. Debtors, having tendered bank notes,
-which the creditor refused, had certain privileges before the law
-which other debtors had not. The notes therefore had a _quasi_
-legalization, but not a forced circulation. The bank was also
-authorized at this time to issue £5, £2, and £1 notes. Cautiously
-issued at first, bank paper continued at par for several years after
-the suspension, which proves that when government possesses the
-monopoly of issuing paper money, and carefully limits its quantity,
-and both receives and pays it out at par, it may keep an inconvertible
-paper at par, or even by sufficiently limiting its quantity carry it
-above par. But this truth does not make an inconvertible paper a good
-money, because it does not make it a self-regulating money, and
-because government is not wise and firm enough to fix and maintain a
-proper limit. Though Parliament intended in successive acts to confirm
-to the Bank of England the monopoly of banking by enacting that no
-partnership of more than six persons should take up money on its own
-bills, yet the common law assured to private persons and smaller
-partnerships the right to do this; and private bankers multiplied
-after the suspension, since they were allowed to pay their notes in
-Bank of England notes. Thus the quantity of paper money gradually
-increased till in August, 1813, the Bank of England notes were at 30%
-discount in gold.
-
-The United States, both as Colonies and as a Country, have had varied
-and instructive experience with inconvertible paper Money. We will
-glance at two or three specimens only. The first issue of Treasury
-Notes, commonly called Greenbacks, given by Congress the quality of
-legal tender for all debts, public and private, except duties on
-imports and interest and principal of the national bonds, was made in
-April, 1862, and was justified in Congress and out solely as a war
-measure. An aggregate of $450,000,000 was put out in all, of which
-$87,000,000 were afterwards taken in, and the balance was still
-circulating in 1890. In one month after the first issue of
-$150,000,000, these greenbacks began to droop in value as compared
-with gold; in four months, when the second batch of $150,000,000 was
-authorized, their depreciation was already marked and firm; and in
-nine months, when President Lincoln reluctantly gave his approval to
-the third issue of the same amount in order to pay off the soldiers
-and sailors, he uttered a solemn protest against the policy of thus
-inflating the current money, which, he said, "_has already become so
-redundant as to increase prices beyond real values, thereby augmenting
-the cost of living to the injury of labor, and the cost of supplies to
-the injury of the whole country_." In March, 1863, $50,000,000 of
-paper promises for fractions of a dollar were authorized, redeemable
-in sums of not less than three dollars in greenbacks, and receivable
-for all dues to the United States less than five dollars, except for
-duties on imports. Subsidiary silver coins have since taken the place
-of these fractionals. In July, 1863, the greenback dollar had lost
-one-quarter of its nominal value; in July, 1864, it had lost almost
-two-thirds of its nominal value, as its lowest point was reached in
-that month, namely, 35 cents as compared with the gold dollar; in
-July, 1865, it had risen to 70 cents; in July, 1866, it stood at 66
-cents, just two-thirds of a dollar proper; and from that time it
-slowly rose, with many fluctuations, till New Year's, 1879, when it
-became legally and actually redeemable in gold and silver. Its
-variations for the sixteen years, however, cannot be counted by the
-number of years, nor even by the number of days; for they were
-numerous on each business day, and, as Comptroller Knox says, "_can
-only be numbered by tens of thousands_." What a Measure of Services
-that was!
-
-Between 1863 and 1879 the Bills of the new national Banks were
-redeemable in the greenbacks only, that is to say, one species of
-national promises-to-pay were paid on demand by another species of
-similar promises, both alike inconvertible into coin; and, as a
-natural consequence, the bank-bills bobbed up and down in value in
-servile obedience to the inconvertible legal tenders.
-
-Massachusetts Colony was the first constituent of the present United
-States both to mint silver, and to issue irredeemable promises to pay
-it. Under the false impression that only Money made inferior to
-Sterling would stay in the Colony, Massachusetts began to mint in 1652
-silver shillings and sixpences and threepences purposely debased in
-weight (including seigniorage) 22% below sterling. The silver for
-these coins came in mostly from the trade with the West Indies, to
-which were now shipped peltry, fish, various forms of lumber, beef,
-pork, pease, cattle, and horses, for which they took mainly sugar,
-molasses, rum, and silver. "_They would have brought more silver and
-less rum and other merchandise, had the first been in greater request
-at home._" (Bronson.) John Hull, the mint-master took out 15 pence out
-of every £ for his own pay, and grew rich by the process. That was
-over 6%. In 1662, a twopenny piece was added to the series, and the
-mint existed (sometimes idle) for over 30 years, but all the pieces
-coined bore the dates of 1652 or 1662. This paucity of dates is
-commonly and perhaps properly accounted for on the ground that coining
-in the colony was contrary to the prerogative of the Crown; but it is
-to be added that John Hull was not a man to get new dies so long as
-the old ones would answer his purpose. The law forbade the exportation
-of these pieces under the penalty of thereby forfeiting one's whole
-visible estate; because, though this money was much worse than
-sterling, there was a worse money than this circulating in the colony,
-and Gresham's law began to crowd it from the first, and to some extent
-it was both smuggled out and clipped down. But it furnished a sort of
-standard, nevertheless, and tended to keep the later money within
-distant sight of the silver, and became the reason why in New England
-there were six shillings to the dollar. The Spanish pillar dollar,
-which was the standard in the West Indies, was worth 4_s._ 6_d._
-sterling; and in 1672 a law was passed in Massachusetts allowing these
-dollars to circulate at 6_s._ provincial, which was a discount on the
-home pieces of 25%. Ever after there were six shillings in a dollar in
-New England. Hull's money is called the "pine-tree" coinage, and was
-the only coin money minted in the country till after Independence.
-
-Also in 1690 Massachusetts set the first example, which was imitated
-20 years later by the other New England Colonies and by New York and
-New Jersey, of issuing "Bills of Credit" to meet the expenses of the
-two disastrous Expeditions against the French in Canada. Those Bills
-were not made legal tender in private payments, and pains were taken
-to keep up their credit, but they were depreciated from the first, and
-came to be very much depreciated. Massachusetts and Connecticut made
-their bills receivable for taxes at a premium of 5%, laid special
-taxes for their redemption, and from time to time called in portions
-of the issues. In 1718 Connecticut enacted that a debtor tendering
-these bills should not be liable to legal execution on his estate or
-person for the payment of that debt, an expedient, as we have seen,
-resorted to by England in the great Bank restriction of 1797-1821.
-These early New England bills bore no interest, were not loaned out by
-the colony, and were a convenient though dangerous means of
-anticipating the income of future taxes; but after 1712 a paper money
-scheme originating in South Carolina came into favor in the colonies,
-which was, to open loan-offices for the issue of colony bills on the
-mortgage of land, the interest on which helped to pay the colony
-expenses, the principal of which at first, and on being paid back and
-re-loaned, furnished a capital to borrowers, while the bills
-themselves furnished a money for the people. Pennsylvania had the best
-luck with this scheme of all the colonies which tried it: as early as
-1729 Benjamin Franklin became thoroughly possessed of John Law's
-notion, that paper money may be "based" on land or other valuables,
-saying in a pamphlet of that year that "_bills issued upon land are in
-effect coined land_": Pennsylvania bills nevertheless were at 46%
-discount in 1748. Some of the later colony bills bore interest, some
-were of a "new-tenor," so-called, designed to take up the old
-ones,--Virginia in 1755 made hers a legal tender for debts,--some were
-issued in bounties for Indian scalps and for various manufactures and
-fisheries, but all ran one road of depreciation and gave birth to one
-set of results. Connecticut managed her issues the best of the
-colonies, and yet Bronson says of the state of things in that colony
-in 1749, "_Trade was embarrassed and the utmost confusion prevailed:
-no safe estimate could be made as to the future, and credit was almost
-at an end: no man could safely enter into a contract which was to be
-discharged in money at a subsequent date: prudence and sagacity in the
-management of business were without their customary reward._"
-
-John Law, a shrewd Scotchman, born in Edinburgh in 1671, son of a
-goldsmith, with an innate talent for finance and well educated, was
-the first to give scientific form and color to the false theory that
-paper money _represents_ commodities of some sort, and may be issued
-to an amount equal to the value of these. "_Any goods that have the
-qualities necessary in money may be made money equal to their value.
-Five ounces of gold is equal in value to £20, and may be made money
-to that value; an acre of land is equal to £20, and may be made
-money equal to that value, for it has all the qualities necessary in
-money._" The fallacy in these words of Law is patent enough to any one
-who will stop to think a moment about the _nature of Money_. Because
-land, for example, has value, it does not follow that it has "_all
-the qualities necessary in money_"; and, as a matter of fact, it lacks
-the precise quality necessary in money, because, though it has
-purchasing-power, it cannot from its very form and nature become _a
-generalized and current_ purchasing-power. Money is indeed a valuable
-thing, but that does not prove that all valuable things can be money.
-With this radical vice of Law's view was wrapped up another, namely,
-that there may be in any country as much paper money as the sum of the
-values of all its valuable things. Now, we have learned perfectly,
-what escaped the acute intellect of John Law, that Money is only a
-valuable _measure_ of all other salable Services; and therefore, that
-the amount of it that can be made useful at any one time and place is
-strictly limited, and bears very little relation to the sum of the
-values present at that time and place.
-
-Scotland fought shy of Law's idea when he published it there in 1705,
-and so did Paris the first time he visited that city, in which and in
-other cities he gambled successfully and talked finance to princes and
-statesmen fascinatingly; but when he returned to Paris in 1715 with
-his ill-gotten fortune, he gained the ear of the Regent Duke of
-Orleans, who permitted him to found a bank there, in which were
-incorporated some sound principles of monetary science as well as the
-prime fallacy of his system. The bank bought a portion of the State
-Debt, just as the Bank of England had done, and laid in also a fair
-stock of coin, and thereupon issued a paper money. For a couple of
-years, or so, the bank surpassed all hopes, for Law had touched a
-spring till then but little known in France, the potent spring of
-Credit. But his whole thought, meditated on for years, could not be
-expressed through a private bank. The State should be a banker; it
-should collect all its revenues into a central bank, and attract the
-money of individuals to it as deposits; besides, the State has public
-property of vast value, on the strength of which paper money can be
-emitted and made legal tender; and thus the State, instead of
-borrowing, should lend to all on easy terms and the profits thus
-accruing would lessen or abolish taxes. Nor was this all. The State
-should also be a merchant; the whole nation should form a commercial
-company, a body of traders, whose common treasury should be the State
-bank. Commerce by individuals creates great wealth; why should not the
-organized commerce of a State make everybody rich? The discounts of
-the bank, and the profits of the trade, would surely provide for the
-public service without taxation. These vast ideas were actually
-carried out. Law's bank became the Royal Bank, issuing a paper money
-guaranteed by the State and resting back upon the value of all
-national property. The money was receivable in taxes, nominally
-redeemable in coin, and made a legal tender. It actually bore at one
-time 5 and 10% premium over gold and silver. People were anxious to
-exchange their coin for notes. Meanwhile a commercial company was
-formed in connection with the bank, to which the State ceded at first
-the monopoly of the commerce of Louisiana and of the Canada beaver
-trade for twenty-five years, and the soil of Louisiana forever; under
-the auspices of which NEW ORLEANS was founded, and named from the
-Regent, the patron of the grand system; and in succession, the
-monopoly of tobaccos, the rights of the Senegal Company, of the East
-India Company, of the China Company, and of the Barbary Company;
-until, having almost all the commerce of France outside of Europe in
-its hands, it entitled itself the COMPANY OF THE INDIES. Its shares
-rose from a par value of 500 francs to 10,000 francs, more than forty
-times their value in specie at their first emission. To support such
-speculations, which completely turned the heads of all classes of the
-people, the amount of paper money reached at last the sum of
-3,071,000,000 francs, 833,000,000 more than had been legally
-authorized to be emitted. The collapse of this most gigantic bubble of
-history was terrific. Before the close of 1720, the shares of the
-Company could be bought for a louis d'or, or twenty shillings
-sterling, and the paper money of course became worthless.
-
-The ghost of John Law reappears gibbering and chattering in some human
-shape once in a generation or two in all civilized countries. In
-March, 1890, Senator Stanford of California, himself reputed to be
-worth $30,000,000, propounded the question in the Senate of the United
-States, whether it were not advisable for the Government to issue
-legal-tender notes on the basis of the real estate of the country. His
-interrogative argumentation implied, (1) that there was a scarcity of
-Money causing great hardship to individuals and depression to
-business, (2) that if national bank bills are properly issued on
-government bonds it is equally proper to base legal tenders on real
-property, (3) that there is no natural and strict limitation to the
-amount of Money in a country at any one time, and (4) that as far as
-he knows there may well enough be as much money in amount as the
-estimated value of the real estate. All this is John Lawism pure and
-simple. All this utterly ignores the nature of Money as a valuable
-measure of all other Services. It also ignores the truth, that an
-advancing country needs less rather than more Money in amount as it
-advances, because cheques and other forms of non-money Credits are
-constantly increasing both absolutely and relatively. It is because
-this Senator's monetary notions seemed to correspond with those of a
-majority of the Senate, that it is perhaps proper to give them here a
-moment's attention.
-
-These supposed legal-tender notes would be secured by a government
-lien on land and buildings, and by the direct credit of the Government
-as well; just as the national bank bills are secured by the bonds of
-the nation held in reserve for that purpose, and also by the direct
-image and superscription of Cæsar upon every bill. People holding
-mortgaged real estate could accept a non-interest bearing government
-lien instead of a 6% or 8% private mortgage, that is, could pay off
-their mortgages with the legal tenders given them by the Government,
-the latter taking the lien or new mortgage; and people owning real
-estate clear could, if they chose, execute a perpetual mortgage to the
-Government, that is, give up the fee simple to their lands, and
-receive legal-tender notes to the full amount in return. This would at
-least relieve the "scarcity" of Money! The volume of national Money at
-that moment was in round numbers $1,400,000,000; the assessed
-valuation of the real property of the country was at the same moment
-at least $15,000,000,000; so that, on this scheme, perhaps
-$10,000,000,000 of additional legal-tender Money could be issued! Here
-is paternalism and socialism and John Lawism all combined. Here is a
-Government of strictly limited and carefully enumerated powers, under
-a written Constitution as precise as language can make it, containing
-the solemn declaration that all "powers not delegated to the United
-States are reserved to the States respectively or to the People,"
-owning or soon to own not only the railroads and the telegraphs but
-also the major part of the lands of a free country, and going into the
-mortgage business on the heroic scale!
-
-If this honorable Senator and his like-minded colleagues were
-tolerably familiar with the financial history of their country, and
-perhaps they were, they would have known that this precise scheme had
-had a practical trial in Rhode Island, just before the adoption of
-the national Constitution. The Legislature authorized the issue of
-$500,000 in scrip-money based upon the value of the real estate of the
-farmers of the Colony. The law required a mortgage for twice the
-amount of scrip-money based upon it, and it was therefore supposed the
-money would be as good as gold or better. But somehow or other the
-merchants of the towns could not see the matter in that light. The
-depreciation of the scrip-money began at once, and the prices of wares
-ran up in a way that should have set business in active motion,
-according to all the views of the "scarcity" school. It was therefore
-enacted by the Legislature, that anybody who refused to accept the
-scrip at its face value should be fined $500 and lose the right of
-suffrage! They made it a legal tender! But business refused to boom.
-The merchants shut up their stores, the farmers could not market their
-crops, and idleness and rioting set in all over the State. Then the
-farmers organized a boycott against the towns, and food became scarce.
-Meanwhile the mortgage legal tenders would not pass at the best for
-over 16 cents to the dollar! There was more of "enforcing"
-legislation, and appeal to the courts, but nothing could boost the
-mortgage-money. The chief result of the experiment was, that Rhode
-Island gained in this way the title of "Rogues' Island."
-
-No matter how good the cause, how patriotic the People, an
-inconvertible paper money is sure to run down at the heel. In June,
-1775, one week after Bunker Hill, the Continental Congress voted to
-emit $2,000,000 in "Bills of Credit" issued on the faith of the
-"Continent." Eleven separate Colonies, New Hampshire and Georgia
-issuing none, began about the same time their revolutionary issues of
-the same sort, amounting in all during 1775-83 to $209,524,776. The
-vice of such irredeemable scrip is, there is no economical limitation
-of the Supply. The middle of 1777, when Burgoyne was prosperously
-advancing from Canada towards New York, saw a general fall of the
-notes both Continental and Colonial, and of course and in consequence
-a universal rise of the prices of other products. At the close of that
-year, the average depreciation from silver was not far from 3 to 1; at
-the close of 1778, it was not far from 6 to 1; at the end of 1779, it
-was about 28 to 1; the Continental press then rested, after
-$200,000,000 nominally had been put out, but actually about
-$40,000,000 more than that, a usual if not universal accompaniment of
-such issues. When the stuff dropped out altogether in the spring of
-1781, the country found no more lack of silver for Money than
-Massachusetts had found in 1749, when and after she redeemed her
-outstanding bills of credit at 11 for 1 in sterling silver, £138,649
-of which, the share falling to her from the capture of Louisburg, was
-shipped to the Colony in coin, and she became for the next 25 years
-the "Silver Colony." Assuming that only $200,000,000 Continental had
-been issued, Thomas Jefferson carefully estimated that the Nation
-realized from them $36,367,720 in specie value, or 18% of the nominal
-value.
-
-14. Whether the Money of any Nation be coin or paper or both, when
-once it is in the hands of the People, Government has properly nothing
-to say _about the rate of interest at which one person loans this
-money to another_. Usury Laws so-called, prohibiting the lender from
-taking more than a prescribed rate % for the use of money loaned,
-under penalties sometimes of the entire interest and sometimes of the
-entire debt have disfigured the statute-books of all Nations and of
-all the States of this Union. Such laws cannot justify themselves for
-a moment in the light of sound principles of Political Economy. Their
-origin may be explained by a reference to two false views, now
-happily exploded.
-
-(a) The laws of Moses forbade to the Israelites the taking from one
-another any _interest_ on money loaned, but at the same time it
-allowed them to take such interest freely of strangers; the permission
-in the one case going to show that there is nothing in the taking of
-interest that is unjust or sinful, and the prohibition in the other
-being readily explainable from the general purpose of the municipal
-regulations of Moses, which was to found an agricultural and not a
-trading commonwealth, in which every family was to possess land that
-could not be permanently alienated or sold, in which it was a great
-object to maintain the personal independence and equality of these
-families, in which the law for the recovery of debts was very summary
-and effective, lessening the risk of losing the principal, and which
-was to be and was sedulously separated in its usages from the
-surrounding nations. It has been well understood for a long time that
-the municipal code of Moses was local and peculiar, not necessarily
-applicable at all to the circumstances of other States, and in no
-sense binding on the conscience of legislators; and yet there
-doubtless sprang from the prohibition referred to a prejudice against
-interest, and this prejudice was perhaps deepened in the Middle Ages
-and onwards by the conduct of the Jews themselves, who, in addition to
-their sin of persistently growing rich in spite of the endless
-disabilities laid on them by the people of Europe, always demanded, in
-accordance with the permission of their great lawgiver, a good rate
-_per centum_ of interest from those strangers to whom they became
-money-lenders. The Jews were everywhere hated, and consequently the
-usury which they practised was hated also. The fundamental absurdity
-of forbidding in trading communities the taking of interest on sums
-loaned to a borrower which he was at liberty to use for his own
-profit, deterred the nations from going to the length of prohibition,
-unless it might be in the case of the hated Jews. There is a clause of
-Magna Charta, interesting as showing how early the children of Abraham
-became the money-lenders of Europe, to the effect that, during the
-minority of any baron, while his lands are in wardship, no debt which
-he owes to the Jews shall bear any interest.
-
-(b) Governments formerly deemed themselves competent to determine and
-fix the _general_ purchasing-power of their own money. Even the
-Constitution of the United States uses this language: "to coin money,
-_regulate the value thereof, and of foreign coins_." There was
-formerly, and there is still to some extent, a curious and harmful
-confusion in the public mind in respect to this term, "the value of
-money." In the only proper sense of the term the _value of money_
-means its power of purchasing services in general, and the value of
-money is _high_ when a given sum of it will purchase much of general
-services, and _low_ in the contrary case; and a high or low value of
-money in this true sense depends on a very distinct set of causes from
-those which determine the high or low rate of interest on money
-loaned; nevertheless, so long as governments supposed that they could
-regulate the former, it is very natural that they should also suppose
-that they could regulate the latter; and although all intelligent
-governments have given over the idea of being able to regulate the
-general value of the money they furnish to the people, many of them
-still adhere to the notion, equally false with the other, that they
-_are_ able to regulate the loanable value, or the rate of interest, at
-least to prevent any more than their prescribed maximum rate from
-being taken. A few simple considerations will sufficiently condemn all
-usury laws.
-
-(1) It is at once needless and invidious to deny by law to
-money-lenders, who offer just as honorable and useful services to
-society as any other class of men, the privilege of selling _their_
-service for what it will bring in the market, while other men in every
-department of business are allowed to exchange their services on the
-best terms they can make without interference or control. Let us see
-precisely the nature of the transaction when one man loans money to
-another. It is a clear case of value. The lender does a service to the
-borrower, and for this service justly demands a compensation. The
-service is this: The lender might himself use the money to gratify his
-own desires. It is his money; he may use it, as he pleases, for his
-own gratification. Or he may himself employ it productively, and, at
-the end of the period, receive back his principal with the customary
-rate of profit. If he surrenders this advantage to the borrower, if he
-passes over to him the right to use this money, say, for a year, he
-practises what we call in Political Economy _abstinence_. For this
-abstinence he has a right to claim a reward, precisely as the man has
-a right to claim a reward who foregoes working for himself in order to
-work for another. This reward of abstinence is _interest_. The
-money-lender foregoes an advantage. He performs a service for the
-borrower; and, therefore, the right to interest stands on just as
-unassailable ground as the right to wages. Moreover, the loanable
-value of money varies under Supply and Demand just like other values;
-there are always those who want to borrow, and always those who want
-to lend; both parties must be assumed to know their own minds, and to
-be equally competent to make their own bargains; it is a case of
-mutual exchange for a mutual benefit, like all other trade; and the
-current rate of interest is determined at any one time by the actual
-free exchanges between borrowers and lenders. Now for any government
-to try to compel a lender by law to take only 6% when his money is
-worth 8, is a direct violation of the rights of property. It is a
-forcible and pernicious interference with the freedom of contracts. It
-is based on the false premise that the loanable value of money is
-uniform, and that government is competent to determine what it is. No
-value is uniform. And no government is competent to determine even the
-maximum price of money loaned, any more than the maximum price of
-commodities.
-
-(2) Usury laws are almost uniformly _disregarded_, both by the
-governments which make them and by the people for whom they are made.
-Indeed, such laws cannot be enforced in a commercial community. Common
-sense is outraged by a law which requires a man to part with his
-property at less than the actual value; and when common sense is
-against a law, it stands a slim chance of observance. If the legal
-rate be six, and the actual worth be eight, who lends at six? Not the
-banks. They require deposits of their customers, the use of whose
-money shall make up to them the difference between the legal and the
-actual rate. The modes of evasion are various, but they are adequate
-and universal. Besides, governments themselves have shown a noteworthy
-inconsistency in this matter, which incidentally proves the
-unsoundness of their whole action. While announcing pains and
-penalties to those who take more than a given rate, they are careful
-never to bind themselves down to any given rate. Governments are
-always more or less borrowers, and if usury laws are necessary in
-order to help borrowers in a pinch, there ought to be a clause in the
-organic law of every country, forbidding the government to pay and its
-lenders to take any more than a certain rate per cent. There is no
-such clause in any organic law. Governments wisely follow the natural
-market, and borrow low when they can, and pay high when they must. In
-the last months of Mr. Buchanan's administration, the United States
-paid 12% on a public loan, and could get but little at that. Sauce for
-the goose is sauce for the gander, and if usury laws are good for the
-citizens, some solid reason ought to be rendered why they are not good
-for the government. The truth is, they are not good for either, since
-natural laws are perfectly competent to regulate the rate of interest,
-and do regulate it substantially in spite of a factitious,
-impertinent, and mischief-making interference.
-
-(3) If Usury laws were _not_ disregarded, they would be even worse in
-their effects than they are now. We must suppose that their aim is to
-aid borrowers, and make it easier for them to contract loans. But are
-borrowers, as a class, any more deserving of the fostering care of
-government than are lenders? Even if it could make its interference
-effective, as it cannot, is there any reason why government, leaving
-these borrowers to make all other bargains, sales, and transfers
-according to their best skill and judgment, should rush to their
-rescue only when they propose to borrow money? If they are competent
-to do their other business for themselves, government pays their
-capacity a poor compliment in undertaking to help them in the single
-matter of making loans; and the borrowers in turn have reason to pray
-to be delivered from their friends, since they, of all others, would
-be the men especially injured if all the lenders obeyed the usury
-laws. Suppose that a borrower is in great need of a loan, and that for
-some reason his credit is now a little weak. Many men would be willing
-to loan him at 9%, which affords a margin for the extra risk, but at
-6, which we will suppose the maximum allowed by the law, he cannot
-borrow a dollar, because his credit is not quite equal to the best.
-If, therefore, the lenders obey the law, he, and such as he, must
-fail. And because it is unlawful to take over 6% he will be obliged to
-pay those who are willing to violate the law 10 or 12, to compensate
-them for the risk and odium of such violation, while, under freedom,
-he could borrow at 8. Moreover, if the loanable value of money at the
-time be actually 9, while the law only allows 6, many men will attempt
-to use their own capital productively, who would otherwise loan it, in
-order to realize the high rate; and this action of theirs still
-further restricts the loan-market and makes it more difficult to
-borrow. If, then, the purpose of government be to aid borrowers, no
-means could be more unskilfully chosen for that end than to pass usury
-laws, since such laws, so far as they are obeyed, have necessarily the
-opposite tendency; and even when violated redound to the disadvantage
-of borrowers, so long as the laws themselves are popularly regarded as
-of any legal or moral force.
-
-In 1716, the Bank of England, as a great loaning institution, was
-exempted from the operation of all usury laws: why the bank only, and
-not other people as well, the Act of Parliament does not state. In
-1867, the State of Massachusetts repealed all its usury laws, though
-6% is to be understood in the absence of special agreement, and the
-result has been entirely satisfactory to all classes of the people.
-Rhode Island had done this previously, and Connecticut did it
-subsequently, and both have experienced equal satisfaction in the
-result. Other States will soon follow in their lead; and this relic of
-ignorance and prejudice will pass away. Adam Smith left the Wealth of
-Nations disfigured by the concession that governments might properly
-enough pass usury laws; but it is gratifying to be able to add that he
-was convinced of his error in that by Bentham's book on Usury, and
-fully acknowledged his conviction in the spirit of a genuine lover of
-truth. We conclude, then, that usury laws are needless, since
-interest, like all other prices, will perfectly adjust itself. They
-are disregarded, since lenders will loan or withhold their money
-according to their own keen sense of interest. They are pernicious,
-since they infringe the rights of property, and tend to prevent weak
-borrowers from having a fair chance in the market.
-
-The present writing is at midsummer, 1890; and, in order to complete
-the entire discussion so far as this country is concerned, it is
-needful to add, that, between 1878 (when specie payments were resumed)
-and 1890, the circulating medium of all kinds is proven by official
-statistics of the highest authority to have increased from
-$805,793,807 to $1,405,018,000, or more than 57 _per centum_. This
-circulating medium consists of six formal kinds; namely, gold, silver,
-greenbanks, bank-bills, gold-certificates, and silver-certificates.
-Each of these differs in important respects from each of the rest, but
-all come alike under our fundamental classification of Moneys, as
-either an intermediate merchandise or promises to render it. This
-increase is way beyond any increase in the population of the country,
-and way beyond any apparent or proven increase in the national
-business; while at the same time the banking facilities of the
-country, which always spare the use of Money by substituting cheques
-therefor in the wholesale business and in a large share of the retail
-business also, have been increasing in equal measure. The number of
-national banks, especially in the West and South, has been
-multiplying. The use of cheques has been enlarging in every commercial
-community in the land. Yet up to the present time all of this vast
-volume of Money has been kept at par with gold, and consequently at
-the highest state of efficiency for commercial purposes.
-
-What about the immediate future? Science is not prophecy except in a
-quite subordinate sense. Congress is loudly threatening at this very
-moment to more than double the enforced monthly coinage of silver
-dollars at the public expense for the sole benefit of a comparatively
-few miners of silver. If this threat be executed upon a long-suffering
-people of tax-payers, who will have no one to blame but themselves if
-they tolerate the outrage, Science is willing to venture the
-prediction, that the monetary standard here will drop from gold to
-silver within a twelvemonth or two; that general prices will rise much
-beyond the appreciation of money implied in that drop, though they
-will be illusory and gainless; that prudent debtors will hold high
-carnival for a time at the expense of their creditors; that the
-country will become as empty of gold as a contribution-box is of other
-money between Sundays; that foreign trade (soon to be explained),
-already in a sickening decline, under restrictions and prohibitions,
-will hasten to a practical demise; and that the United States, at once
-the laughing-stock and the victim to the superior intelligence of
-other nations, will come through alternate fever and chills to a
-position of common sense and ultimate recovery.
-
-
-
-
-CHAPTER VI.
-
-FOREIGN TRADE.
-
-
-Wonderful is the continuity in the growth of any great Science, and
-equally so the persistency of any radical error that once gets fairly
-imbedded within it. As we saw fully in the last chapter Money is
-nothing in the world but a convenient, intermediate, equivalent, and
-easily measurable merchandise; but almost as soon as men began to
-analyze Sales and to generalize from their data, a notion nestled way
-down in their work, that Sales against Money were somehow or other
-different from Sales against other merchandise; and thence sprang up,
-particularly among the Romans, what we have called the Bullion Theory.
-The broad and the true view was held indeed from the beginning, and
-was maintained even among the Romans, as we learn from an interesting
-passage in the Roman Law,--"_Sabinus and Cassius think Value can dwell
-in another thing than money too, whence is that which was commonly
-said, Buying and Selling is carried on in the exchange of goods, and
-that view of purchase and sale is very old; but the opinion of
-Procullus has deservedly prevailed, who says, Exchange is a particular
-kind of transaction different from Selling._"
-
-Science has indeed sloughed off this old and vital error, and most of
-its sequels; but Public Opinion in many countries is full of it still;
-and Legislation, in our own country at least, is all the time trying
-or threatening to transmute merchandise (say silver) into money, as
-if that could raise its value or change its nature.
-
-It was but a single step from the Bullion Theory to the Mercantile
-System. If money be somehow different from and better than
-merchandise, then each nation should strive to handle its foreign
-trade so as to get back from other nations more money than it renders
-to them in exchange: in other words, each nation must try to sell to
-the rest more goods than it takes goods back in pay, so as to have a
-"_balance_" come in of gold and silver. How natural the transition
-from Bullionism to Mercantileism! And it was a step of genuine
-progress too. Goods are good, and there is profit in their exchange;
-but gold is somehow better than goods, and we must manage somehow to
-get a "balance" in that! If this position had only been sound, and one
-nation only been in possession of the precious secret, how nicely it
-might have worked for that nation! But all the leading Nations of
-Europe made the transition from Bullionism to Mercantileism at one and
-the same time, and they vexed and impoverished each other for three
-half-centuries, and went to war with each other besides, under the
-double illusion, (1) that gold could be practically gotten in that
-way, and (2) that if gotten it were one whit better than the goods for
-which it would have been at once spent.
-
-Economics as a Science is now free from every taint of Mercantileism
-also, but it lingers on more or less in half-informed minds, and in
-the less-experienced nations; and the system itself merged itself
-three half-centuries ago into another, which is not another, namely,
-into Protectionism. If nation A must sell more goods to nation B than
-it takes back in goods, so as to get the coveted "balance" in gold
-from B, would it not help that cause along to put obstacles in the way
-of restrictions or prohibitions against the introduction of goods
-from B to A? Less goods, more gold, argues A. A forgets that the same
-mental processes are going forward in B's mind towards the same
-conclusion in relation to A. Now, cogitates A, what kind of goods from
-B had we better restrict or prohibit? A, by the way, consists of some
-millions of individuals, some of whom are always on the watch to get
-their axes ground at the government grindstone. What kind of goods
-shall we prohibit from B? Why, of course, those kinds which we are now
-making or growing. We can supply these for ourselves. It does not
-escape the notice of these makers and growers, that the restriction or
-prohibition of similar goods from B will raise the price at home of
-their own goods. Scarce is ever costly. On go the restrictions,
-ostensibly at first in behalf of an imaginary "balance" in gold, which
-fragile reason soon passes out of mind in the presence of a very real
-reason for such restrictions, namely, artificial high prices for
-certain domestic goods, paid indeed by the entire home community to
-the comparatively few makers or growers of the goods now "protected,"
-as the current phrase is. Mercantileism has passed over into
-protectionism. The feeble friends of a "balance" have now become the
-strong friends of a "monopoly." Personal greed to grow rich at the
-expense of one's own countrymen thus becomes the single or combined
-force that puts on and keeps on and piles up the so-called
-"protective" restrictions and prohibitions.
-
-Scientifically Protectionism is as dead as Mercantileism and
-Bullionism. There is not an Economist in Christendom, of any
-international or even national reputation, who now undertakes fairly
-and squarely by means of analysis and induction, to propound or defend
-a scheme so contrary to common sense and common honesty as this is,
-and which, universally applied, would annihilate the commerce of the
-world. But many of the nations are still tinctured more or less by the
-old subtlety, and powerful classes within them and specially within
-the United States, classes grown rich and powerful by what is nothing
-else than public plunder, are strenuous and successful advocates, not
-in open discussion and fair debate but by clandestine and corrupting
-methods and combinations, to maintain in the light of the nineteenth
-century an outworn and decrepit "something" worthy only of the dark
-ages. The old and foolish cry for a "balance of trade" is merged now
-in the United States into the insane and hateful clamor for the
-destruction of public trade in the behalf of private gain.
-
-This is the sole reason why we must now undertake a careful chapter on
-Foreign Trade. There is no reason in the nature of things, or in the
-nature of trade, why Foreign Commerce should be treated of separately
-from Domestic Commerce. The two are precisely alike in all their
-principles and in all their results. In one as in the other, in every
-case and everywhere, there are (1) two persons, each of whom has a
-Service in his hands to sell against a Service in the hands of the
-other; (2) two reciprocal estimates, by which each owner concludes
-that he prefers the Service of the other to his own; (3) two mutual
-renderings, by which each Service comes into the possession, present
-or prospective, of the new owner; and (4) two personal satisfactions
-as the result of all, constituting the ultimate motive and the sole
-reward of Buying and Selling.
-
-There are two possible differences in certain cases between Domestic
-and Foreign trade, both superficial and but barely worth the mention
-here. Foreign countries engaged in trade _may_ be more remote from
-each other than places exchanging products within the same country.
-The distances, however, between Bangor selling ice to New Orleans for
-sugar, and Boston selling boots and shoes to San Francisco for fruits
-and wine, are much greater than those between Liverpool and St.
-Petersburg, or those between Stockholm and Palermo; so that, it may be
-said in general, that the trade between all the European countries
-confronts less distances, and presumably less costs of transportation,
-than the trade within the United States. And another thing is to be
-said in this connection: Foreign trade as a general rule is conducted
-by water-routes, and domestic trade under the same rule is carried on
-by land-routes; and, therefore, the costs of transportation by the
-latter are much more expensive.
-
-The other possible difference is more considerable, and considerably
-more in favor of Foreign as compared with Domestic trade. We have
-learned perfectly already, and the point is fundamental, that all
-trade proceeds on the sole basis of a relative Diversity of Advantage
-as between the two parties exchanging. This relative superiority of
-each exchanger over the other at different points depends in domestic
-trade partly upon divergent natural gifts to individuals, partly upon
-their concentration of mind or muscle or both on a single class of
-efforts each, and partly upon the use and familiarity in the use of
-the gratuitous helps of Nature aiding that class of efforts. But in
-foreign trade there are commonly some additional grounds of Diversity,
-since the various countries of the earth have received from the hands
-of God a diversity of original gifts, in climate, soil, natural
-productions, position, and opportunity. And besides these original
-international differences, there has been developed of course in the
-history of the inhabitants of these countries a diversity of tastes,
-aptitudes, habits, strength, intelligence, and skill to avail
-themselves of the forces of Nature around them. International trade,
-accordingly, is somewhat more broadly and firmly based than the home
-trade can be, inasmuch as these international differences are apt to
-be more inherent and less flexible than domestic differences between
-individuals; it is on these diversities, original, traditional and
-acquired, that international commerce hangs; it could never have come
-into existence without them; and it would cease instantly and
-completely were they to fade out. Men engage in foreign trade,--not
-for the pleasure of it,--but for the sake of the mutual gain derivable
-to both parties; they desist from it so soon as that mutual gain
-disappears; and there is no gain in any series of exchanges, unless
-each party has a superior power in producing that which is rendered,
-compared with his power in producing that which is received.
-
-With these few preliminaries, we pass now, in the first place, to
-unfold in order the COMMON AND UNIVERSAL PRINCIPLES OF FOREIGN TRADE.
-For the sake of illustrating these, we will now take a simple supposed
-case, a trade between England and France in cottons and silks, and
-follow it through clearly to the end.
-
-1. When will it be mutually profitable for England, that is, for
-certain English merchants, to send cottons to France to buy silks
-with, and for France, that is, for certain French traders, to send
-silks to England to buy cottons with? Money and all other commodities
-except these two, silks and cottons, are wholly out of the question
-now and should be wholly out of our minds the while, though for
-simplicity's sake we shall use the _denominations_ of money for
-comparing the respective efforts, translating pounds and francs into
-dollars. The answer is easy: the trade will be mutually profitable,
-when efforts bestowed in France upon silks will procure through
-exchange with England more of cottons than the same amount of efforts
-bestowed in France upon cottons will produce of cottons directly;
-_and_ then, when efforts bestowed upon cottons in England will
-procure more of silks through exchange with France than the same
-amount of efforts bestowed in England upon silks will produce of silks
-directly. It is not a question of the absolute cost of either
-commodity to the parties producing it, or of a comparison of those
-absolute costs at all, but a question of the relative cost of that
-produced in either country compared with what would be the cost of the
-other commodity were it to be produced in that country. So long as
-there is a difference of relative efficiency in the production of the
-two commodities in the two countries, so long, setting aside the costs
-of carriage, may there be a profitable exchange of the two. A demand
-in each country for the product of the other is of course presupposed
-in the illustration.
-
-Suppose now, that Efforts in England on certain cottons be gauged at
-$100, and that Efforts in France on certain silks be gauged at $80,
-and that these finished commodities then exchange even-handed against
-each other: is that a losing trade for England and a gainful trade for
-France? That is more than we can tell yet. That depends upon the
-further decisive question, whether the Efforts gauged at $100 if
-expended in England in the manufacture of silks will procure as many
-and as good silks as the same obtain in exchange with France; and
-whether the Efforts gauged at $80 if expended in France on cottons
-directly will secure as many of them as if expended on silks directly
-and then traded off for cottons. In effect the Frenchmen ask, Can we
-get more and better cottons by working on silks and then trading them
-off for English cottons than we can get by equivalent Efforts in
-working on cottons at home? Likewise the Englishmen ask, Can we get
-more and better silks by working on cottons at home and then trading
-with France for silks than we can get by trying to make silks
-directly? France by climate and soil and habitudes is better adapted
-to silks than cottons: England by virtue of the same is better adapted
-to cottons than silks.
-
-2. How does the Diversity of relative Advantage practically work in
-foreign trade? Let us suppose that while the cottons cost $100 in
-England, it would cost $120 to manufacture there as good silks as can
-be made in France for $80; and that while the silks cost but $80 in
-France, it would cost $96 to make cottons there as good as the English
-can make for $100. On this supposition France can make both the silks
-and the cottons at a cheaper absolute cost than England can. What of
-it? Does that destroy the motive and the gain of an exchange between
-the countries in these two articles? Let us see. By an exchange with
-England, France gets for $80 in silks, cottons which would otherwise
-cost her $96, which is a handsome gain of 20%; while England gets for
-cottons costing her $100 silks which would otherwise have cost her
-$120, which is another handsome gain of 20%. Although France can make
-each commodity for less absolute money than England can make either of
-them, there is a Diversity of relative Advantage; and, therefore,
-there might be in this case, as there is actually in many such cases,
-a very profitable trade. The efficiency of France in making silks
-relatively to the efficiency of England in making silks is in the
-ratio of 80 to 120, namely, a difference of 50%; while the aptitudes
-of France in making cottons relatively to that of England in making
-the same is only in the ratio of 96 to 100, namely, a difference of
-4-1/6%. So long as England offers in cottons a good market for French
-silks, how utter the folly and large the loss of France in going to
-work to make cottons!
-
-In the majority of cases, doubtless, foreign trade takes place in
-articles, in the production of one of which each of the respective
-countries has an absolute advantage over the other; but an every way
-advantageous trade may be carried on in commodities, in the production
-of _both_ of which one nation shall have an absolute superiority over
-the other, provided only that this superiority be _relatively diverse_
-in the two commodities, as has just been shown. This is an effectual
-answer to the ignorant clamor of some, we take it, who make objection
-to importing articles which might be made at home for the same sum of
-money as foreigners expend in making them; admitted, that they might
-be so made, does it follow that the country importing them would get
-them as cheaply by making them itself? _By no means does that follow._
-Let no nation, then, be in haste to drop a trade, because it thinks it
-can make the goods received in exchange as cheaply as the other nation
-makes them, so long as it has an advantage absolute or relative over
-the other in making the goods rendered in exchange; and when that
-advantage ceases, it may be sure, that the trade will drop of itself;
-because it always takes _motives_ to make the mare go.
-
-3. What are the extreme limits of the Value of cottons and silks in
-the case supposed, and when will a third nation be able to undersell
-either in the ports of the other? This is the answer: the extreme
-value of French silks in English cottons will be 80 and 96; they
-cannot fall below 80 because they cost the French that to manufacture
-them; they cannot rise above 96, because at that rate the French can
-make cottons, and there would be no motive, that is, no _gain_, in
-their exchanging for cottons. Nations, that is to say, individuals,
-will never get themselves served at a greater effort than that at
-which they can serve themselves. If a given effort does not realize
-more through exchange than it would do directly, then that exchange
-ceases of necessity, as fire goes out for lack of fuel. The extreme
-limits of the value of English cottons in French silks will be 100
-(lowest) and 120 (highest) for reasons precisely similar in the case
-of the English. Therefore, the highest profits possible to both
-nations under the conditions of the trade are 20% each. France would
-be glad to take the cottons at a return of 80 in silks, at which rate
-her gain would be 20%, and she cannot under any circumstances offer
-quite 96, at which rate her gain would disappear.
-
-No third nation, accordingly, in a trade of silks for cottons can
-expel the French from the English ports, until it is prepared to offer
-nearly 96 (or more) in silks in return for English cottons; that is to
-say, until its efficiency in making silks relatively to that of
-England in making them presents a greater difference than the
-difference of efficiency between France and England in making silks,
-which is a difference of 50%. England would be glad to take the silks
-from France at a return of 100 in cottons, at which rate her gain also
-is 20%, and she cannot possibly offer quite 120 in cottons, because at
-that rate her gain would wholly vanish. England could be undersold in
-the French ports, when somebody is ready to offer nearly 120 (or more)
-in cottons against the French silks, whose _quantum_ in the exchange
-may vary from 80 towards 96. Here is the whole doctrine of one nation
-underselling another in the ports of a third nation. Silks stand here
-for sample of all French commodities of whatever name and cottons for
-all English goods whatsoever; and England and France stand in the
-illustration for any and all nationalities. Any nation obtains any
-share or a greater share in the commerce of the world solely in virtue
-of a greater relative efficiency in producing _something_ valuable, as
-compared with some other nation's power in producing something _else_
-that is valuable.
-
-4. How does the varying play of International Demand affect the value
-of articles in foreign trade? The answer is clear and easy: if the
-demand for French silks in England just answers to the demand for
-English cottons in France, so that the silks offered by France just
-pay for the cottons offered by England, then, cost of carriage aside,
-the gains of the trade will be equally divided between the two sets of
-merchants, and each will realize 20% profits, because neither will
-have any motive to lower the value of its commodity below its highest
-value. The Frenchmen from their point of view will offer 80 in silks
-and take 96 in cottons: the Englishmen from their standpoint will
-offer 100 in cottons and get 120 in silks. Demand and Supply are
-equalized at a point of value most favorable to both parties, and one
-really determined by the relative cost of production.
-
-This case of equalization, though possible, is likely rarely to occur
-in practice. On any terms of exchange first offered, there is likely
-to be a stronger demand in one country for the product of the other
-than in this country for the product of that. This will of course lead
-to a change of Value, and a new division of Profits. The product for
-which the demand is less will find its market sluggish, and in order
-to tempt further and brisker exchanges will be compelled to offer more
-favorable conditions. He who enters a market in quest of what is
-_more_ in demand with a service which is _less_ in demand, will have
-to lower his terms, or not trade. The equalization of Supply and
-Demand will only be reached in this case, by quickening the demand for
-the commodity now less in demand through an offer of better terms in
-trade. Thus, if the demand for French silks in the English ports be
-slack, in comparison with the demand for English cottons in France, at
-the rate of exchange first established, say, 80 for 96, the French
-merchant has no resource, if he wishes to continue the trade, but to
-agree to give more silks, for the same amount of cottons, say, 85 for
-96. If this actual reduction prove sufficient to cancel the account
-in cottons with the account in silks, then the trade will proceed on
-this new basis for a while, because the equalization of demand and
-supply has been reached through a new valuation of the two
-commodities, and there is now consequently a new division of the
-profits. France gains less than 13% by her trade with England, while
-England gains 27% in her trade with France.
-
-Under these new terms of exchange, it is quite possible that silks may
-again become heavy in reference to cottons, and a new decline take
-place in their relative value. If the French are obliged in
-consequence to offer 90 for 96, in order to obtain the cottons they
-want, their own profits will sink to 6%, while the same causes will
-lift the English profits to 35%. If, in any contingency, the French
-were driven by the state of the market to concede something near to 96
-in silks for 96 in cottons, the trade would cease in that case, just
-as every transaction ceases when the motive for it ceases. We must
-remember of course, that the cottons of England are just as likely to
-become slack in reference to silks, as the silks are relative to the
-cottons; and when this happens, the English dealers will have to lower
-their terms, and thus surrender a larger share of the profits to the
-French. By this ceaseless play of Supply and Demand, within the
-outermost limits drawn by the relative Cost of Production at the time,
-is the Value of commodities determined in Foreign Trade; and no degree
-of complication in the variety of articles, or in circuitous
-exchanges, affects, for substance, these fundamental principles.
-
-5. What are the causes deciding the exportable articles of any nation,
-and their order of precedence in Export? Watch a little at this point,
-and the true answer will loom up steady and certain. If, instead of
-one article, say cottons, England sends two or ten kinds of goods to
-France in payment for silks or wines or whatnot, she will of course
-send in preference that commodity in which her own commercial efforts
-are relatively most efficient, so long as the French demand will
-receive it, because her own profits will be the greatest on that;
-then, when obliged to lower terms on that down to the point of
-relative advantage at which her next available article stands, she
-will send that next in quantities regulated by the demand for that;
-and so on down to the end of the list of possible exportables to
-France. France is guided as to her exportables to England by precisely
-the same principles and prospects of profit. So of all commercial
-nations whatsoever. No matter whether the articles be one or many; no
-matter whether the trade be a direct or indirect trade; the profits in
-international commerce depend in all cases, first, upon the ratio of
-the cost of what is rendered to what would otherwise be the cost of
-what is received, secondly, upon the relative intensity of the two
-Demands.
-
-It follows logically and necessarily from all this, that what a nation
-purchases by its exports, it purchases by its own most efficient
-Production, and consequently at the cheapest possible rate to itself,
-and at the highest possible profit to its merchants. Under a decent
-freedom of international choice and action, of sale and delivery, only
-_those things_ are ever exported, for the procuring of which a nation
-possesses decided advantages relatively to other nations, and
-relatively to its own advantages in producing directly what is
-received in return; and hence, the return cargoes, no matter what they
-have cost their original producers, are purchased by this nation as
-cheaply as if they had been produced by its own most advantageously
-expended Effort. This is a wholly impregnable position; and the
-advocates of restricting and prohibiting Foreign Trade are challenged
-to try their hand a little or a good deal (as best suits them) at its
-bristling defences.
-
-It follows also from the discussion under this head, what shallow
-thinkers are they, who deem it needful that each nation should be able
-"_to compete_" with other nations in every branch of production. Why
-are they not consistent enough to apply their favorite catchword,
-"_compete_," to domestic exchanges also, and require that the
-clergyman shall have artificial and governmental facilities for
-"_competing_" with the lawyer, the tailor with the blacksmith, the
-farmer with the manufacturer, the publisher with the author? Will
-folks never learn that _all_ Exchanges, domestic as well as foreign,
-hang on relative superiority at different points, and that any Nation
-trying to make its success in production equal at all points would be
-just as stupid as an artisan trying to learn and practice all the
-trades at once? Suppose the said nation to succeed, what then? It
-would supply its wants at a certain low average efficiency of effort;
-whereas, by a thorough development of all its own peculiar resources,
-it could command by exchange the products of the whole world at a cost
-not exceeding that of its own most productive and efficient Exertion.
-The precious metals, whether produced at home or obtained from other
-nations by another series of exchanges, whether coined or in the form
-of bullion, stand here in the same relations as other commodities, and
-are frequently the most profitable articles that a nation can export.
-In one word, whatever justifies individuals in selecting diverse paths
-of production according to their capacities and opportunity, the same
-(and even more) justifies the Nations in fully drawing out their own
-best capabilities under the conditions in which God has placed them;
-and then, exchanging what costs them little for what would otherwise
-cost them much, in enjoying all that the world offers at the least
-possible expenditure of irksome effort. Such wise and wide action
-promotes the common good of all the nations, and makes the best of all
-accessible to all, and arms each with the power of all; while the
-narrow and senseless policy of drawing into one's own shell after
-putting up barricades against one's neighbors, by lessening everywhere
-the Diversities of relative Advantage, so far forth incapacitates all
-for profitable and progressive Exchanges.
-
-6. How do new improvements in machinery and other enhanced facilities
-of Production in one country affect its foreign trade? A cheering
-response will be drawn out, if we now apply this question to the
-conditions of our old trade in silks and cottons. Suppose France by
-new methods of silk culture to become able to make the silk which
-before cost $80 for $50, cottons in France and silk and cottons in
-England remaining in natural cost as before, does France alone gain
-the entire advantage of the increased cheapness of silk? Wait a
-minute, and we will see. The production of silk in France is greatly
-quickened by the cheaper methods, more is produced, more is carried to
-England to buy cottons with, but at the old rate of 80 for 96, the
-English will not take any more silks, and the French who can now
-abundantly afford it, since their nominal 80 is really 50, will offer
-more silks for 96 in cottons, in order to tempt a brisker and broader
-sale. They offer, say, 96 in silks for 96 in cottons, and if that
-reduction of Value of silks in cottons be enough for the equalization
-of the respective Demands, the trade will proceed on that basis, at
-least for a time; and as there is now a larger difference of relative
-advantage than before, there will be, as always in such cases, larger
-profits to be divided between the two parties. The 96 now in silks to
-the English is really only 60 in cost to the French, so that the
-French gain in the trade is largely increased; because they now get
-for what costs them 60 what would otherwise cost them 96, a clear gain
-of 60%. Before the new methods of silk culture were introduced they
-could gain but 20% at the utmost.
-
-But the English have also reaped largely from the ingenuity and
-diligence of their neighbors. Before, they gained only 20% in the
-exchange at best; but now they get for what cost them $100 that which
-would otherwise cost them $144, a handsome profit of 44%. Indeed, it
-might easily happen, through the incessant changes in International
-Demand, that even a larger share of the benefit of the French
-improvements should accrue to the English than to the French
-themselves; the share of the French all the while being large, and
-much larger, than if, greedily endeavoring to keep all the benefit,
-they should refuse to trade at all. Thus we reach again from another
-outlook, a grand and universal doctrine of Exchange, _that each party
-is benefited by the progress and prosperity of the other_. Indeed, the
-only possible way in which all nations can share in the thrift and
-enterprise and improvements of each other, is through mutual
-international exchanges; and when each nation sees to it that it have
-a few commodities at least for which there is a strong demand among
-foreigners, and in the production of which themselves have a strong
-superiority, it may rest assured that it buys all it buys from abroad,
-gold included, at the cheapest rate to itself, and shares a part of
-the prosperity of every nation with which it trades.
-
-7. Which party in foreign trade pays the Costs of Carriage, or do each
-pay them in equal proportion? It is plain, that the aggregate cost of
-transportation to the foreign markets is just so much added to the
-Cost of Production, and is a deduction of so much from what would
-otherwise be the whole gain of the Commerce; but it is plainly not
-true, that each party necessarily pays the whole of his own freights;
-and, therefore, that the party carrying bulky articles is at a
-disadvantage compared with the other. He may or may not be at a
-disadvantage on that account. That will depend on the effect of the
-new expense for freight, however divided, on the Demand in each
-country for the product of the other. We will suppose, that in the
-outset England pays the whole cost of carrying cottons to France, and
-France the whole cost of sending silks to England; but as cottons are
-many times more bulky than silks proportionably to value, a larger
-bill of freights would fall of course to England; and cottons would
-therefore fall in value relatively to silks; but cottons and silks
-have both risen absolutely, that is, with reference to any given
-effort, or with reference to a money standard.
-
-Suppose now that France, instead of 80 for 96, has to render 82 for
-96; and England, instead of 100 for 120, now has to give 105 for 120.
-The French gain in the trade is reduced from 20 to nearly 17%, and the
-English gain from 20 to nearly 14%; but it is by no means certain,
-that the commerce would go on precisely on these terms; the enhanced
-value of silks might well deaden the demand for them in England, more
-than the relatively less enhanced value of cottons in France would
-affect the demand for them. Silks have risen in England 5%, but
-cottons have risen in France only 2-1/2%; it is therefore very likely
-that thereafter the demand for cottons will be stronger than the
-demand for silks, and if so, the French will have to offer better
-terms, or, what is the same thing, to be obliged to pay a part of the
-English freights; so that there is nothing in the true state of the
-case to justify the conclusion jumped at by some people, that they
-who carry heavy goods are at a disadvantage compared with those who
-carry light goods. That will depend wholly upon the Equation of
-International Demand as between the two kinds of goods. Nothing in the
-nature of things hinders, that each party shall in effect pay the
-freights of the other, or one even really pay the freights of both.
-
-8. Lastly, what is the effect upon international commerce of the
-constant play of the Par of Foreign Exchange. This is a point of great
-importance, that has been but little discussed in this connection,
-because it has not been popularly understood or scarcely even
-popularly explained. In the light of the full unfolding of "Credits"
-in our Fourth Chapter, and in the light of these simple principles now
-under discussion, there will be no great difficulty to any intelligent
-reader in fully understanding this matter of Foreign Exchange,--a
-matter never before so vital to the commercial interests of the United
-States as now. For the sake of general illustration we will take the
-"Exchange" as between the United States and Great Britain, since the
-same fundamental principles apply as between all commercial countries.
-
-When merchants export goods, say from New York to London, or _vice
-versa_, they do not wait for their pay till the goods be actually
-marketed abroad, but draw at once Bills of Exchange to the amount of
-the home value of the goods on the parties to whom the goods are sent,
-and then put these bills on present sale with brokers or middlemen at
-home. There thus becomes a market or prices current in New York for
-commercial bills drawn on London, and similarly a market in London for
-bills drawn on New York. The New York exporter, accordingly, is not
-certain of getting in money the full face of his bill _minus_ interest
-for the time it has to run, because a great many such exporters may
-have thrown their similar bills upon the market the same day, which
-always tends so far forth to depress the price of the bills in
-accordance with an universal law of Economics. Scarce is ever costly:
-plenty is ever cheap.
-
-Who buys these bills when exposed for sale in New York? Who wants
-them? Clearly, only those who have commercial debts to pay in London.
-A bill of exchange drawn in New York on London is nothing but a debt
-due from somebody in London to anybody whom the drawer in New York
-chooses to make the payee. The debtor lives in London, and it is every
-way cheap and convenient for all parties, that he settle his debt with
-a creditor living in London. So it happens, that parties in London who
-have sold goods in New York and drawn bills on them for present
-payment, expose those bills for sale in London to the parties who have
-debts to pay in New York. If now, London or those whom London
-represents in these transactions, have sold but few goods to New York
-or to those whose business is settled in New York relatively to the
-amounts sold by New York to London, then London bills will be
-relatively scarce as compared with the New York bills drawn on London.
-In other words, New York has more debts to pay in London than London
-has in New York, and, consequently, the parties in London who want
-bills to pay New York debts with, have to buy them in a relatively
-scarce market. They have to _bid_ for them, as it were. The effect of
-this is always to carry up the price of that, for which the buyers are
-many and the sellers relatively few. So, under perfectly natural
-causes, London bills on New York come to a premium; that is to say,
-the London sellers get more than the face of their bills drawn, and
-the trade with New York becomes _extra_ profitable to them.
-
-Suppose London bills of Exchange on New York are selling for 101,
-thus giving 1% extra profit to English exporters; for precisely the
-same reasons that they are so selling, New York bills on London are
-selling in New York for 99, thus subtracting 1% from what would
-otherwise be the gains of the New York exporters to England under the
-common principles of Foreign Trade. It is evident, therefore, that the
-causes of the course of the international Par of Exchange are an
-essential part of the principles of foreign Commerce; and whatever
-tends to derange or upset the natural course of the Par, as a constant
-or constantly recurring cause, must receive careful attention in a
-book like the present. We have begun at the very beginning of this
-matter, and we are now going to follow it up to the very end.
-
-The Diversity of relative advantage in the Production of the two
-commodities exchanged, is the first and chief ground of mutual Profit
-in foreign trade; the varying Intensity of relative Desire on the part
-of each exchanger for the product of the other, is the second and
-secondary ground on which foreign trade must go on; and the third and
-final difference as between the two parties, which goes to make or mar
-the profit of each of them in the trade, is the current Price of the
-Bill of Exchange drawn by each creditor on his debtor abroad. It is
-plain that these three things must always be taken into account
-simultaneously by prudent exporters and importers, in order to
-estimate the prospect of a profitable trade then and there; and it is
-plain also, that one or even two of these three differences of
-relative advantage might fade out for a time, and a profitable trade
-still proceed, provided the other two or one of these differences were
-sufficiently pronounced. For example, to take an extreme case, silks
-from France might still go to England for cottons to the advantage of
-both countries for a time, though "exchange" were exactly at "par"
-between them and the "demand" for silks were precisely met by the
-"demand" for cottons, on the strength of a marked and persistent
-diversity in relative cost of production of the two textiles.
-
-Here is another of the trinities of Political Economy. Here is
-complication indeed, but a complication regulated and beautified by
-inflexible laws of Nature and the scarcely less inflexible laws of
-human Motives.
-
-So far the argument has proceeded on the supposition of a common
-standard of Value, say gold, between England and France, London and
-New York, and by implication all other commercial countries. Commerce
-rejoices in, and progresses by, a common measure of Values. By an
-experience of 2000 years the world has proven gold to be the best
-international Measure. From a simple comparison of the weights of pure
-metal in the standard coins of the nations is established a fixed
-monetary "par" as between them. Thus the dollar of the United States
-contains 23.22 grains of pure gold, and the English pound sterling
-contains 113.001 grains of the same; consequently, there are $4.8665
-to the £ sterling, and this is and has been since 1834 the monetary
-"par" between the United States and Great Britain. Similarly, the par
-between France and the United States is $1 to 5 fr. 18 centimes, since
-the franc is 19.29 cents gold for gold. The monetary par, accordingly,
-as between any two nations using the gold standard, is a matter easily
-ascertained and kept in mind; while the constantly variable prices
-current of Bills of Exchange are reckoned in and from this monetary
-par. Thus, if a commercial bill drawn in New York on London sells for
-$4.8665 _minus_ current interest for the time it has to run, English
-"exchange" with us is said to be at "par"; if it sell for more than
-that, exchange is technically said to be "_against_" us, although the
-excess in price is just so much additional profit to the American
-exporter; and if it sell for less than that, exchange is said to be in
-our "_favor_," although the difference is just so much subtracted from
-the gains of the American exporter.
-
-The close of the second week in July, 1890, found in New York
-"Sterling exchange dull but firm, with actual business at $4.84-3/4
-for 60-day bills and $4.89 for demand bills: the posted rates were
-$4.85-1/2 and $4.89-1/2 respectively." Exchange, accordingly, had
-turned "against" the United States, that is to say, American exporters
-could get a little more for their bills on London than the monetary
-par. Under such circumstances it may be cheaper to send the gold to
-liquidate a British debt than to buy bills and send _them_. Just this
-happened last week: $2,000,000 in gold went (mainly under this
-impulse) from New York to London. There is a limit, therefore, to any
-further rise in the price of "exchange," when it reaches in an upward
-direction the then present cost of sending gold to foreign creditors.
-The limit in the downward direction to the price of exchange is the
-last margin of profit to the exporter as such. Thus, when the New York
-exporter can only get, say, $4.83 for his sight bill of exchange on
-London, his loss in the trade so far forth is 1%; and it may be
-doubtful, whether his possible gains at the other two points, namely,
-relative cost of production and relative intensity of demand, will
-overbalance this certain loss and leave a sufficient margin of profit.
-
-This chance of profit or loss from casual turns in the commercial
-"exchanges" is a very small matter in foreign trade in comparison with
-the other two grounds of possible profit or loss. The main thing for
-every commercial nation to see to is, that it have at least a few (the
-more the better) commodities in general use throughout the world, _in
-the cost of the production of which it has a relative advantage over
-all competitors, and the demand for which by foreigners is relatively
-intense and constant_. And it will never come amiss for any nation
-with these two crucial advantages to keep a sharp watch over a class
-of its own citizens, lest they, shrewdly and greedily, for special
-reasons of their own, get laws passed the result of which can only be
-_to increase the costs of production of these few exportables, and at
-the same time lessen the foreign demand for them_. ETERNAL VIGILANCE
-IS THE PRICE OF LIBERTY OF COMMERCE.
-
-As a general rule for the last half century commercial "exchanges"
-have been "against" Great Britain, that is, her exporters have been
-able to get more than "par" for goods sent abroad in the price of the
-bills drawn on them, and her commerce has been _profitable_ to her so
-far as this cause is concerned; which during the same interval of time
-the "exchanges" have been "in favor" of the United States, that is,
-her exporters have been obliged to sell their bills drawn for less
-than "par," and her commerce so far forth has been _unprofitable_ to
-her. We may only briefly indicate here the causes of this state of
-things.
-
-(a) Great Britain has been during this period a vast loaner of Capital
-to other countries, and particularly to the United States; while the
-United States has been a vast borrower of Capital, particularly from
-Great Britain. The interest on these loans from Britain, and the
-principal also so far as it has been repaid, has been constantly
-remitted thither in goods for the most part, and bills of exchange
-drawn on these goods have been sold at all ports, and particularly at
-New York; the abundance of these bills has tended of course to lower
-their price at the place of sale, and so far forth to heighten in
-effect the relatively less abundant British bills drawn on exports
-thence; and the _creditor_ country for this reason is apt to sell its
-bills above "par," and the _debtor_ country its bills below par. It
-makes no difference at this point how the borrowed funds have been
-invested by the borrowing country, since the interest and the
-principal must be repaid at some time chiefly in the manner just
-indicated.
-
-(b) With the exception of a dozen or two articles customs-taxed for
-simple revenue, Great Britain in this period has kept her ports
-absolutely open to imports from all the world, and of course to all
-imports from the United States, which has tended to swell the volume
-of imports into that country, and the volume of foreign bills drawn on
-them, particularly of United States bills; while the United States
-during the same time has excluded imports by customs-taxes designed
-for that very purpose, to the number of over 4000, and in many cases
-to a height of tax involving prohibition of import. The Constitution
-of the United States expressly forbids customs-taxes upon exports, so
-that goods may indeed go out freely, so far as tariff-barriers are
-concerned; but as the only impulse that ever carries goods _out_ is to
-get _back_ more desirable goods in pay, and as these return-goods are
-greatly restricted or virtually prohibited by the United States, the
-Constitutionally-free exports are not large enough to help much in
-keeping down below "par" the price of bills of exchange drawn here. It
-should also be said that Great Britain is restrained in her exports to
-the United States by the latter's legal unwillingness to receive them,
-which tends of course to keep the price of bills drawn on the exports
-she can and does send still more above "par."
-
-(c) The enormous customs-taxes in the United States on ship-building
-materials and on almost everything else have practically destroyed the
-ocean merchant-marine of the country. The bulk of the Freights,
-therefore, on what foreign commerce there is left to us under the
-Chinese-wall policy of our Government,--the bulk of the freights both
-ways,--has to be paid to foreigners, mostly to the British, and these
-payments too are made in exportable goods, which wretched fact (looked
-at in its causes) increases exports hence relatively to imports
-hither, and of course diminishes _pro tanto_ the current price of
-mercantile bills drawn here. So far as these _extra_ exports to meet
-freight charges are carried to England, they tend to lift there in the
-usual way the price of bills drawn on British exports. It is a million
-pities, no matter from what point of view one looks at it, that the
-present governing classes of this country totally misapprehend the
-Nature of foreign trade, and by short-sighted legislation minimize its
-Benefits to the people.
-
-So far we have been unfolding the causes and courses of foreign
-exchange on the hypothesis, that both the nations exchanging employ
-the same standard in measuring Values. While the present paragraphs
-were in process of composition, the President of the United States
-signed (July 14, 1890) the so-called "Compromise Silver Bill," which
-is to go into operation after thirty days, and the effect of which in
-the judgment of some of the best economists and financiers of the
-country _may be_ to bring down the national measure of Values from the
-gold dollar to the silver dollar. We are bound at this point,
-therefore, to explain the action and reaction on the course of the
-"exchanges," of a monetary standard lower in general value than the
-standard prevailing in the commercial world. We have all the data
-needful for clearing up this matter completely, at once in the
-inflexible laws of Money and in the actual experience of several of
-the Nations. For example, England has the gold standard, and India the
-silver standard; there is an immense commerce between the two
-countries; silver is merchandise and not money in London, and gold is
-merchandise and not money in India; every cargo, accordingly, to and
-from either has to have its value "changed" through the price of
-current bills into the current money of the other country; the price
-of silver in gold in London (average) between 1852 and 1867 was 61-1/3
-pence per ounce; at 60 pence per ounce the ratio of gold to silver is
-1:15.716; between 1875 and 1882 silver drooped (with many
-fluctuations) in the London market, bearing about the average of
-52-1/3 pence per ounce, which is a ratio with gold of 1:18; during the
-first half of 1890 the price of silver in London was as nearly as
-possible 43 pence per ounce, which is a ratio with gold of 1:21.93; so
-that, the prices of India bills in London and of London bills in
-Bombay have yielded up to the careful observer all the secrets of the
-"exchanges" between high-standard and low-standard countries.
-
-But we have no need to go out of our own country for illustrations of
-all this. Between May, 1862, and January, 1879, the "Greenback Dollar"
-was the measure of current Values. It was depreciated every day of
-that interval as compared with the gold dollar, and it fluctuated in
-the comparison more or less nearly every business day. The New York
-importer bought his foreign goods for gold, paid the customs-taxes on
-them in gold, and then sold them against greenbacks. How much must he
-charge for his goods in order to make himself whole? The current
-premium in gold over greenbacks was posted every day, and perhaps
-every hour, but was that a safe guide to greenback prices for our
-importer? Wholesales are rarely for immediate realization in money,
-and even if they were, the money would have to be rechanged into gold
-in the future for repurchases abroad. In the uncertainty of greenback
-values, the importer must _insure himself_ in his prices to-day
-against a possible further depreciation next week, or next month. In
-other words, _he must speculate in the prospective gold premium_.
-Suppose his industrial cycle to be one month. If he sell his foreign
-goods in greenbacks to-day as these stand in comparison with gold, and
-greenbacks fall still lower before the month is out, he will lose
-money in those transactions; if greenbacks should rise in the
-interval, he would gain money, because he could get more gold for them
-in the next turn. To the credit of human nature be it said, that in 9
-cases out of 10 a merchant will raise the present prices of his goods
-in order to make himself as sure as possible in a case where all is
-uncertain. There can be no reasonable doubt that in the fifteen years
-of depreciated greenback units, retail prices to ultimate consumers
-were lifted 10% above the average reckoning of goods in greenbacks
-from this cause alone.
-
-In regard to exports at that time the facts and principles are still
-clearer. These exports were sold in Europe for gold. But the bills of
-exchange drawn on them were sold in New York for greenbacks. Take
-wheat, for example, of which there was a large export in all those
-years. The New York broker or banker in buying these bills was obliged
-to make the conversion from greenbacks to gold. He had to estimate as
-well as he could what the value of greenbacks would be when the
-gold-bill became payable in London. In other words, he had to
-speculate in greenbacks, because he had to take the risk of their
-declining or advancing value for an interval of time, say, one month.
-He would not take this risk without virtually making a charge
-sufficient in his judgment to cover it, and leave him a good profit in
-any case. This charge came out of the price of the wheat ultimately
-paid to the growers thereof. The bill of exchange was sold in New York
-or Chicago in order to get present pay for the farmers who furnished
-the wheat, and present profit for the commission-merchants or
-middlemen. But the bill brought less greenbacks than the quoted
-premium on gold would warrant for that day, on account of the risk,
-the uncertainty, the speculation. Therefore, less went to the farmers
-for their wheat per bushel or centner. _The masses of the people lose
-the immense losses of that depreciated money._ And during these very
-years also the Government put customs-taxes to a then unheard-of
-height on imports from abroad, not primarily for the sake of the
-revenue to come from the taxes, but chiefly with a view to keep
-certain foreign goods out of the country altogether, in order that
-_some_ citizens might be able to sell their own product _to the rest_
-at artificially enhanced prices. Thus the natural market abroad for
-wheat and pork and petroleum and other provisions was enormously
-lessened by the prohibition of imports,--a market for products is
-products in market,--at the same moment when the actual prices for
-products exported were still further diminished by the action of
-depreciated money on the par of commercial exchange.
-
-Our neighboring Republic of Mexico has had for a long time the
-so-called bi-metallic standard of Money, the same as the United States
-have had.[9] When the great fall of silver in gold took place in the
-London market as indicated above, gold was rapidly exported from
-Mexico, and soon disappeared from circulation, in accordance with
-Gresham's Law. For many years now the simple silver standard has
-prevailed in Mexico. Its entire working in foreign trade through the
-"exchanges" has been sufficiently demonstrated; and as there is more
-than a possibility, more even than a bare probability, that the United
-States under the law of 1890, and other and earlier extremely
-complicated laws of Money, may drop from bi-metallism to silver
-monometallism in the near future, in the way of premonition and
-warning to our own people we may fitly close our discussion of foreign
-"Exchanges" by briefly stating what of hazard and disaster under the
-silver standard is now going forward among our neighbors to the
-southward.
-
-The effect of estimating Mexican transactions in silver money, while
-all the nations with which they trade estimate theirs in gold, is seen
-in an artificial enhancement of prices to the Mexicans on all their
-imports, and an artificial depression of prices to them on their
-exports. Look first at imports. There is of course a current discount
-on Mexican silver as compared with the gold in which the imported
-goods are bought. This discount is now over 20% throughout the
-commercial world, the London price of silver in gold giving the key to
-that song. But this is not all by any means; the discount is variable
-from day to day and from month to month; in changing his gold prices
-present into silver prices future, the Mexican importers must insure
-themselves. This necessitates a speculation in the future of silver.
-What the risk may be will depend somewhat on the activity of the
-silver market: if silver be rapidly fluctuating in price, the importer
-will add more to his silver prices additional to the current premium
-on gold, than if silver be comparatively stable; but in all cases he
-will add enough to cover all prospective risks. It is quite likely
-that five _per centum_ is added on the average to wholesale prices by
-Mexican importers on this ground alone, which addition with all the
-usual increments must be borne by retail and ultimate prices.
-
-Now look at Mexican exports. The larger part in value of these exports
-is silver in some form, mostly in the form of silver dollars. But
-these silver dollars are merchandise in London, and quite variable in
-price there, as has already been shown; and bills of exchange drawn on
-this silver in any form, and sold in Mexico to parties remitting gold
-values to London, are subject to constant depression on account of the
-uncertainty as to the value of silver in gold when the bills reach
-London. It follows from this, that the use of the silver standard in
-Mexico actually depresses the value of silver there. By means of the
-"exchanges" both ways, silver tends to be still further depreciated in
-comparison with gold, retail prices of all importables enhanced in
-silver, and the chief exportable (silver) depressed in value all the
-while! Truly, the Mexicans are between the upper and nether
-millstones. Poor Money never pays.
-
-In confirmation of this fact that Mexico has not lifted the relative
-value of silver by making it the sole Measure of Value, we have the
-corresponding fact that the herculean efforts of the United States
-since 1878 to advance the value of silver to a parity with that of
-gold in the legal ratio of 1:15.98, have issued in the constant
-relative decline of silver here; and, what is more surprising, in an
-almost constant increase of the yearly production of silver here. The
-following table tells the whole instructive story: the figures are
-official: commercial "fine ounces" are .915 of technically "fine"
-silver.
-
-  +------+--------------+-------++------+--------------+-------+
-  | Year.|  Production  |Average|| Year.|  Production  |Average|
-  |      |(fine ounces).|Price. ||      |(fine ounces).|Price. |
-  +------+--------------+-------++------+--------------+-------+
-  | 1878 |  34,960,000  | $1.15 || 1884 |  37,800,000  | $1.11 |
-  | 1879 |  31,550,000  |  1.12 || 1885 |  39,910,000  |  1.06 |
-  | 1880 |  30,320,000  |  1.14 || 1886 |  39,440,000  |   .99 |
-  | 1881 |  33,260,000  |  1.13 || 1887 |  41,260,000  |   .97 |
-  | 1882 |  36,200,000  |  1.13 || 1888 |  45,780,000  |   .93 |
-  | 1883 |  35,730,000  |  1.11 ||      |              |       |
-  +------+--------------+-------++------+--------------+-------+
-
-These Seven, then, are the essential Principles of Foreign Trade,
-brought out, it is hoped, as clearly and consecutively as the relative
-and complicated nature of the transactions will allow; in the light
-of these Principles it is very clear, that Foreign Trade is just as
-legitimate as, and may be more profitable than, Domestic Trade; that
-it rests on the same ultimate and unchangeable grounds in the
-constitution of Man, and in the Providential arrangements of Nature;
-that the Profit of it is mutual to both parties, or it would never
-come into being, or, coming into being, would cease of itself; that to
-prohibit it, or restrict it, otherwise than in the interest of Morals,
-Health, or Revenue, must find its justification, if any at all, wholly
-outside the pale of Political Economy; and that for any Government to
-say to its citizens (of whom Government itself is only a Committee),
-who may wish to render commercial services to foreigners in order to
-receive back similar services in return, that such services shall
-neither be rendered nor received, is not only to destroy a Gain to
-both parties, but also to interfere losingly with a natural and
-inalienable Right belonging to both.
-
-If the reader pleases, we will turn now, in the second place, to the
-METHODS AND MOTIVES IN VOGUE TO RESTRICT AND PROHIBIT FOREIGN TRADE.
-The instrument for this purpose is called a _Tariff_. The origin of
-the word Tariff, its nature and kinds, will throw much light upon what
-has been a vexed question, but is one easily solvable, and indeed long
-ago resolved.
-
-1. Origin.--When the Moors from Africa conquered Spain in the year of
-our Lord 711, they fortified the southernmost point of the peninsula
-where it juts down into the Straits of Gibraltar, and by means of
-their castle and town, called in their Barbary language _Tarifa_,
-compelled all vessels passing through the Straits to stop and to pay
-to these Moorish lords of the castle a certain part (determined by
-themselves) of the value of the cargoes. This payment appears to have
-been blackmail pure and simple; it was certainly extorted by force;
-and whether there were any pretence of a return-service in the form of
-promised exemption from further pillage or not, that made no real
-difference in the nature of the transaction. Eleven centuries later,
-the United States demonstrated what they thought about similar
-extortions on American commerce practised in the same waters by the
-descendants of these same Moors, by despatching Commodore Decatur with
-a strong fleet to Algiers and Tunis and Tripoli; to which piratical
-states they had already paid in twenty-five years two millions of
-dollars in "tribute" or "presents" for exemptions of their
-Mediterranean commerce from plunder; who captured the pirate ships and
-compelled the terrified Dey of Algiers (and the rest) to renounce all
-claim thereafter to American "tribute" or "presents" of any kind. The
-word _Tarifa_, accordingly, in English and other modern languages, a
-word which seems to be very dear to some men's hearts, does not appear
-to have had a very respectable origin, though that is not sufficient
-of itself to condemn the thing described by the word. That will depend
-upon its nature and purposes.
-
-2. Its nature.--There never was one particle of doubt on the part of
-those compelled to pay the Moorish demands at Tarifa, or on the part
-of the United States compelled to pay "tribute" to the Algerines for a
-quarter of a century, about the _nature_ of the transaction. The sign
-at Tarifa was _minus_, and not _plus_. To the credit of those pirates
-let it be said, that they never pretended to take what they took for
-the _benefit_ of those from whom they took it. They took it for their
-own benefit. The action was abominable, but it was aboveboard. There
-was no deceit and no pretence about it. Both parties knew perfectly
-what was going on. What was delivered was just so much _out_ from what
-would otherwise have been the _gains_ of the voyage. And the truth
-is, the thing, tariff, is always true to the origin of the word,
-tariff, so far as this, that a tariff always _takes_, and never
-_gives_. The only phrase a tariff speaks, or can speak, is, _Thou
-shalt pay_! There is lying open on the table of the writer at this
-moment a stout volume of 417 pages, printed, with nearly as many more
-interleaved, entitled Tariff Compilation, published by the United
-States Senate in 1884, containing every item of all the tariffs passed
-by Congress from 1789 to the present time. One may read this volume
-from beginning to the end, or he may read it from the end backwards to
-the beginning, or he may begin in the middle and read both ways, and
-all he will find between the covers is a series of _Demands_ made upon
-somebody to _pay_ something. These demands, of course, are made upon,
-and realized from, the citizens of the United States, who are the only
-people under the authority and jurisdiction of the Congress. A tariff,
-then, may be correctly defined as _a body of takings or taxings levied
-upon the people of any country by their own government on their
-exchanges with foreigners_. How anybody can intelligently suppose that
-a body of _taxes_, which their own countrymen will have _to pay_, can
-be so cunningly adjusted as to become to them a positively productive
-agent, a blessing and enrichment to the payers, a spur to the progress
-of their Society, _they_ may be properly called upon to explain who
-pretend to believe such an absurdity in the nature of things.
-
-3. Its kinds.--There are two kinds of Tariffs under our general
-definition, very diverse from each other in their respective purposes,
-principles, incidence, and results.
-
-(1) There is a tariff for Revenue. The sole purpose of a revenue
-tariff as such is to get money by this mode of indirect taxation out
-of the pockets of the People for the coffers of the Government, in
-order to be then expended, governmentally, for the general benefit of
-those who have paid the money in for that single end. The underlying
-thought of this kind of tariff, a tariff for revenue only, is, that
-the Government itself shall get all the money which the people are
-obliged to pay under these taxes, except the bare cost of collecting
-them; that only _such_ taxes shall be levied at all as will come
-bodily and readily into the general Treasury for public uses; and no
-intelligent and justice-loving people will long tolerate tariff-taxes
-laid with any other intent than the economical support of their
-government, or laid in any other way than shall bring into the
-Treasury all that is taken out of the People. A Revenue Tariff,
-therefore, may be properly defined as _a schedule of taxes levied on
-certain imported goods with an eye only to just and general taxation_.
-
-There are three vital principles on which a revenue tariff as such
-must always be levied. (a) As the sole object is to get money for the
-national treasury, and as money can only be gotten as the foreign
-goods taxed are allowed _to come in_, such taxes must be levied at _a
-low rate_ on each article taxed, so as not to interfere essentially
-with the bringing in of that class of goods with a profit to the
-importers, and not at all to encourage the smuggling of them in. (b) A
-varied experience of all the commercial nations has shown, that it is
-not needful in order to derive a large and growing revenue to lay even
-low rates on _all_ goods imported, but only on certain classes of
-them, so as to burden at as few points as possible the successful
-ongoing of international exchanges; since the prosperity ever induced
-by commercial freedom enables a country to import and to pay for in
-its own quickened products vast quantities of the articles subjected
-to the tax, so that large revenues come from low rates levied at few
-points. Here we lay bare the ground of a great income in the
-exemption of the bulk of imports from any tax at all. (c) Custom-taxes
-should be laid wholly or at least mainly on articles procured from
-abroad, and not also produced at home; for otherwise the incidence of
-the tax on the portion imported will necessarily raise the price also
-of that portion made or grown at home; and thus the people will pay
-_more_ money in consequence of the tax than the Government _gets_ from
-the tax in revenue. Three points, then, in a revenue tariff, namely,
-_low duties on few articles, and these wholly foreign_.
-
-The best modern example of a purely revenue tariff is that of Great
-Britain since 1860. All duties are on one or other of the following
-sixteen items, namely, Beer, Cards, Chiccory, Chocolate, Cocoa,
-Coffee, Fruit, Malt, Pickles, Plate, Spirits, Spruce, Tea, Tobacco,
-Vinegar, and Wine. Of these, Spruce yielded no revenue in 1880; Cards,
-Malt, Pickles, and Vinegar, yielded in the aggregate that year only
-£1.491; leaving the other eleven items to furnish practically all the
-customs revenue; but of these Coffee and its three substitutes with
-Beer and Plate, furnished only £337.258, so that, the remaining five
-articles yielded £18.915.489, or 98% of the whole income in 1880. In
-other words, Fruit, Spirits, Tea, Tobacco, and Wine, brought in all
-but 2% of the customs-taxes of Great Britain in 1880. In 1890, the
-duties on certain Wines and Spirits having been lifted, there was a
-large surplus of revenue over the Estimates, which has just been
-devoted to the enlargement of the Navy. Every other European
-commercial country had a deficit that year as compared with its
-Estimates of the year preceding. The figures are not now at hand for
-an exact statement, but there can be little reasonable doubt that the
-"Five Articles" rendered at least 98-1/2% of the tariff-taxes of
-England last year. If there be also some domestic production of any
-article taxed by the British tariff, a corresponding excise-tax on
-that part produced at home, which part would otherwise be raised in
-price by the tariff-tax to no advantage of the Revenue, enables that
-Government to get easily all that the people are made to pay in
-consequence of the tariff-tax on the imported part.
-
-(2) There is a tariff under Protectionism so-called. The ruling aim in
-this second kind of tariff is not at all to obtain income for
-Government in order to promote the general good, but on the contrary
-by means of heavy taxes on _foreign_ articles to raise the prices of
-corresponding _domestic_ ones for the exclusive benefit of a few
-producers of these home goods at the expense of all home buyers of
-them. If these special tariff-taxes be so high and complicated as to
-keep out altogether the foreign articles, and so the Treasury realize
-nothing at all from the taxes on them, so much the more
-"protectionist" do they become, and so much the better pleased are the
-special domestic producers with the entire monopoly of the home market
-at their own prices. Such taxes are prohibitory and protectionist at
-the same time. Prohibition is the perfection of Protectionism. A
-Protectionist Tariff, accordingly, may be justly defined as _a body of
-taxes laid on specified imported goods with a single eye to raise
-thereby the prices of certain home commodities_.
-
-The vital points of a protectionist tariff are also three, but these
-are the exact opposites and antipodes of the three points of a revenue
-tariff, so that it is self-contradictory and impossible to combine in
-one tariff-bill the two sets of contrary elements. A revenue tariff
-with incidental protectionism is a solecism. (a) If a tariff-rate is
-to be protectionist in character, that is, competent to raise the
-price of home products, it must be _high_, so as either to exclude
-altogether the corresponding foreign products, in which case there is
-no revenue at all, or else to make their price by means of the duty
-added reach the point at which the home producers plan to sell their
-own, in which case there will be very little revenue. For instance,
-when the Bessemer steel companies asked in 1870 for two cents a pound
-tariff-tax on foreign steel rails, they called it in terms in their
-"confidential" statement to the Ways and Means "_exceptional
-protection_," and admitted in so many words that they expected to
-supply the home market entirely, and so the Government would get
-_nothing_ in revenue and the people be compelled to pay $44.80 _extra_
-for their home steel rails per ton. It is a little bit of comfort to
-think, that they only obtained $28 per ton, or 1-1/4 cents per pound,
-which was not quite prohibitory, so that the Government got a little
-revenue on steel rails, and the people paid for some years only about
-_double_ for their rails what they were worth in a free market! To
-reach its end a protectionist tariff-tax must be _high_ of necessity.
-
-(b) No system of protectionist tariff-taxes can be entered upon or
-continued in any country except by means of many persons who all alike
-want their special products artificially lifted in price by
-legislation, and who are obliged _to combine_ in order to get and keep
-what they want, so that protectionist taxes on a few things only were
-rarely or never found in a tariff; so contrary are such taxes to the
-common sense and common interests of man, that only strong
-combinations of many special interests can begin or maintain them,
-whence there must be _many_ taxes if any under this strongly selfish
-scheme; and by an actual count of them by the writer in 1868 there
-were found to be 2317 distinct rates of tax assessed on different
-foreign articles in the Tariff of the United States, which was
-strikingly in contrast with the Revenue Tariff of Britain in point of
-the number of things taxed. So needful is log-rolling to the
-maintenance of protectionism, that the passage of the "knit-goods
-bill" in the summer of 1882, for example, was contingent on the
-contemporaneous passage of the famous "River and Harbor bill" of that
-year.
-
-(c) While Revenue Taxes select by preference things wholly imported,
-Protectionist Taxes are placed of course on such foreign goods as are
-also and especially made or grown at home, otherwise their plain and
-sole purpose would be thwarted, which completes the contrast between
-the two kinds of tariffs. For illustration, Tea and Coffee are the
-best things possible to tax in a tariff for revenue, because (1) they
-are in universal consumption, and (2) they are wholly imported, and
-taxes upon them do not raise the price of anything else, and so the
-Government gets all that the people pay under them; for this very
-reason the taxes upon Tea and Coffee, which had yielded for years some
-$20,000,000 of revenue yearly, were thrown off in 1872 under
-protectionist leadership, by the deceptive cry of "_a free breakfast
-table_," in the subtle interest of commercial bondage; seeking to give
-the impression on the one hand that everything on the breakfast table
-was to be free, whereas nothing on it or around was to be free except
-the two beverages mentioned, and on the other hand that the removal of
-these two taxes was a great boon to the people, whereas the motive for
-the removal of these was _to continue_ on the people burdens tenfold
-heavier. Eighteen years have rolled away since then, and Tea and
-Coffee are still upon the free list; the incompatibility of the two
-kinds of tariff-taxes is demonstrated in the fact, that there has not
-been for years a single tax primarily for revenue in the United States
-tariff,[10] the opposite protectionist idea having logically wrought
-itself out there; and the same incompatibility is shown in the
-British tariff, in which there has been no protectionist tax since
-1860. Each aim logically carried out completely excludes the other
-aim.
-
-The best and worst specimen of a protectionist tariff that the world
-has ever seen, has been in operation in the United States for thirty
-years, 1861-1890. Its inner history is not yet fully known by the
-public, but enough is known to expose the motives and to condemn the
-action of all those, whether constituents or congressmen, who knowing
-what they were doing, contributed to build up gradually that mass of
-incongruities and iniquities, under which the entire agricultural
-class of the country (nearly one-half of the people) has become
-impoverished, by much the larger part of the farming lands of the
-Union covered by heavy mortgages, and the ocean-marine of a naturally
-nautical people almost totally destroyed. Attempts more or less
-successful have been made at various times and at different points to
-conceal from the Public the impulses really behind the provisions of
-this tariff, and even the amount and the mode of the incidence of its
-taxes; many of the most protectionist taxes have been complex,
-combining upon the same article _specific_ and _advalorem_ rates, as
-for instance, upon blankets "_50 cents per pound and 35% advalorem_,"
-so that it was difficult or rather impossible for the common reader or
-buyer to ascertain how much the tariff-tax really was; much of the
-language of the tariff-bills has been to the last degree involved and
-uncertain, often leading to perplexing disputes and costly litigations,
-and sometimes covering up a half-hidden purpose; importers have been
-bribed, as it were, in cases of doubtful legality, to pay the maximum
-rates demanded, by the prospect and promise that the extra sums if
-ultimately found by the courts illegal should be repaid bodily _to
-them_ and not to the people who in the mean time had bought and paid
-for the goods thus enormously enhanced in price, and millions of the
-people's money have gone back in that way to importers and to spies and
-informers; a careless wording in tariff-descriptions has again and
-again covered goods not designed to be touched, as the lastings and
-rubber webbings of the shoemakers to the consternation of that great
-interest, which asked for no protectionist privilege for itself, but
-wanted its raw materials at their natural price; and the iron industry
-of Pennsylvania was bitterly angry at Secretary Sherman, who construed
-a line of the tariff relating to cotton ties used at the South more
-favorably to the planters than to the iron-workers, although the latter
-were strongly privileged at every point of the tariff (even at this) in
-the teeth of the interests of the consumers of iron, and the later
-honorable ambition of the Secretary to become a candidate for the
-Presidency of the United States was largely thwarted in consequence by
-the hostility of these miserable and revengeful monopolists.
-
-There were fifty descriptions of iron and steel taxed by the tariff in
-1879, and the average rate of tax on these at that time was 77%
-_advalorem_, and this was about the average rate for the thirty years
-under the consideration. On special articles of prime necessity and
-universal consumption, as steel rails, the tax varied under the rate
-of $28 per ton put on in 1870 from 85% to 100% _advalorem_; and the
-purpose of this particular tax was plainly seen in an average price of
-domestic steel rails in this country $24.44 a ton higher than in
-England for better rails under a longer guarantee for the eleven
-years, 1870-80; in other words, 87% of the tax paid on the smaller and
-better part imported was added to the average price of the larger and
-worser part produced at home during those eleven years. That the
-English rails were better and even regarded as cheaper under their
-guarantee with the $28 a ton added to their price, is proven by the
-fact that the N. Y. Central railroad company relaid their tracks with
-the English rails, and were putting them down in Detroit in plain
-sight of simultaneous track-laying across the river in Canada, where
-the same kind of English rails were costing $28 a ton less. Every
-passenger and ton of freight carried by steel-track roads in the
-United States in this interval contributed his and its share to make
-up to the roads this _extra_ price paid for steel rails. In 1883 the
-tariff-tax on steel rails was reduced to $17 per ton. That this
-enormous artificial price of iron and steel products under
-tariff-taxes redounded wholly to the profit of the capitalists
-concerned, and not at all to the benefit of the laborers concerned, is
-shown by the Census of 1880, which gives $393 as the average pay for
-that year of the persons employed in the iron and steel industries of
-the country; and the late Senator Beck of Kentucky demonstrated on the
-floor of the Senate, _nemine contradicente_, that only 8.8% of the
-value of the products of the Bessemer steel industry in 1881 went to
-the laborers employed in it, while 66.9% of the same went to the
-capitalists as profits. Let the thoughtful reader remember at this
-point, that iron and steel products are only one of an indefinite
-number coddled and privileged by the tariff at the expense of the
-masses of consumers.
-
-It is impossible to tell exactly _how much_ more the people of the
-United States were compelled to pay for their commodities under
-tariff-taxes, whose ground-thought was to compel them to pay more and
-the more the better, than the Treasury received as the direct product
-of these taxes during 1861-90, but an approximation can be made within
-the truth whose results are fitted to startle the minds of all good
-citizens. For convenience' sake only, and because the official
-figures are complete for the shorter period, let us take for
-comparison the twenty years, 1863-82. The annual average tariff-income
-for those 20 years was in round numbers $158,000,000; but the
-ground-thought of the tariff-scheme in all those years was not to get
-an income for Government, but factitious prices for capitalists
-privileged by law; and during the last half of the time there were no
-tariff-taxes on Tea and Coffee, which had been before the principal
-revenue taxes. If, now, we may fairly suppose, that for each _one_
-foreign article paying a tax into the Treasury there were _four_
-domestic articles raised each in price as much as the foreign article
-paid in customs-tax, then it follows, that the People paid in each of
-those 20 years under customs chiefly protectionist, $632,000,000, or
-$12,640,000,000 in all, no penny of which went into the Treasury of
-the United States. That this supposition of 4:1 is wholly reasonable,
-appears partly from the known proportion (officially reported) between
-Domestic and Imported as to several leading articles, for example, of
-steel rails in 1880 the Domestic was 20 times the Imported, and the
-People paid 19 times more under the tax than the Treasury got; and on
-woollen blankets in 1881 the Treasury took in less than $2000, while
-the People paid in the _extra_ price of blankets more than 1000 times
-that sum that year; and on iron and steel goods of all kinds the
-average tariff-taxes were about 77% in that interval of time and the
-vast bulk of the iron and steel goods consumed was boasted to be of
-domestic production.
-
-Let us confirm these striking results by another more than reasonable
-supposition taken from the opposite quarter. The census of 1870 gave
-$4,232,000,000 as the value of home manufactures for that year, which
-we may fairly take as the average of the 20 years under consideration;
-now, if we throw off one-third of those home products as not affected
-by the tariff at all, and reckon that the rest were only raised in
-price 22%, which was only one-half of the average rate of tax on
-dutiable goods,--the average rate on these was officially pronounced
-in 1880 at 44%,--then almost precisely the same results will follow as
-before: two-thirds of $4,232,000,000 is $2,880,000,000, and 22% on
-that sum is $633,600,000. An acknowledged statistical expert of
-national reputation, Mr. J. S. Moore, calculated from data quite
-diverse from our own, that the People paid $1,000,000,000 in the one
-year, 1882, _extra_ to the sum reaching the Treasury that year, under
-protectionist tariff-taxes. We see, then, clearly the _methods_, by
-which Protectionism reaches its ends, and we cannot but conclude, that
-these methods issue in monstrously unjust burdens on the masses of the
-People.
-
-It remains, under this second general head, to examine the _motives_
-of those men, who have gotten the protectionist tariff-taxes put upon
-the different classes of imported goods in this country. Fortunately
-we have data of unquestionable authority, covering the entire first
-century of our national existence, which prove these two propositions:
-first, _that no protectionist tax has ever been_ PUT ON _by our
-Congress from the first day until this day except at the instance and
-under the pressure of the very men personally and pecuniarily
-interested to secure thereby an artificial rise of price for their own
-domestic wares_; and second, _that these very men have been almost, if
-not quite, as active and determined_ TO KEEP OFF _protectionist taxes
-on other goods used by them in their processes of production, whether
-raw material, machinery, or accessories_. These two propositions,
-taken together, demonstrate beyond a cavil the motives of the
-protectionists as a class. Of course, they have had their dupes and
-tools. Out of their own mouths and out of their own actions are they
-to be judged. One hundred years is long enough of time in order to
-display perfectly the motives of a prominent and persistent class of
-men, under that Government of the world, whose key-note is Exposure,
-and under that maxim of the world, Actions speak louder than words.
-
-Thomas H. Benton, a United States Senator from Missouri for 30 years,
-1820-50, himself in all that time a prominent leader and debater, and
-always an indefatigable investigator, published an _Abridgment of the
-Debates in Congress from 1789 to 1856_ in 15 large volumes. Each
-important tariff Debate for the first 70 years of our national history
-is distinctly brought out in these volumes, and the impulses and
-motives behind each leading speaker may be discerned as clear as day.
-The present writer has been over these debates with great care, and
-has mastered them in their substance and motives on both sides; and he
-has been besides a deeply interested reader and excerptor of all
-Congressional tariff-debates for more than 30 years just past; and now
-invites his present readers to take a cursory glance over this broad
-field, and satisfy themselves as to the motives personal and associate
-of the protectionist debaters from the first to the present time.
-
-Because the new Constitution prescribed that "_all bills for raising
-revenue shall originate in the House of Representatives_," the main
-debates on the first tariff-act of 1789 were in that branch of the
-national Legislature. Nothing could be simpler or sounder than the
-basis of the new tariff as proposed by Madison, the acknowledged
-leader in the debates, namely, the so-called Revenue System of 1783,
-as adopted by the old Congress, and ratified by all the States in
-succession, excepting New York. That was, small specific taxes on
-eight articles, namely, Wines, Spirits, Tea, Coffee, Cocoa, Molasses,
-Sugar, and Pepper. In the earlier part of the discussion no other end
-than revenue was mentioned in connection with the taxes. Madison
-said: "_I own myself the friend of a very free system of commerce: if
-industry and labor are left to take their own course they will
-generally be directed to those objects which are most productive, and
-that in a manner more certain and direct than the wisdom of the most
-enlightened legislature could point out; nor do I believe that the
-national interest is more promoted by such legislative directions than
-the interests of the individuals concerned._" It is significant of
-after times that the first word in this debate respecting any other
-word than revenue through the tariff-taxes came from Pennsylvania; and
-equally significant, that the next and strongest words for something
-else than revenue came from Massachusetts; and more significant than
-either was the junction of the two States in influence and votes when
-it came to the final adjustment of the actual tariff-rates.
-Pennsylvania had already gotten well forward in the manufacture of
-iron and steel products, particularly of nails, and wanted
-"_encouragement_," that is, protectionist taxes upon the foreign
-products corresponding. Said Hartley of Pennsylvania: "_I am therefore
-sorry that gentlemen seem to fix their mind to so early a period as
-1783; for we very well know our circumstances are much changed since
-that time: we had then but few manufactures among us, and the vast
-quantities of goods that flowed in upon us from Europe at the
-conclusion of the war rendered those few almost useless; since then we
-have been forced by necessity, and various other causes, to increase
-our domestic manufactures to such a degree as to be able to furnish
-some in sufficient quantity to answer the consumption of the whole
-Union, while others are daily growing into importance. Our stock of
-materials is, in many instances, equal to the greatest demand, and our
-artisans sufficient to work them up even for exportation. In these
-cases, I take it to be the policy of every enlightened nation to give
-their manufactures that degree of encouragement necessary to perfect
-them, without oppressing other parts of the community._"
-
-Massachusetts was not a whit behind Pennsylvania in asking for
-discriminations in her own favor at the obvious expense of the rest of
-the country. New England rum was made out of molasses, and Jamaica rum
-was its competitor in public favor; distillers in the neighborhood of
-Boston and Salem wanted therefore a _high tax_ on Jamaica rum, and a
-_low one_ on the imported molasses used in the home manufacture.
-Madison was willing to discourage rum-making and rum-selling both in
-the interest of temperance, and proposed a tax of eight cents a gallon
-on molasses and fifteen cents on Jamaica rum, which called out this
-indignant burst from Goodhue of Massachusetts: "_Molasses is a raw
-material, essentially requisite for the well-being of a very extensive
-and valuable manufacture. It ought likewise to be considered a
-necessary of life. In the Eastern States it enters into the diet of
-the poorer classes of people, who are, from the decay of trade and
-other adventitious circumstances, totally unable to bear such a weight
-as a tax of eight cents would be upon them. I cannot consent to allow
-more than two cents. Massachusetts imports from 30,000 to 40,000
-hogsheads annually, more than all the other States together. Fifteen
-cents, the sum laid on Jamaica spirits, is about one-third part of its
-value: now eight cents on molasses is considerably more: the former is
-an article of luxury, therefore that duty may not be improper; but the
-latter cannot be said to partake of that quality in the substance, and
-when manufactured into rum is no more a luxury than Jamaica spirits._"
-
-The Senate in the First Congress sat with closed doors, and was thus
-more open than the House to the influence of interested petitions
-which soon began to pour in upon it, asking for amendments to the
-House bill in the line of protectionism; and through such amendments
-the Massachusetts and Pennsylvania members, with a few other members
-similarly inclined, partially carried their points into the first
-Tariff. The tax on molasses was fixed at 2-1/2 cents a gallon, and on
-Jamaica rum at ten cents a gallon; nails were taxed one cent per pound
-imported; and an accepted Senate amendment classed Hemp and Cotton
-together as two products of the soil worth "encouraging," hemp at 3/5
-of a cent per pound and cotton at three cents a pound; yet hemp
-constantly "encouraged" to this day at the cost of ship building and
-other industries has never risen to the rank of a staple. Coal was
-also taxed protectionistly, at the instance of Virginia, then the
-coal-producing State. Note the three universal features of
-Protectionism in the original application of it to the United States;
-(1) the purely selfish call to tax one's neighbor in order to lift the
-price of one's own wares (nails), (2) the equally selfish resistance
-to such a tax as falls on one's raw materials (molasses), and (3) the
-final log-rolling among those legally privileged at different points
-(Massachusetts and Pennsylvania and Virginia).
-
-Take a second instance of the same general point from our second
-Tariff, passed in 1816. Two Massachusetts young men, Lowell and
-Jackson, brothers-in-law, had started a modern cotton-mill in Waltham,
-near Boston, in 1813, and constructed in it, with the help of an
-ingenious mechanic named Moody, a power-loom; as soon as the war with
-England was over, and Congress in consequence began to talk about a
-new Tariff, Lowell went to Washington, and by personal influence with
-Mr. Calhoun, then the leading man in the House, with Mr. Lowndes his
-colleague from South Carolina, who afterwards reported the new bill,
-and with other members of Congress, contributed largely to the
-introduction into this Tariff of protectionist features towards
-_cottons_. Lowell struck strong at the start. He represented
-(doubtless with entire honesty) to Calhoun and Lowndes, both from a
-cotton-planting State, that a domestic market for raw cotton _in
-addition_ to the foreign market would raise the price of that
-agricultural staple. Both were easily convinced that such would be the
-case, although both found ample reasons afterwards for altering their
-opinion in that regard. Lowell, the "cotton city" on the Merrimack,
-founded in 1821, was named from the successful lobbyist of 1816.
-Lowndes reported a tax on cottons of 33-1/3% _advalorem_, with a
-proviso _that all cottons should be assumed at the custom-house to
-have cost at least 25 cents to the square yard_. This was the famous
-principle of the "_minimum_," a device to increase the protectionism
-without _seeming_ to do so.
-
-The debate on this feature of the bill was a marvel in many ways. The
-penetrating reader will not be at a loss for the reason of this. John
-Randolph moved to strike out from the bill the proviso for the cotton
-_minimum_, and argued at some length "_against the propriety of
-promoting the manufacturing establishments to the extent and in the
-manner proposed by the bill, and against laying up 8000 tons of
-shipping now employed in the East India trade, and levying an immense
-tax on one portion of the community to put money into the pockets of
-another_." Calhoun rejoined: "_Until the debate assumed this new form,
-he had determined to be silent; participating, as he largely did, in
-that general anxiety which is felt, after so long and laborious a
-session, to return to the bosom of our families. It has been objected
-to that bill, that it will injure our marine, and consequently impair
-our naval strength. How far it is fairly liable to this charge, he was
-not prepared to say. He hoped and believed it would not, at least to
-any alarming extent, have that effect immediately; and he firmly
-believed that its lasting operation would be highly beneficial to our
-commerce. The trade to the East Indies would certainly be much
-affected; but it was stated in debate that the whole of that trade
-employed but six hundred sailors. The cotton and woollen manufactures
-are not to be introduced: they are already introduced to a great
-extent; freeing us entirely from the hazards, and in a great measure,
-the sacrifices experienced in giving the capital of the country a new
-direction. The restrictive measures and the war, though not intended
-for that purpose, have by the necessary operation of things turned a
-large amount of capital to these new branches of industry. But it will
-no doubt be said, if they are so far established, and if the situation
-of the country be so favorable to their growth, where is the necessity
-of affording them protection? It is to put them beyond the reach of
-contingency._"
-
-Thus Calhoun goes on, making the greatest mistake of his life which he
-regretted to his dying day, to give plausible reasons for his
-insistence and his vote, but he does not even touch upon the _real
-reason_. If he had detailed his conversations with Lowell, it would
-have been far more to the point. His motive, like that of every other
-man in Congress who has urged protectionist schemes, was the special
-benefit of some of his constituents at the more or less concealed
-expense of their countrymen. But, as always happens when men really
-act from unavowed motives, he was suspected of having them; and he
-guarded himself: "_He was no manufacturer; he was not from that
-portion of the country supposed to be peculiarly interested. Coming as
-he did from the South, and having in common with his immediate
-constituents, no interest but in the cultivation of the soil, in
-selling its products high, and buying cheap the wants and conveniences
-of life, no motives could be attributed to him but such as were
-disinterested._" But Randolph still charged, that the discussion
-showed "_a strange and mysterious connection_" between this measure
-and the National Bank bill which had just passed. This was a loophole
-of escape for Calhoun: "_he wished merely to reply to the insinuation
-of a mysterious connection between this bill and that to establish the
-Bank. He denied any improper or unfair understanding, and could
-challenge the House to support the charge._"
-
-A beautiful instance of the _confession_, which all protectionists
-make in action when it comes to the pinch, that a rise of price is at
-once the object and the result of protectionist tariff-taxes, is found
-in the awkward attempt of Congress to relieve indirectly the burnt-out
-citizens of Chicago in 1871. The great fire occurred in October of
-that year. In the winter following a bit of legislation took place in
-Congress in consequence, which is too instructive to be passed by
-without notice, because in all the parts of it taken together we have
-in epitome the motives and the processes and the prompt confessions of
-Protectionism. Contributions were taken up all over the country, and
-even in Europe, for the relief of the people of Chicago. As Whittier
-puts it:
-
-    "From East, from West, from South and North,
-    The messages of love shot forth,
-    And, underneath the severing wave,
-    The world, full-handed, reached to save."
-
-But cannot Congress do something to help rebuild the ruined city?
-April 5, 1872, President Grant set his signature to a congressional
-bill enacted to last one year only, and for the express benefit of
-Chicago alone, _to exempt all building materials except lumber from
-the operation of tariff-taxes_. As a public and emphatic confession on
-the part of Congress, that tariff-taxes raise the prices of
-protectionist goods, and that the remission of such taxes lowers the
-prices of such goods and becomes a boon to the buyers, all this is
-refreshing and satisfactory; but why was _lumber_, by much the most
-important of the building materials needed, _excepted_ from the bounty
-of the legislators to the unfortunates of Chicago? The bill applied to
-Chicago only, and was to last but one year at best! The bill as drawn
-and debated included _all_ building materials. Why was lumber
-excepted? Because, while the bill was still pending, a special car
-filled with the lumber-lords of Michigan and Wisconsin was rolled to
-Washington in haste, and the potent influence of these men was
-sufficient to cause the express exemption of their product from the
-intended cheapening (for one year) of the building materials for
-desolated Chicago. The brief official record of this curious
-transaction will be found in U.S. Statutes for 1872, page 33. It needs
-no comment but the obvious one, that here is the whole matter of
-protectionism in a nutshell;--the motive, the open confession, the
-greedy lobby determined to thrive on their neighbors' misfortunes, the
-inhumanity, the spirit of monopoly, the infernalism,--a game of grab
-from beginning to end!
-
-Shameless as the protectionist debates in Congress have been from the
-start, in letting it be plainly seen, that the sole motive of their
-efforts is an artificial rise of price in certain goods which their
-fellow-citizens would be compelled under the law to pay, the debate in
-the House of Representatives in the spring of 1883 was by far the most
-shameless and avowed in this respect of any that ever transpired
-there. In the last days of that debate all pretence of any action for
-the good of the country at large dropped utterly out of the discourse:
-the old fallacies and disguises and subterfuges of "home markets" and
-"higher wages" and "commercial independence" were no longer put
-forward even in word under the clash of selfish interests, and in the
-eagerness to secure for their wares a factitious price to be paid by
-their countrymen; proposed reductions in tariff-taxes were fought off
-by these men, and in many instances still higher taxes were urged on,
-under their unabashed avowal that, unless home prices were thus
-stiffened and uplifted, they could not make and sell their wares at a
-profit; one honorable member from New Jersey brought his pottery wares
-upon the floor of the House, and tried to demonstrate to his
-fellow-members that, unless these very goods were hoisted in price, by
-taxes on his foreign competitors, he could no longer tread his clay
-and work his wheels with profit to himself: in other words, he and
-others like-circumstanced, by lobbying and log-rolling, persuaded
-Congress to pass so-called laws to compel their countrymen _to hire
-them to carry on what they publicly alleged were unprofitable branches
-of business_. By their own confession, the only trouble with their
-goods was, that they were inferior in quality and superior in price to
-otherwise similar goods in the open market of the world.
-
-One more, and the latest instance, out of hundreds equally accessible
-and equally conclusive, will suffice for a demonstration of the point
-in hand. In the early summer of 1890, a Massachusetts member of the
-House of Representatives, an avowed protectionist from an alleged
-protectionist district of that State, waxed so warm in arguing against
-a protectionist tax upon a certain raw material useful in tanning
-leather, that he took off his coat and proceeded in his shirt-sleeves!
-One would suppose, both from his zeal and the tenor of his speech,
-that he was a veritable free-trader! But no! He had argued a hundred
-times that protectionist taxes (to be paid by other people) were a
-good thing for the payers, and enriched the whole country; but lo! it
-turned out in this case that he himself was a buyer of this particular
-material, and lo! he did not relish the tax-lifted prices caused by
-the tariff. They were all wrong. They must be fought off at all
-hazards, even in the hottest weather! This is a very respectable
-gentleman, well thought of by his neighbors in Worcester County, but
-his protectionism is _not_ respectable. It is chameleon-colored. It is
-one thing in one light, and an opposite thing in another light.
-Indeed, the protectionist congressman has never yet been discovered in
-this country, who was fond of paying protectionist taxes himself, or
-willing that his immediate and powerful constituents should pay them!
-It has been proven many times over, that the very strongest friends of
-a Free List in this broad land have been certain so-called
-protectionist Senators and Representatives.
-
-From these few sample-examples, the reader of penetration will
-perceive, that there is no element of logical coherence or moral
-decency or even outward respectability in Protectionism. There is no
-_principle_ in it or of it. It does not hang together. It walks in
-darkness and not in light. It is full of deceit. It is fond of
-disguises. It is contrary to common sense. It offends justice.
-Morality frowns at it. It has no basis in any Science, least of all in
-the Science of Buying and Selling, whose best impulses it feebly tries
-to deny, and whose largest and most innocent gains it fain would
-destroy.
-
-Next in order we will examine, in the third place, a few of the chief
-FALLACIES AND FALSEHOODS, by which Protectionism has striven to give
-itself a standing in the commercial world. In our day at least, these
-are, without exception, afterthoughts and subterfuges. We have just
-seen under the last head the real impulses, plain as a mountain peak,
-which put on and keep on and pile up these taxes on the masses of the
-people; but these real motives will not bear inspection and public
-criticism, and so plausible reasons must be found or at least
-propounded, which shall do the double duty of covering the real
-reasons, and of seeming to convince while they only perplex the
-victims of the scheme. These plausibilities we propose now to analyze
-and to expose. The test of any alleged truth is its harmony with
-acknowledged truths: the test of any propounded error is its
-incongruity with and contradiction of acknowledged truths. On a
-logical comparison, therefore, of any false proposition with any known
-truth, the latter will be sure to fling out its flat contradiction and
-floor the falsehood forever. Protectionism contradicts economic truths
-at practically innumerable points, but we will now watch the
-collisions at the principal points only.
-
-Fallacy A: _that a nation may still sell to foreign nations while
-prohibiting the buying from them_. Protectionism is multiplied
-prohibitions on the buying of goods from foreigners. Between four and
-five thousand of such prohibitions deface our national Statute-book at
-the present moment. All the while, however, the assumption underlies
-this policy, and the express proposition is often heard in different
-forms along the lines, that our citizens may still sell their products
-to foreigners, nevertheless. England has _got to buy_ our cotton or
-starve: the Continent _is compelled_ to take our pork products, for
-they are the cheapest food in the world: how can China or India _help_
-taking the silver from our mines? Softly. Buying and selling from the
-very nature of it is never compulsory, but always voluntary. A
-commercial service is never rendered but in plain view of a
-return-service to be received. The mental estimation of each buyer is
-couched in the very terms of what is offered in return by each seller.
-Buying and selling from its inmost nature is always one act of two
-persons acting conjointly and inseparably to the advantage of each.
-How, then, can the individuals of one country _sell_ anything to
-individuals of another country without at the same instant _buying_ of
-these in return? The act of selling is just as much buying as it is
-selling, and the act of buying is just as much selling as it is
-buying. As we have abundantly seen already, the introduction of Money
-as a _medium_ in the transaction makes no difference in the _nature_
-of the exchange of commodities internationally. The postulate,
-therefore, that the people of one country can continue to sell
-products to the people of another while refusing to take their
-products of some kind in return, is an _absurdity_ in the nature of
-things and an _impossibility_ in the world of facts. _A market for
-products is products in market._
-
-All known facts confirm this irrefragable reasoning, and discredit
-utterly the fallacy in hand. When France and Germany a few years ago
-gave back to our protectionists a dose of their own medicine, and
-prohibited American pork-products, ostensibly because they feared the
-trichinæ but really to cajole their own farmers under the plea of
-protectionism, their brethren in the faith have made up all sorts of
-faces ever since, have wound up the respective diplomatic clocks to
-strike twelve against the too presumptuous countries which ventured to
-restrict American products in their ports, have protested and
-proclaimed. What is the matter? Is not sauce for the goose sauce for
-the gander also? Have not American protectionists shut out French and
-German products 100:1 under the same plea now used on the Continent?
-"_But we cannot sell our products abroad_," cry the angered Western
-farmers. Of course they cannot, because restrictions on buying _are_
-restrictions on selling; and additional restrictions of the same kind
-put on French and German buying are of course still further
-restrictions on American selling. And the farmers are, as usual, the
-victims both ways.
-
-To hear an ordinary American protectionist talk, one would think that
-Great Britain is the enemy of mankind for admitting into her ports
-practically without let or hindrance the goods of all the world. _Free
-Trade England!_ Let us look a moment. England has to pay for all these
-goods received from all quarters. In what does she pay? In her own
-goods, of course. What is her market? The whole world. Is that market
-ever slack on the whole? Never. Is she ever flooded with cheap goods?
-The more she buys the more she sells of necessity. How much does she
-sell _per capita_ of her people? More than twice as much as the United
-States sells _per capita_. How can she sell so much of her own stuff?
-Because she buys freely other stuff from all the world. What are the
-limits to her capacity to sell her own goods to foreigners? Precisely
-the limits of her willingness to take in pay other goods from
-foreigners. Cannot these limits be overpassed in either direction? By
-no possibility: when people can no longer pay for what they buy, the
-buying ceases; and when they are not permitted to take their pay for
-what they sell, the selling ceases. Is this free trade profitable to
-Great Britain? Immensely so in every way. Whither has it carried up
-her ocean-marine? To the topmost notch. Is capital abundant in England
-in bulk, and are its loanable rates low? England is the richest
-country in the world, and all nations resort thither to buy. What is
-the source of this vast volume of Capital? The only source of Capital
-is savings from the natural gains of Buying and Selling.
-
-Is Great Britain willing to take in goods from the United States?
-Certainly, under the universal conditions of taking in foreign goods
-at all. Is the United States willing to take in British goods in pay
-for her own goods exported thither? She is not, except over
-protectionist barriers averaging 47%. Is it a good thing for the
-United States, that Great Britain takes in her goods freely? We should
-suppose so! Does the former already sell to the latter and through the
-latter more goods than to all the world besides? Much more. Could this
-profitable trade be easily increased? It could be quadrupled in a very
-short time. How? By simply according to our citizens a decent liberty,
-which is their inalienable right. Would the United States like it to
-be commercially treated by Britain exactly as the former treats the
-latter? It would bankrupt the United States in six months. Would our
-protectionists like it? It would make them howl. Is it the commercial
-salvation of the United States that Britain is immovably for free
-trade with her and the rest of the world? Nothing else saves her from
-commercial ruin. Can the ghost of a reason be given, commercial or
-other, why the United States should continue to fling double fists
-into the face of British goods seeking a market and so making one? Not
-a shadow of a shade of a good reason was ever given for such folly, or
-ever can be.
-
-It is more than a pleasure to acknowledge at this point the great
-service done by James G. Blaine, Secretary of State, during the summer
-of 1890, to Country and Commerce, by his courageous avowal contrary to
-his own personal record and to the vehement behest of his party, that
-the economic principle just enunciated is sound, and should be at once
-applied by the United States in connection with all the countries of
-Latin America. In a letter to the Senate on the results of the recent
-Pan-American Conference, he said: "_The Conference believed that while
-great profit would come to all the countries, if reciprocity treaties
-could be adopted, the United States would be by far the greatest
-gainer._" The principle of reciprocity is the principle of free trade
-applied by both parties to the trade. It is the sound principle, that
-goods buy goods and pay for goods at the same instant to a mutual
-profit. Manifold reiterations of this principle came from the
-Secretary that summer, especially in vigorous protestations against
-the McKinley tariff-bill then pending, alleging with truth that
-"_there is not a line or a section in the bill which opens a market
-for another bushel of wheat or another barrel of pork_." The
-unequivocal statements of a favorite statesman have roused the
-somewhat indifference of thousands of citizens, and make certain the
-speedy prevalence in the United States of the unassailable doctrine,
-that any People must buy freely if they would sell broadly.
-
-Fallacy B: _that tariff-taxes are needful in order to start infant
-industries_. There is no analogy whatever between Child-bearing and
-Child-growing and any form of Buying and Selling at any time, but the
-deceit in the wretched simile has cost the world billions of dollars
-of pure loss. To bring up infants from birth to maturity is indeed a
-good deal of a task for the parents, but it is not in any sense an
-economical task: the parents neither ask for nor receive a
-return-service in kind: the transaction is wholly moral in its
-character, and not economical at all: there is no party of the second
-part in the premises: there is a free giving, and that is all. Buying
-and Selling, on the contrary, has no infancy, and no maturity and no
-old age. This particular Minerva springs at once full-grown and
-full-armed from the brain of Jove. The conditions of Trading are
-forever the same; with no reference to the age of the parties, the
-antiquity of the industry, or any other such irrelevant thing. If any
-person anywhere (old or young) has got something to sell, and finds
-(directly or indirectly) any other person anywhere who wants his
-wares and can pay for them,--all the conditions of mutual profit are
-present, and everything else is an impertinence.
-
-Much more than this. Tariff-taxes have to be paid by somebody. Their
-payment is inexorable at the custom-house, and interest and other
-charges are added before the sum reaches the ultimate payer. But the
-ultimate sum however made up is exactly so much _out_ of the
-commercial gains of the payer. The sign is every time _minus_ and
-_not_ plus. When egregiously high tariff-taxes are multiplied in
-number, and all the additions are made to them, they become an
-incalculably large sum, every cent of which _has to be paid_ out of
-the gains of current Industry. Now, what a queer way that is to foster
-industries! What a queer way to help start them! It takes Capital to
-start new industries, and to carry on old ones; but tariff-taxes (with
-all their accretions) take just so much _out_ from what would
-otherwise naturally become Capital. That is to say, all Capital is
-savings from the gains of Exchanges; and these gains are _reduced_ by
-every tariff-tax that touches them directly or indirectly. Taxes from
-their very nature can help nobody. They hurt everybody. What a device
-this is to start new industries with, namely, to pick the pockets of
-the very men, who are to start the industries, if they ever are to
-start at all! Lower your reservoir to begin with, in order to give
-head and force to your faucet flow!
-
-But this is not half of it. On what industries do the protectionist
-taxes fall at first to weaken and discourage them? Of course on the
-natural and profitable ones, which only ask to be let alone in order
-to maintain a healthful life and growth. If, under natural conditions,
-any industry is in existence, one may be perfectly sure it is
-profitable, since Profit is the only thing in the world that can
-start and build up an industry: when the profit ceases, the trade
-ceases of necessity: the motive to it is _gone_. In behalf of what
-sort of industries are these taxes ostensibly and plausibly levied?
-Only, if we are to believe the protectionists, the weak and presently
-unprofitable ones. _It is the infant industries that need the
-nursing-bottle!_ That is to say, tax down and perhaps destroy the
-_profitable_ industries, the industries that _pay_, that can paddle
-their own canoe and no thanks to anybody, in order to bring forward
-certain other industries, which by confession and open proclamation
-are _unprofitable_, and can only _start_ by taxing their neighbors! Of
-course, there is a cat in this meal, and we shall let her out of the
-bag in plain sight presently; but we are taking now our friends, the
-protectionists, at their own word, and exhibiting their marvellous
-wisdom under the terms of their own choosing. What a blessed way for a
-nation to grow rich, to smite down with high taxes the active and
-enterprising and independent and therefore profitable industries with
-one hand, and grope around with the other to find some poor and
-inactive and unfrugal and naturally unprofitable industries, in order
-to fetch forward these by means of the plunder filched from the
-others!
-
-To go back for historical illustration to Washington's first
-administration, when the first (extremely mild) protectionist taxes
-were levied in this country, we have the highest authority for knowing
-that many of the leading branches of manufactures were prosperous and
-profitable. They had no artificial help in order to start, but on the
-contrary had had continual discouragement for a century under the
-miserable protectionist policy of the mother country. Washington
-himself was inaugurated in a dark brown suit of woollen cloth of
-American manufacture: so was John Adams inaugurated first
-Vice-President of the United States about the same time in a garb of
-wholly native manufacture.[11] This was in April, 1789. In November of
-the same year, Washington returned to New York from his first tour in
-New England "_astonished both at the marvellous growth of commerce and
-manufactures in New England and the general contentment of its
-inhabitants with the new government_" (Schouler, p. 117). Alexander
-Hamilton, the first Secretary of the Treasury, in his famous Report to
-Congress on Manufactures, in 1791, enumerated seventeen branches as
-then thriving so as to fairly supply the home market, and settle into
-regular trades. These were, skins and leather, flax and hemp, iron and
-steel, brick and pottery, starch, brass and copper, tinware,
-carriages, painter's colors, refined sugars, oils, soaps, candles,
-hats, gunpowder, chocolate, snuff and chewing tobacco. It is plain
-enough from the debates of the time as well as from the nature of the
-case, that the protectionist taxes in our first two Tariffs, already
-considered here in detail, although they were comparatively slight in
-number and amount, fell in the way of discouragement on these
-incipient yet independent manufactures as well as upon all the farmers
-of the land. There can be but little rational question, that the
-woollen industry was sounder at the core in 1789, when Washington was
-inaugurated in native woollens, than in 1889, when Harrison was
-inaugurated in the same, the ostentatious gift of a firm of
-protectionist woollen manufacturers shortly afterwards adjudged to be
-bankrupt and fraudulently so.
-
-The best point, after all, to make against this hollow fallacy, is the
-practical one, that no industry whatever, whether "infant" or other,
-has ever come in this country into an acknowledged self-sustaining
-position under a whole century's tariff-taxes. Salt, hemp, coal,
-cottons, woollens, nails, and iron and steel products generally, were
-the chief articles protectionized at first, and have been
-protectionized ever since, but no one of them all has ever come into a
-condition of self-support according to the view of the privileged
-beneficiaries. Each one of them was an old industry, and a relatively
-rich industry, when it was taken under the "fostering care" of the
-tariff-taxes, levied for their further enrichment on the masses of the
-people; and it was only greedy and secret combinations among these for
-that purpose, which put them at first and has kept them ever since in
-the rank of public beneficiaries. The simple truth is, that diversity
-of employments is rooted in human nature and in the circumstances amid
-which God has placed men, and so far is it from being true that taxes
-and restrictions are needful in order to foster manufactures, taxes
-and prohibitions cannot prevent them from springing into life! They
-are just as natural to men and to colonies as agriculture is. Indeed,
-agriculture can scarcely take a step without them. The farmer must
-have ploughs and carts and other implements; and, depend upon it,
-there are some natural mechanics in that colony. Clothes are as
-needful as food, and spinning and weaving in some form will begin at
-once, and prohibitions will be powerless to stop them.
-
-Deadly to the fallacy in hand is the word of unquestionable History.
-Any one may read in Palfrey and Bancroft and Hildreth such facts as
-these, scattered all along through the noble volumes. The manufacture
-of linen and woollen and cotton cloth was begun in Massachusetts in
-1638, in Rowley, by some families from Yorkshire; and became so
-remunerative in a couple of years that some acts of the General Court
-designed to stimulate it were repealed. Brick-making and glass-works
-and the manufacture of salt were all begun in Massachusetts before
-1640. In 1643, the younger Winthrop established iron-works in
-Braintree and Lynn, which after some losses were successfully
-prosecuted. Within less than twenty years thereafter, tannery and
-shoemaking had made such strides, that boots and shoes became articles
-of export. That these were no fancy beginnings in manufactures, we may
-strikingly learn from an Act of Parliament passed in 1698. Notice the
-date. This law is a sample of many more:--"_After the first day of
-December, 1699, no wool, or manufacture made or mixed with wool, being
-the produce or manufacture of any of the English plantations in
-America, shall be loaden in any ship or vessel, upon any pretence
-whatsoever,--nor loaden upon any horse, cart, or other carriage,--to
-be carried out of the English plantations to any other of the said
-plantations, or to any other place whatsoever._" Thus the fabrics of
-Massachusetts were forbidden to find a market in Connecticut, or to be
-carried to Albany to traffic with the Five Nations. "That the country
-which was the home of the beaver might not manufacture its own hats,
-no man in the colonies could be a hatter or a journeyman at that
-trade, unless he had served an apprenticeship of seven years. No
-hatter might employ more than two apprentices. No American hat might
-be sent from one plantation to another." In 1701 the three charter
-colonies are reproached by the lords of trade "_with promoting and
-propagating woollen and other manufactures proper to England_." In
-1721 New England alone had six furnaces and nineteen forges, and there
-were many others in Pennsylvania and Virginia. Parliament enacted in
-1750 that no more mills should be erected in America for slitting or
-rolling iron, or forges for hammering it, or furnaces for making
-steel; and in certain cases, agents of the crown were authorized to
-tear down such establishments as "_nuisances_." How far all the arts
-of navigation had been carried in the Colonies before the Revolution,
-every one may read in Burke's famous speech on Conciliation with
-America. How far the products of the loom, the forge, and the anvil,
-were already being exported, in spite of British legislation, to other
-countries, any one may see in Lord North's last proposals and
-concessions to ward off Independence.
-
-Protectionism having once fed its petted beneficiaries from the public
-crib, that is to say, from taxes wrenched from the many to enrich the
-few, invariably clamors for more and more rations for its pets from
-the same public source. Not only does no industry become
-self-supporting by its bite and its sup, but each becomes according to
-its own facile representations and representatives, more and more
-helpless in itself, more and more shameless in its demands, more and
-more _entitled_ to public charity, and less and less inclined to
-surrender one iota of past or present privilege. The daughters of the
-horse-leech cry continually, Give! Give! The following schedule
-relates to woollens mainly, but it is a fair sample of many other
-protectionized classes of goods under the successive tariffs in this
-country, in point of increased taxes on the people in their behoof.
-While these lines are being written, the McKinley tariff-bill,
-so-called, having passed the House, is pending in the Senate. It is
-significant, that this piece of legislation, whether it be finally
-enacted or not, proposes to open the second century of the United
-States Protectionism by largely hoisting the tariff-taxes along the
-main line. Infant industries indeed!
-
-  ======================+===============================================
-                        |       RATE OF DUTIES UNDER THE TARIFF OF
-   ARTICLES.            +-----+-----+--------+--------+--------+--------
-                        |1791.|1859.|  1861. |  1864. |  1883. |  1890.
-  ----------------------+-----+-----+--------+--------+--------+--------
-                        | Per | Per |        |        |        |
-                        |cent.|cent.|        |        |        |
-  Dress goods of cotton |  5  |  19 | 30 per | 55 per | 68 per | 88 per
-    and worsted,        |     |     |   cent.|   cent.|   cent.|   cent.
-    costing 15 cts.     |     |     |        |        |        |
-    the sq. yd.         |     |     |        |        |        |
-                        |     |     |        |        |        |
-  Same, costing 20      |  5  |  19 | 30  "  | 50  "  | 60  "  | 90  "
-    cents sq. yd.       |     |     |        |        |        |
-                        |     |     |        |        |        |
-  Same, all wool or     |  5  |  24 | 30  "  | 47  "  | 77  "  |100  "
-    of mixed materials, |     |     |        |        |        |
-    costing 24 cents    |     |     |        |        |        |
-    sq. yd.             |     |     |        |        |        |
-                        |     |     |        |        |        |
-  Same, costing 30      |  5  |  24 | 30  "  | 55  "  | 70  "  | 90  "
-    cents sq. yd.       |     |     |        |        |        |
-                        |     |     |        |        |        |
-  Same, costing 60      |  5  |  24 | 30  "  | 45  "  | 55  "  | 70  "
-    cents sq. yd.       |     |     |        |        |        |
-                        |     |     |        |        |        |
-  Same, weighing over   |  5  |  24 |25% and |40% and |40% and |50% and
-    4 oz. sq. yd.       |     |     | 12 cts.| 24 cts.| 23 cts.| 44 cts.
-                        |     |     | per lb.| per lb.| per lb.| per lb.
-                        |     |     |        |        |        |
-  Ready-made clothing   |7-1/2|  24 |25% and |40% and |35% and |60% and
-                        |     |     | 12 cts.| 24 cts.| 40 cts.| 50 cts.
-                        |     |     | per lb.| per lb.| per lb.| per lb.
-                        |     |     |        |        |        |
-  Tapestry Brussels     |7-1/2|  24 |30 cts. |50 cts. |20 cts. |28 cts.
-    carpets             |     |     | sq. yd.| sq. yd.| sq. yd.| sq. yd.
-                        |     |     |        |        | and 30%| and 30%
-                        |     |     |        |        |        |
-  Tapestry velvet       |7-1/2|  24 |50 cts. |80 cts. |25 cts. |40 cts.
-    carpets             |     |     | sq. yd.| sq. yd.| sq. yd.| sq. yd.
-                        |     |     |        |        | and 30%| and 30%
-                        |     |     |        |        |        |
-  Brussels carpets      |7-1/2|  24 |40 cts. |70 cts. |30 cts. |40 cts.
-                        |     |     | sq. yd.| sq. yd.| sq. yd.| sq. yd.
-                        |     |     |        |        | and 30%| and 30%
-                        |     |     |        |        |        |
-  Druggets and bockings |  5  |  24 |20 cts. |25 cts. |15 cts. |20 cts.
-                        |     |     | sq. yd.| sq. yd.| sq. yd.| sq. yd.
-                        |     |     |        |        | and 30%| and 30%
-                        |     |     |        |        |        |
-  Silk goods, including |7-1/2|  19 | 30 per | 60 per | 50 per |Average
-    velvets and plushes |     |     |   cent.|   cent.|   cent.|probably
-                        |     |     |        |        |        |   90%
-                        |     |     |        |        |        |
-  Woollen hosiery and   |     |     |        |        |        |
-    underwear:          |     |     |        |        |        |
-      Costing 32 cents  |  5  |  24 | 30  "  | 90  "  | 77  "  |214 per
-        per lb.         |     |     |        |        |        |   cent.
-      Costing 42 cents  |  5  |  24 | 30  "  | 79  "  | 79  "  |175  "
-        per lb.         |     |     |        |        |        |
-      Costing 62 cents  |  5  |  24 | 30  "  | 62  "  | 74  "  |135  "
-        per lb.         |     |     |        |        |        |
-      Costing 82 cents  |  5  |  24 | 30  "  | 54  "  | 82  "  |120  "
-        per lb.         |     |     |        |        |        |
-                        |     |     |        |        |        |
-  Linen goods           |  5  |  15 | 30  "  |Average | 35  "  | 50  "
-                        |     |     |        |37-1/2% |        |
-  Cotton hosiery:       |     |     |        |        |        |
-    Costing 62-1/2 cents|7-1/2|  24 | 30  "  | 35 per | 40  "  |110  "
-      per doz.          |     |     |        |   cent.|        |
-    Costing 2.10 cents  |7-1/2|  24 | 30  "  | 35  "  | 40  "  | 76  "
-      per doz.          |     |     |        |        |        |
-    Costing 4.10 cents  |7-1/2|  24 | 30  "  | 35  "  | 40  "  | 64  "
-      per doz.          |     |     |        |        |        |
-  ======================+=====+=====+========+========+========+========
-
-It is also significant in this connection to read an extract from the
-Report of Mr. William Whitman, President of the National Association
-of Wool Manufacturers, dated March 29, 1890, to the Stockholders of
-the Arlington Mills, Massachusetts. "_I have been your Treasurer for a
-consecutive period of twenty years. During this period the average
-earnings have been_ 20-8/10 _per centum upon the capital. The earnings
-of the last year were nearly three and a half times those of the year
-previous, and there is every indication that the current year will be
-the most profitable one in the company's history._"
-
-Fallacy C: _that a home market is better and broader than a foreign
-market_. Professor Thompson of Pennsylvania has publicly and
-repeatedly stated, that, by a persistent policy of Protectionism a
-"home market" would be created for all the bread-stuffs that this
-great country produces; and John Roach, the shipbuilder, expatiated at
-length before the Tariff Commission of 1882 on the advantages the
-farmer derives from the better "home market" already created by
-Protectionism. To come nearer home in place and further down in time,
-there was organized in Eastern Massachusetts with headquarters at
-Boston in some connection with the national election of 1888, a
-so-called "Home Market Club" of large proportions. It is generally
-understood in the State, that a large minority, if not a majority, of
-the members, are displeased with the McKinley Bill of 1890, declaring
-that the mustard is carried to fanaticism in this bill, that neither
-the "home market" nor any other can profit by such a series of
-prohibitions.
-
-However this last may be, it is plain, that a ridiculous and most
-harmful fallacy underlies all references to a "home market" in any
-connection with foreign trade. It is simple Gospel charity to believe,
-that Thompson and Roach and the founders of the Home Market Club and
-all others, who repeat this wretched stuff, never stopped in their
-thoughts long enough to inquire what a "market" really is, never
-analyzed into its simple elements that composite thing called a
-"market," but each and all in turn have taken up a catch-word
-carelessly which seems on the surface to have some significance though
-in reality it has none.
-
-All will agree, if they will stop to think, that a "market" is always
-made up of _buyers_ with return-services in their hands. A bigger home
-market than before consists only in more domestic buyers than before,
-all ready with acceptable pay in all their hands. More persons than
-before, more services-in-return than before. Now, if Protectionism
-_can enlarge the home market_, it must be (1) either by increasing the
-number of births or diminishing the number of deaths in a given time
-in a given country. Precisely how big bundles of big taxes, which the
-whole population must pay in one form or another and over and over
-again, may be made to stimulate births or prolong lives, no reasonable
-man can see, and it is not unreasonable to deny that a protectionist
-can see it. But conceding that he can see and show this, his task is
-then but half done, for he must proceed to see and show how these same
-onerous taxes are able (2) to multiply the return-services in the
-hands of this increased population!
-
-If he think at all, the protectionist is compelled to remember, that
-his system is always and everywhere a series of prohibitions on
-profitable trade. A profitable trade always gives birth to gains. It
-always gives birth to Capital. It always gives birth to Plenty. That
-is the nature of it, and the Divinely ordained blessing on it. But
-when the greater part of these gains are artificially cut off, when
-the possible capital is reduced in volume, when the scarcity comes in
-which is the primary _purpose_ of Protectionism to create, it shall
-go hard if there be even as many return-services as when the process
-began. Not a better "home market," but a more meagre one, is the
-inevitable issue of restrictions and prohibitions.
-
-If our protectionist try to get out of this snug place, in which he
-now finds himself, provided he is able to feel the force of any logic
-whatever, by claiming that his broader "home market" is to be made by
-new immigrants with old-world values in their hands to buy with, he
-certainly cannot escape by this route, because (1) he must in order to
-do this see and show what there is in big taxes enormously multiplied
-to invite immigrants here at all; and (2) our typical protectionist is
-scared to death by the _handiwork_ of foreign "pauper labor" wherever
-exposed for sale, and of course he is not prepared to welcome the
-pauper laborers themselves, of which class as described by him the
-immigrants would mostly consist; and besides, the tariff would not
-admit to our shores the old-world values, which would be the
-immigrants' sole _return-services_ to help make up the new market!
-
-Within a week of the present writing, Senator Morrill of Vermont has
-broached from his place the idea in debate, that the industries of the
-United States can be so stimulated by protectionism as to cause the
-consumption of all the agricultural products of the United States.
-Well, when? The stimulus has been applied now just thirty years under
-Mr. Morrill's own eye, and by a tariff called by Mr. Morrill's own
-name, increasing its rates every little while, even in 1883, when the
-public pretence was to diminish them; and agricultural products of all
-kinds, including lard and pork and wool, have never been so "deadly
-dull" as in this interval of high protectionism. Scores of thousands
-of bushels of well-ripened Indian corn were burned for fuel in the
-more western States and Territories the very last winter, because the
-market for it was too poor to pay for its transportation to Chicago
-over protectionized rails, and in cars built of tariff-cursed lumber,
-every nail and bolt and screw in which doubled in price from the same
-general causes. If Mr. Morrill were not in his dotage, or if in his
-prime he had ever closely analyzed a single case of trade, foreign or
-domestic, he would see that the abandoned farms of his own State
-reckoned to be about one-third of the cultivated land on the eastern
-slope of the Green Mountains to the Connecticut River,--Mr. Morrill's
-own native region and residence,--abandoned farms for two years past
-assiduously sought by State officials to be filled in if possible by
-immigrants from Sweden virtually giving them the lands and
-farm-buildings,--fling out their flat contradictions to this
-senatorial drivel; that the constant decline for a quarter of a
-century of the farming population in every State in New England gives
-the lie to this miserable proposition; and that the constantly
-increasing area of mortgaged farms in every agricultural State in this
-Union is an overwhelming proof that the "home market" for farm staples
-has been growing constantly worse for years under this boasted
-protectionism.
-
-The year 1890 is likely to prove the pivotal point of time in the
-swing of this whole proposition of Deceit, for two reasons, namely,
-(1) it is the year of the decennial Census, in which at least a
-half-hearted attempt is being made to bring out the aggregate area in
-each State of the mortgaged farming lands, and nothing can prevent the
-appearance in which of the lessening volumes of population in the
-purely agricultural communities; and (2) the year has already been
-marked by the political revolt from the party of protectionism of the
-masses of the farmers in the Mississippi Valley, and their
-organization into "Farmers' Alliances," naturally and demonstrably
-hostile to all Restrictions on the sale of farmers' produce.
-
-Fallacy D: _that protectionism tends to raise the wages of general
-laborers_. In our third chapter, the whole doctrine of Wages was
-clearly and carefully laid down, and it is only needful now to remind
-the reader of two or three of those fundamental principles. The
-Labor-giver and the Labor-taker only touch each other at the old
-points of reciprocal Desires and Renderings. There are two persons
-standing in that relation each to each. A rate of Wages is always a
-result of a Comparison. If the Labor-takers, whoever they may be, more
-strongly desire the services of the Labor-givers, whoever they may be,
-other things remaining as before, there will be a rise in the rates of
-Wages, because Effects always follow the operation of Causes in
-Economics, as in all other scientific spheres; and if the
-Labor-takers, for any reason, desire less than before the services of
-Laborers, other things being equal, the general rates of Wages will
-decline of necessity.
-
-Now, what is the necessary effect of Protectionism upon the general
-Demand for Laborers? How is the whole class of Labor-takers affected
-by prohibitory tariff-taxes? Note every time, that it is the presently
-and independently _profitable_ industries, the industries that ask for
-nothing except to be let alone, that are struck and restrained by
-these tariff-taxes; the fact that any industry is successfully going
-forward under its own motives is sufficient proof of its own
-profitableness; these are the industries, in every case, which are
-curtailed by restrictive tariff-taxes, their former gains are lessened
-of course and by design, and their _motives_ consequently to hire
-Laborers to carry on these branches of business now taxed and
-tormented are _lessened_; less Desire for Labor-givers gives laborers
-less every time round; the so-called argument of Protectionists is, to
-introduce alleged _unprofitable_ industries by means of taxing down
-_profitable_ ones; and pray, what effect must that have upon the
-general Desire to employ Labor-givers, and consequently what effect
-upon general rates of Wages?
-
-Take one look further along this same line. Tariff-taxes of this
-character are designed to keep out, and do keep out, foreign wares,
-which are the natural and profitable market for domestic wares: how
-will this forced exclusion affect the Demand for laborers to make or
-grow the domestic wares whose market is now lost? And what is the
-influence on the Wages of those whose services are now in lessened
-Desire along the whole line? Causes produce their Effects everywhere
-and every time.
-
-Dissatisfaction among, and actual disaster to, Labor-givers as a
-class, have always followed the imposition of protectionist
-tariff-taxes in this country, as a matter of plain observation and
-record; have followed increasingly and more disastrously increased
-restrictions and prohibitions on profitable trade; "Strikes" on the
-one hand to resist a lowering or secure a lifting of Wages, "Lockouts"
-on the other to bring laborers to terms, "Shut-downs" for pretended
-repairs in order to gain time to tide over the gluts that always
-accompany artificially restricted markets, semi-hostile relations
-between Employers and Employed, interruptions to travel and
-transportation, timidities of Capital fatal to new and enlarged
-enterprises, have never characterized this country so strikingly as
-during the quarter-century of Protectionism culminating in 1890.
-
-The following table accurately compiled by Editor Philpott of Iowa,
-from the National Census, shows in remarkable figures the relatively
-slow rate of progress of the Nation in thirteen essential items of
-growth under the Morrill Tariff, as compared with the rapid rates of
-progress in the leading lines under the Walker Tariff. _The comparison
-lies in the per centum of increase over the previous decade of the
-period_ 1850-60 _relatively to each of the two periods_ 1860-70 _and
-_1870-80_: the average of the last two periods is taken for the sake of
-an easier comparison of the progress of the one decade (Walker) with
-the average of the two later ones (Morrill)._
-
-  +----------------------------------+------------+-------------------+
-  |        Lines of Progress.        | 1850-1860. | Average each Ten  |
-  |                                  |            | years--1860-1880. |
-  +----------------------------------+------------+-------------------+
-  | Population                       |     35.5   |        26.2       |
-  | Wealth                           |    126.6   |        61.0       |
-  | Foreign commerce, aggregate      |    131.0   |        45.6       |
-  | Foreign commerce, per capita     |     70.3   |        15.2       |
-  | Railroads, aggregate             |    240.0   |        69.0       |
-  | Railroads, per capita            |    150.0   |        34.0       |
-  | Capital in manufactures          |     90.0   |        66.0       |
-  | Wages in manufactures, aggregate |     60.3   |        58.2       |
-  | Wages in manufactures, per hand  |     17.3   |         9.4       |
-  | Products                         |     85.0   |        69.6       |
-  | Value of farms                   |    103.0   |        23.6       |
-  | Farm tools and machinery         |     62.0   |        27.7       |
-  | Live stock on farms              |    100.0   |        17.3       |
-  +----------------------------------+------------+-------------------+
-
-The State of Massachusetts has been diligently and scientifically
-taking the Statistics of everything relating to Laborers as such for
-many years; and we take now by way of confirmation of what has just
-been written a few statements of fact from the official Reports.
-_One-third of Massachusetts wage-earners were out of work one-third of
-the time under the benign influence of Protectionism [1887]. Wages
-went down in Massachusetts on the whole average 5 per centum 1872-83,
-while in the same interval of time they went up 9 per centum in Great
-Britain [1885]. Wages in Massachusetts advanced in 1830-60 (Walker) 52
-per centum and in 1860-83 only 28 per centum (Morrill). What is called
-the needful cost of living increased in Massachusetts between 1860 and
-1878 (Morrill) 14-1/2 per centum in spite of immense cheapenings in
-costs of production and transportation [1885]._
-
-The U. S. Government has been gathering for a long time important
-Statistics relating to Laborers and their Wages and their Costs of
-Living, not only in the decennial Censuses but also in Consular
-Reports and in the Reports of a national Commission established for
-that purpose. We excerpt a few relevant statements from these almost
-at random. _Wages in free-trade England are from 50 to 100 per centum
-higher than they are in any protectionized country on the Continent of
-Europe. The aggregate Values of this country increased 1850-60
-(Walker) 126 per centum, and in 1870-80 (Morrill) only 80 per centum,
-after reducing the census values of 1870 to a gold basis. Vessels
-American-owned and American-built controlled three-fourths of our
-foreign carrying trade in 1856, and less than one-sixth of it in
-1886._
-
-The Census of 1880 gives the total number of persons employed in the
-great subdivisions of industry in the United States as follows:--
-
-    Trade and transportation                 1,810,256
-    Manufactures, mechanical and mining      3,837,112
-    Professional and personal services       4,074,238
-    Agriculture                              7,670,493
-
-The following table compiled from the censuses of the last four
-decades will be found to yield food for thought in the light of the
-present paragraphs. _It relates solely to manufactured goods at the
-four successive epochs._
-
-  +-----------+--------------+--------------+--------------+--------------+
-  |           |     1850.    |     1860.    |     1870.    |     1880.    |
-  +-----------+--------------+--------------+--------------+--------------+
-  |Value of   |              |              |              |              |
-  | products  |$1,019,109,616|$1,885,861,676|$4,232,325,442|$5,369,579,191|
-  |Value of   |              |              |              |              |
-  | materials |   555,174,320| 1,031,605,092| 2,488,427,242| 3,395,823,547|
-  |Wages paid |              |              |              |              |
-  | out       |   236,759,464|   378,878,966|   775,584,343|   947,953,795|
-  |Materials  |              |              |              |              |
-  | to        |              |              |              |              |
-  | products, |              |              |              |              |
-  | per cent  |            54|            54|            58|            63|
-  |Wages to   |              |              |              |              |
-  | products, |              |              |              |              |
-  | per cent  |            22|            21|            18|            17|
-  |Average    |              |              |              |              |
-  | wages     |              |              |              |              |
-  | earned    |          $247|          $289|          $377|          $346|
-  |Capital to |              |              |              |              |
-  | products, |              |              |              |              |
-  | per cent  |            52|            53|            50|            50|
-  |Number of  |              |              |              |              |
-  | establish-|              |              |              |              |
-  | ments     |       123,029|       140,433|       252,148|       253,852|
-  |Average    |              |              |              |              |
-  | hands     |              |              |              |              |
-  | each      |          7.79|          9.34|          8.16|         10.79|
-  +-----------+--------------+--------------+--------------+--------------+
-
-Our manufactures were put down in the Census of 1880 as in value
-$5,369,579,191. But this sum contains $1,670,000,000 that does not
-strictly belong to manufactures, such as flouring, lumbering,
-blacksmithing, sugar-refining, coffee-roasting, slaughtering, and a
-few others. This sum being taken out, there is left in round numbers
-but $3,700,000,000. This is not a great amount for 50,000,000 of
-people, and for a land with such natural advantages for manufacturing
-as our own.
-
-Fallacy E: _that the costs of Wages to employers and of Materials to
-manufacturers somehow justify Protectionism_. The harmful confusion is
-constantly made here between Rates of Wages and Costs of Labor--two
-very diverse matters. Rates of Wages depend on a very different set of
-circumstances from Costs of Labor. Failure to draw this distinction,
-and a desperate desire to clutch even at a straw with which to bolster
-up absurd Restrictions, have made a hotch-potch and a caricature of
-attempted argument at this point. Rates of Wages have always been
-relatively high in this country as compared with the countries of
-Europe for two general reasons: (1) the country is new, with enormous
-natural advantages of every sort, with comparatively few laborers
-competing steadily with each other for work, large numbers of persons
-passing constantly out of the employed into the employing classes; and
-(2) there has almost always been from the first, and there is likely to
-be again in the immediate future even if there be not at the present
-moment, a Money in this country depreciated below the gold standards of
-Europe, in which the rates of current wages are always reckoned, and
-which makes them _seem_ to be higher than they actually are in
-purchasing-power. On the other hand, Costs of Labor have always been,
-and are now, low in this country as compared with Europe, for two
-general reasons also: (1) all classes of laborers are more efficient
-and skilled in this country than in Europe, working with more energy
-more hours in the week, under less cost of superintendence, being as a
-rule more temperate and healthful and educated persons, so that
-employers _get more for what they give_ than do employers abroad; and
-(2) the cost of that to the employers in which the laborers are paid,
-whether money or other valuables, is always less here than abroad,
-because the money usually is depreciated money which costs less in
-commodities, and even if it be not, the current prices of general
-commodities are higher here than there, so that the cost of wages paid
-directly or indirectly in commodities is less here to employers.
-
-A second and distinct and wholly convincing proof, that the Cost of
-Labor to employers has been less here than abroad during the first
-century of our national existence, has been the unquestioned fact,
-that the Rate of Profits has been higher. A constant stream of foreign
-Capital has come hither for investment, drawn solely by the higher
-rates of Profit. But if the rates of Profit have proven to be higher,
-the costs of Labor must have been lower, because laborers and
-capitalists divide the whole returns between them. Nobody else has any
-claim upon the conjoint proceeds. _Profits are the Leavings of the
-Costs of Labor._ If, therefore, these Leavings are larger in one
-country than another, then of necessity the Costs of Labor are lower
-in the first country.
-
-Now, Protectionists have had the effrontery (largely the result of
-ignorance) to contend, that they are at a disadvantage as employers of
-laborers on account of the rates of Wages they are obliged to pay to
-them! _Exactly the reverse is the truth._ Instead of being at any
-disadvantage at this point, it is a matter of absolute demonstration,
-that American employers pay the smallest costs of Labor in the world!
-Employers as such have no interest in the rates of Wages as such, but
-only in the costs of Labor to themselves as capitalists. High rates of
-Wages not only usually accompany low costs of Labor, but also are a
-proof of them! The patient (not to say stupid) American People have
-consented for thirty years past to be abominably taxed for the
-exclusive benefit of a set of brazen mendicants, on the ostensible
-ground, that the said public beggars were unfortunately placed in
-comparison with European competitors, when the simple truth has been,
-that they had a constant advantage in the best, and cheapest (in cost
-to themselves), and steadiest and most intelligent (on the whole),
-laborers in the world.
-
-What is the truth about raw materials in this country? Especially raw
-materials in those branches of industry, which have been most steadily
-protectionized from the first, like iron and copper, and cottons and
-woollens? Can any reason be found for legislatively excluding foreign
-products of these classes on the ground of any disadvantage of our
-producers on the score of raw materials? Look at iron ore, for
-example, now protectionized to the extent of 75 cents per ton. No
-country in the world possesses such deposits in quantity and quality
-and accessibility of iron ore as the United States of America. Vast
-beds of the best ore in the world, especially in wide regions along
-the whole course of the Tennessee River, lie directly upon the surface
-of the ground; and the so-called "Iron Mountain" in Missouri is said
-to have ore enough above the general surface of the country round to
-supply the wants of the entire United States for two centuries! Yet
-every ton of this ore is artificially lifted in price to the very
-People to whom God gave it in exceeding abundance. The average cost of
-mining, washing, screening, and loading upon steam freight-cars for
-transportation to market, of brown-hematite ore at one of the Mines
-in Tennessee during the summer and autumn of 1890, was 33 cents per
-ton, with a constant downward tendency in cost as machinery was
-multiplied and methods improved. This included the rent paid to the
-owners of the land holding the ore-beds, and every other item of cost
-carefully computed by the owner of the capital and manager at the
-mines. This statement is made on the authority of the said owner and
-manager over his own sign manual, with his consent given that it be
-printed as at present in the interest at once of Science and
-Righteousness.
-
-It has often been publicly stated by experts, that there is more coal
-in deposit in the United States than in all the rest of the world put
-together. Nevertheless, bituminous coal has been protectionized since
-1874 to the extent of 75 cents per ton, and slack or culm (another
-form of coal) 40 and 30 cents per ton. The bounty of God to the people
-of this country has been so far forth thwarted by the greed of
-mine-owners acting on the subservience of members of Congress to the
-few rich combined for that purpose to the impoverishment of the
-unorganized masses. Especially has every interest of New England both
-popular and manufacturing been sacrificed to the short-sighted
-selfishness of the mine-owners, because the British Provinces, just to
-the northward, are full of bituminous coal waiting for a market
-against New England goods.
-
-Limestone is a second indispensable requisite for the reduction of
-iron ores. God has put the ore and the coal and the lime in unfailing
-quantities in close proximity with each other throughout the entire
-valley of the Tennessee. So small is the natural cost of making iron
-in that favored region, that it has been transported this summer to
-Savannah by rail (freights heightened by tariff-taxes on steel rails
-and lumber), and then exported 3000 miles to Liverpool with good
-profits to the makers by their own confession.
-
-Steel rails are protectionized at present to the extent of $17 per
-ton, formerly $28 per ton. Fortunately, we have at present a competent
-National Labor-Commissioner, heretofore in the service of
-Massachusetts in the same capacity, Carroll D. Wright, who has just
-made a Report to Congress on the comparative cost of producing steel
-rails here and abroad. The following table is national and official
-and indisputable. It shows the Element of Cost in one ton of steel
-rails in Eleven distinct establishments, the first Two being located
-in the United States, the next Seven in countries on the Continent of
-Europe, and the last Two in Great Britain. The first column gives the
-Cost of the Material in the several districts, the second the Cost of
-Labor, and the third the total cost of the rails.
-
-  +-----------------+-------------+-------------+-------------+
-  |    Distinct     |  Materials. |   Labor.    | Total Cost. |
-  | Establishments. |             |             |             |
-  +-----------------+-------------+-------------+-------------+
-  |  1              |   $21.10    |    $1.54    |   $24.79    |
-  |  2              |    25.11    |     1.38    |    27.68    |
-  |  3              |    17.67    |     1.04    |    19.57    |
-  |  4              |    18.06    |     2.51    |    22.18    |
-  |  5              |    18.06    |     4.64    |    25.65    |
-  |  6              |    18.23    |     2.58    |    23.12    |
-  |  7              |    18.10    |     2.68    |    23.19    |
-  |  8              |    18.66    |     2.97    |    23.74    |
-  |  9              |    23.42    |     2.01    |    27.02    |
-  | 10              |    18.05    |     2.54    |    21.90    |
-  | 11              |    16.39    |     1.36    |    18.58    |
-  +-----------------+-------------+-------------+-------------+
-
-The reader who knows how to read between the lines will observe the
-strong confirmation of this table to the point already made in these
-pages, namely, that the "pauper labor of Europe" costs much more at a
-given point than the more highly paid labor of England and the United
-States. Thus: the average Cost of Labor in a ton of rails in the two
-latter countries is $1.70; the average in the seven Continental
-countries is $2.63. The average total cost per ton in the nine foreign
-countries is $22.77; the average in the two establishments here is
-$26.23. It must be remembered, that the cost of the material and of
-all the processes of manufacture here is greatly enhanced by the
-device of the tariff-taxes: still the difference in cost is even then
-only $3.46 per ton greater than the foreigners' cost: considering that
-these foreign rails must be carried 3000 miles over sea, how comes it
-that a tariff-tax of $28 or $17 per ton is needful in order to foster
-rail-making in this country? Take off all the tariff-taxes the
-rail-makers and transporters have _to pay out_, and could they not
-well forego the additional taxes they now impose on their
-fellow-citizens? Is there anything anywhere in the natural costs of
-Materials and Labor here to put American manufacturers at any
-disadvantage in their natural lines of business as compared with
-foreigners in _their_ natural lines of industry?
-
-Fallacy F: _that artificial tariff-burdens placed at one point may
-become a compensation for other such burdens placed at another point of
-the same general line_. This fallacy has been luridly illustrated in
-this country since 1867, when in the Wool and Woollens Tariff of that
-year additional protectionism was accorded to Woollens ostensibly to
-compensate the manufacturers for protectionism then first accorded to
-raw wools. For a number of years the woollen manufacturers had succeeded
-in persuading the wool-growers not to demand of Congress tariff-taxes on
-raw wools, thus publicly confessing that such taxes raise the prices of
-materials to the manufacturers thereof. But the wool-raisers argued
-naturally, if protectionism be good for woollens, it must also be good
-for wools; the truth was, it was equally baneful to both, and to every
-other beneficiary of it in the long run; but the wool-workers had no
-answer to the simple logic of the wool-growers,--they gave their case
-away when they alleged that _they_ could not live without government
-aid,--and so they were obliged to surrender to their already angered
-brethren of the fleeces in 1867, and higher tariff-taxes were put on the
-woollens in order to compensate the manufacturers for the anticipated
-rise in the price of wools. Of course it was supposed that the patient
-people would bear the now doubled burdens put upon them by _two_
-privileged sets of their fellow-citizens. If protectionist taxes made
-the manufacturers rich, why should they not also enrich the rural
-herdsmen? In short, why may not such taxes make everybody rich?
-
-There were those at the time, and the present writer was one of them,
-who foresaw and foretold just what has actually happened, namely, that
-both allies in this scheme of popular plunder were going in to their
-own death as well as in to the impoverishment of their countrymen. How
-would any level-headed man, capable of seeing beyond the point of his
-nose, have prognosticated in the premises? Something like this: it
-takes many kinds of wools mixed, say six or eight, to make the best
-woollen cloths, and several kinds to make good cloths at all; the
-United States could only furnish two or three kinds, and these in
-quite limited quantities; the tariff-taxes would raise the price of
-the foreign wools by just so much, to the detriment of the
-manufacturers, who could no longer buy the foreign wools, needful for
-good cloths, and must consequently drop down to inferior cloths in
-their mills, using shoddy and cotton and what not: how will that
-affect the market for native wools, especially the fine Ohio and
-Vermont wools? Only as the manufacturers are prosperous in making good
-cloths that find a quick and wide market at home, can the growers find
-a good market for their wool; from these heavy taxes on their material
-and machinery and lumber and dye-stuffs and so on, the manufacture
-will surely droop, and employ itself on poor goods from cheap
-materials, and the market for native fleeces will droop in
-consequence, and the prices of home-wools will go down and down and
-down of necessity.
-
-Precisely this has happened. The gold prices of wool were never before
-so low in this country as since the unholy alliance of 1867, and as a
-rule they have gone down lower and lower and lower. Why? Because the
-manufacturers _could_ not, under the tax-laws of their country which
-they themselves had egged on, make the cloths demanding the native
-fine wools. Sheep-raising became unprofitable. Millions of
-fine-woolled sheep were slaughtered in a few years for their pelts and
-mutton in Ohio alone. The following official table from the Department
-of Agriculture exhibits the relative number of sheep in thirteen
-States of the Union, at the two epochs 22 years apart:--
-
-  +--------------+------------+------------+
-  |   States.    | Feb. 1867. | Feb. 1889. |
-  +--------------+------------+------------+
-  | Maine        |    895,884 |    547,725 |
-  | Vermont      |  1,335,980 |    365,770 |
-  | New York     |  5,373,005 |  1,548,426 |
-  | Pennsylvania |  3,456,568 |    935,646 |
-  | Kentucky     |    933,193 |    805,978 |
-  | Virginia     |    700,666 |    435,846 |
-  | Missouri     |  1,005,509 |  1,109,444 |
-  | Illinois     |  2,764,072 |    773,468 |
-  | Indiana      |  3,033,870 |  1,420,000 |
-  | Ohio         |  7,159,177 |  4,065,556 |
-  | Michigan     |  4,028,767 |  2,134,134 |
-  | Wisconsin    |  1,664,388 |    793,146 |
-  | Iowa         |  2,399,425 |    540,700 |
-  |              +------------+------------+
-  |              | 34,750,504 | 15,475,839 |
-  +--------------+------------+------------+
-
-The effect of the tariff-taxes on wools, accordingly, even during a
-period when the population of the country increased 65 _per centum_,
-has been _to diminish the number of sheep in the hands of the farmers
-by more than one-half_. The wool clip in the entire country has indeed
-increased since 1867, but it has been in Texas and on the free ranges
-of the extreme boundaries of civilization in the West, where about one
-pound in three of the gross fleece is clean wool, and the most
-favorable estimate of the present clip would only suffice to clothe
-about one-half of the people of the country. Does this look like
-becoming "_independent_" of the rest of the world in the matter of
-woollen clothing for our great People? Will our folks never learn that
-there is nothing "_dependent_" in Buying and Selling, that the more
-any individual or nation Buys and Sells the more _independent_ they
-become of course, and that the hermit in his poverty-stricken cell is
-the best image of Protectionism?
-
-The extra barriers heaped up in 1867 against foreign woollens not only
-did not lessen their importation, but in connection with the
-discouragements thrown upon the domestic manufacture as just explained
-increased the importations; so that, in 1877, imports of woollen goods
-stood at $25,000,000; and in 1882 had increased to $42,000,000, the
-latter being an increase in one year, from 1881, of 34 _per centum_.
-The people must be clothed at some rate, and many people will have
-good cloth at any cost; and the whole result of this imbecile policy
-of Prohibitions on wool and woollens has been demonstrated right
-before our eyes, (1) to kill off the sheep, (2) to compel the
-manufacture of poor goods, (3) to multiply foreign woollens in
-domestic use, and (4) to double in general the cost of clothing the
-American People. It is difficult to say whether the grangers as a
-class, or the manufacturers as a class, or the consumers of woollens,
-are more put out by this state of things. They are all in the slough
-together, and have only themselves to thank for their condition. And
-it is growing worse and worse. As a mere and small example, less than
-one-half the amount of woollen machinery is now in operation in
-Berkshire County, Massachusetts, that was running here 15 years ago;
-and three-fourths of all the woollen manufacturers doing business in
-the County have failed in the 20 years just now past. In one word, _it
-is no compensation to one industry for artificial burdens piled upon
-it, to pile corresponding burdens upon other industries affiliated
-with it_. ALL LEGITIMATE INDUSTRIES EVERYWHERE ARE INTIMATELY
-AFFILIATED WITH EACH OTHER.
-
-Fallacy G: _that because some kinds of prosperity sometimes accompany
-and follow after Protectionism, therefore they are caused by it_. This
-is at once the commonest and the hollowest of the forms of false
-argumentation employed in this country to bolster up a monstrously
-unjust Privilege. The rapid growth of Chicago, for example, in the ten
-years following the first imposition of the Morrill tariff-taxes, was
-often referred to, as if the Taxes caused the Growth. Admitting for
-argument's sake, what would be the height of folly to admit in
-reality, that these Taxes were _among_ the causes of that Growth, how
-absurd to refer to one antecedent the result of one hundred or one
-thousand antecedents! So of the growth of national population in the
-twenty years following the Wool and Woollens Tariff of 1867:
-population increased about 65 _per centum_ in that interval:
-tariff-taxes on most of the necessaries of life increased in the same
-interval just about in the same proportion: was there any tie of Cause
-and Effect as between the rise of taxes and the rising tide of
-population? Any _tendency_ in the one to bring the other? Because one
-thing _follows_ another in point of time, is that any proof that the
-second is the _result_ of the other in point of cause?
-
-In the old classification of Logical Fallacies this particular one was
-called by the Romans "_post hoc ergo propter hoc_," that is, _after
-something therefore on account of that thing_. The thoughts and the
-speech of civilized men have always been full of some form of this
-incongruity of inference; but it is the stock in trade, the staple and
-body of protectionist argumentation. But it is utterly devoid of any
-significance whatever. Unless some natural tie of connection can be
-shown, as between precedent and consequent, unless it can be probably
-shown that _nothing but_ the precedent could cause the consequent,
-unless taxes are adapted in their very nature to increase riches,
-unless repeated subtractions can be shown to be the same thing as
-multiplied additions, then all this sickening talk of cheapening
-prices and intensified activities and diffused popular blessings under
-an odious scheme of subtle taxes that only _take_ and can never
-_give_, is to be treated with a silent and pitying contempt, whether
-used by the duped or the duping. A good instance of this empty form of
-reasoning,--much better because more uniform than any one ever sought
-to be applied in the realm of Trade,--would be this: the Day has
-uniformly followed after the Night ever since the dawn of Time, and
-therefore the Night is the cause of the Day!
-
-It has been indeed hard work to destroy the commerce utterly of a
-great People by legal restraints however multiplied and by
-mountain-barriers however piled up, and some prosperity has pushed
-itself into prominence after all these and in spite of all these.
-Behold! cry the logical protectionists, behold in such prosperity the
-_effects_ of our beautiful legislation! Immeasurable areas of fertile
-land to be had by all Immigrants for the asking; endless deposits on
-every hand of coal and of all the useful and precious metals; primeval
-forests and streams leaping with power from their mountain springs to
-mill-wheel and intervale; commodious land-locked ocean harbors on
-every side but one, and vast chains of inland "unsalted seas"; a
-salubrious climate, and an ingenious, well-trained people;
-self-organized and liberal governments, guaranteeing all rational
-liberties to the people--but one; all these antecedents and
-accompaniments go, as it were, for nothing in the minds and on the
-tongues of some of our citizens, as causes of accruing prosperity, in
-comparison with (as a cause) the commercial bondage at the one point
-possible under our liberal and blessed institutions.
-
-These are seven of the fundamental Falsities of Protectionism. They
-might easily be made seven times seven, and even seventy times seven.
-But not one of them is to be forgiven. They are unpardonable sins
-against Science and Liberty and Progress. Any radical and
-comprehensive Falsehood, like Protectionism, practically contradicts
-the Truth at innumerable points. The test of any proposed truth is its
-harmony with other and acknowledged truths: the test of any suspected
-error is its contradiction to such truths. Enough has now been said to
-settle the place of any pretended right of a part of the people
-commercially to enslave the other part, and ultimately themselves
-also.
-
-It only remains in this chapter, in the fourth place, to indicate
-briefly at a few points the course of OPINIONS in relation to
-commercial Restrictions and Prohibitions in general, such as exist at
-present in their most exaggerated forms within the United States, on
-the part of those best entitled by study and intellect and opportunity
-to form and formulate a candid judgment in such matters.
-
-In respect to the personal motive and circumstances of those combining
-to frame such legal interferences with the natural liberty of their
-contemporaries, and the inevitable results of them, we will quote
-first from Sir Thomas More, a man of men, in his Utopia, written in
-1516. "_The rich are ever striving to pare away something further from
-the daily wages of the poor by private fraud, and even by public laws;
-so that the wrong already existing, for it is a wrong that those from
-whom the State derives most benefit should receive least reward, is
-made yet greater by means of the law of the State. It is nothing but a
-conspiracy of the rich against the poor. The rich devise every means
-by which they may in the first place secure to themselves what they
-have amassed by wrong, and then take to their own use and profit at
-the lowest possible price the work and labor of the poor. And so soon
-as the rich decide on adopting these devices in the name of the
-public, then they become law. The life of the labor-class becomes so
-wretched in consequence that even a beast's life seems enviable._"
-
-The utter folly of supposing that a Parliament or a Congress or a
-Committee of either is fit to determine, or to have any voice in
-deciding, what shall or what shall not be manufactured or grown, what
-shall or what shall not be exported and imported, was never more
-happily exposed than by Adam Smith in his Wealth of Nations, published
-in 1776. "_The statesman who should attempt to direct private people
-in what manner they ought to employ their capitals, would not only
-load himself with a most unnecessary attention, but would assume an
-authority which could be safely trusted not only to no single person,
-but to no council or senate whatever, and which would nowhere be so
-dangerous as in the hands of a man who had folly and presumption
-enough to fancy himself fit to exercise it._"
-
-Alexander Hamilton, our first Secretary of the Treasury, and in some
-respects the most brilliant of all our statesmen, has often been
-claimed and referred to as a protectionist by those unfamiliar with
-his writings; but the paragraph of those writings, or the phrase of
-any authenticated conversation of his, has never been quoted and never
-can be, because they do not exist, which proves him to have been a
-"protectionist" in the modern, or any other proper, sense of that
-word. On the contrary, his deliberate and well-founded opinion in the
-premises is given at length in number XXXV of the Federalist, this
-number printed early in 1788: "_Exorbitant duties on imported articles
-serve to beget a general spirit of smuggling; which is always
-prejudicial to the fair trader, and eventually to the revenue itself:
-they tend to render other classes of the community tributary, in an
-improper degree, to the manufacturing classes, to whom they give a
-premature monopoly of the markets: they sometimes force industry out
-of its most natural channels into which it flows with less advantage;
-and in the last place, they oppress the merchant, who is often obliged
-to pay them himself without any retribution from the consumer. When
-the Demand is equal to the quantity of goods at market, the consumer
-generally pays the duty; but when the markets happen to be
-overstocked, the great proportion falls upon the merchant, and
-sometimes not only exhausts his profits, but breaks in upon his
-capital. I am apt to think, that a division of the duty between the
-seller and the buyer more often happens than is commonly imagined.
-There is no part of the administration of the Government that requires
-extensive information, and a thorough knowledge of the principles of
-Political Economy, so much as the business of taxation. The man who
-understands those principles best, will be least likely to resort to
-oppressive expedients, or to sacrifice any particular class of
-citizens to the procurement of revenue. It might be demonstrated that
-the most productive system of finance will always be the least
-burdensome._"[12]
-
-Shrewd old Benjamin Franklin, impersonation of common sense and common
-honesty, ridicules in his sly way the whole wretched business in the
-columns of the "Pennsylvania Gazette" in 1789. "_I am a manufacturer,
-and was a petitioner for the act to encourage and protect the
-manufacturers of Pennsylvania. I was very happy when the act was
-obtained, and I immediately added to the price of my manufacture as
-much as it would bear, so as to be a little cheaper than the same
-article imported and paying the duty. By this addition I hoped to grow
-richer. But as every other manufacturer, whose wares are under the
-protection of the act, has done the same, I begin to doubt whether,
-considering the whole year's expenses of my family, with all these
-separate additions which I pay to other manufacturers, I am at all the
-gainer. And I confess, I cannot but wish that, except the protecting
-duty on my own manufacture, all duties of the kind were taken off and
-abolished._"
-
-In the first congressional debate on the Tariff after the new
-Government went into operation, that is, in 1789, Fisher Ames of
-Massachusetts, who had just before made the strongest plea against the
-Molasses Tax, the raw material of New England rum, became also the
-strongest stickler there for the protectionist view, that artificial
-manufactures may properly enough fasten and fatten upon Agriculture,
-like shell-fish upon ship-bottoms, and went to the root of the whole
-matter of that inevitable antagonism in a few frank and radical words,
-the best because the most truthful words that can be found upon that
-side in the century that has followed. "_From the different situation
-of the manufacturers in Europe and America, encouragement is
-necessary. In Europe, the artisan is driven to labor for his bread.
-Stern necessity, with her iron rod, compels his exertion. In America,
-invitation and encouragement are needed. Without them, the infant
-manufacture droops, and those who might be employed in it seek with
-success a competency from our cheap and fertile soil._"
-
-Gouverneur Morris, one of the youngest and among the most gifted of
-the Revolutionary statesmen, had a clear insight into Economic
-realities. "_Whatever saves Labor rewards Labor._" "_Those who will
-give the most for money, in other words, those who will sell cheapest,
-will have the most money._" "_Taxes can be raised only from revenue:
-push the matter further, and their nature is changed: it is no longer
-taxation, it is confiscation._"
-
-FOOTNOTES:
-
-[9] See an excellent Essay on Mexican Finance by M. L. Scudder, Jr.
-
-[10] Public Statement of Professor Taussig of Harvard College.
-
-[11] See James Schouler's United States, p. 77 of Vol. I.
-
-[12] There were two other authors of some of the papers of the
-Federalist, Madison and Jay; but Hamilton's authorship of number XXXV
-was never questioned by anybody; he himself claimed it expressly with
-his other numbers a few days before he was shot.
-
-
-
-
-CHAPTER VII.
-
-TAXATION.
-
-
-Political Economy is the Science of Buying and Selling. It must
-include of course in its discussions the Motives, the Methods, the
-Obstacles, the Rewards, relating to Sales, which are themselves first
-to be defined as furnishing the sole Field of the Science. We have now
-gone through with painstaking all of these topics in order, but we
-have not yet fairly struck Taxation, which is indeed in all its forms
-an obstacle to Sales, and in some of them the annihilation of Sales,
-but which in its nature is something much more than an obstacle,
-namely, a Condition of something higher than itself. In the very
-strictest sense of the terms, Taxation is not a part of the Science of
-Political Economy, because it is not an essential part of any one of
-those natural processes by which men buy and sell and get gain. It is
-rather a Condition through Government of the successful ongoing of all
-those processes. There cannot be, therefore, a _science_ of Taxes, as
-there is unquestionably a science of Sales. The facts of Taxes are
-artificial and governmental, the facts of Sales are natural and
-original.
-
-All forms of Production, as we have now seen, go forward in accordance
-with positive natural forces and motives, which God has appointed, and
-which men have a natural impulse to ascertain and generalize and
-profit by; for it is Nature bids men work and save, buy and sell,
-invent and transport, navigate and grow rich; but Nature has given no
-whisper anywhere, at least that we can hear, about any Taxes. That is
-the work of Society. That seems to be something negative, not
-positive, so far as Buying and Selling is concerned. Taxation is
-indeed something necessary to the social order, as men are; it
-furnishes means of defence against greater evils than itself is; but
-in itself considered, it is an economic evil, because it takes away
-from exchangers a part of the gains of their exchanges; strictly
-speaking, therefore, it cannot be made a part of Economic Science.
-
-But, on the other hand, as we shall see at length in the exposition
-that follows, all the relations of Taxation from the beginning to the
-end are so ultimately connected with Exchanges, are so founded on and
-limited by Exchanges, its true principles are so exclusively
-economical, and its abuses are so instantly and constantly harmful to
-all the ongoings of natural and profitable Trade, that Taxation must
-always be treated as if it were a part of Economics. The latter is a
-science, the former is an art; but the art is almost exclusively
-dependent upon the principles of this one science; and a comprehensive
-treatise on the science, accordingly, must exhibit all its main
-bearings upon those practical rules of Taxation, which are so vital to
-the happiness and prosperity of any People. All scientific Economists,
-therefore, have considered the subject of Taxes to lie within their
-legitimate beat. They have, however, justified the inclusion upon very
-different grounds, one from another; and so far as now appears, the
-present writer was the first technical Economist to disclaim in the
-name of his Science direct jurisdiction over Taxation.
-
-A careful discussion of a series of distinct though related Questions
-belonging to Taxes will exhibit the whole practical matter in the
-light of well-established principles of economical Science.
-
-1. What is the fundamental GROUND of Taxes? _Government_ is an
-essential prerequisite to any general and satisfactory Exchanges,
-since it contributes by direct effort to the security of person and
-property; and justly claims, therefore, from each citizen a
-compensation in return for the Services thus rendered to him. We do
-not mean to say that government exists solely for the protection of
-person and property, or that all the operations of government are to
-be brought down within the sphere of exchange, for government exists
-as well for the improvement as for the protection of society, and many
-of its high functions are moral, to be performed under a lofty sense
-of responsibility to God and to future ages; nor do we mean to say
-that government has not also a deep ground for its existence, in
-virtue of which it may on extraordinary occasions demand all the
-property of all, and even the lives of some, of its citizens; but we
-do mean to say that, whatever may be conceded as the ultimate ground
-of government, the matter of taxation, by which government is
-outwardly and ordinarily supported, and by which it takes to itself a
-part of the gains of every man's industry, finds a ready and solid
-justification in the common principles of Exchange. If, as far as the
-tax-payer is concerned, the exchange does not seem to be voluntary, on
-a closer analysis it is seen to be really voluntary; for in effect the
-people organize government for themselves, and voluntarily support it,
-and there is no government separate from the will of the people.
-
-In a very important sense, accordingly, a tax paid is a reward for a
-service rendered. The service which government renders to Production
-by its laws, courts, and officers, by the force which it is at all
-times ready to exert in behalf of any citizen or the whole society
-when threatened with evil in person or property, is rendered somewhat
-on the principle of division of labor, one set of agents devoting
-themselves to that work; and, notwithstanding some crying abuses of
-authority which no constitution or public virtue has yet been found
-adequate wholly to avert, is rendered on the whole economically and
-satisfactorily. Taxes, therefore, demanded of citizens by a lawful
-government which tolerably performs its functions, are legitimate and
-just on principles of Exchange alone.
-
-2. What is the SOURCE out of which Taxes are actually paid? The answer
-is, out of the gains of Exchanges of some sort. Gifts aside, and
-thefts which are out of the question, no man ever did, no man ever
-can, pay his taxes, except out of the gains of some sales which he has
-already made. Even the man who lives wholly on the interest of his
-money must make a true exchange in lending it (a credit transaction),
-and must already have gotten his return-service in interest, before he
-can pay his taxes; personal and professional servants must receive
-their wages, the outcome of exchanges, before they can possibly pay
-their taxes; and men can realize nothing for taxes or other payments
-from their farms or foundries or stocks in trade except as they sell
-either them or their products. The more sales, the more gains, and the
-greater reservoir whence taxes may be drawn. Political Economy, as the
-vindicator of sales, as the defender of all legitimate gains
-whatsoever, is the best possible friend of tax-payers and
-tax-gatherers as such. Whatever thought or force restricts sales,
-makes it _pro tanto_ the harder to pay and collect taxes, so much the
-harder for a government to keep its head above water and reach the
-ends of its being.
-
-It follows from all this, by a necessary inference, that the annual
-Taxes of any country must come out of the annual Earnings of the
-people of that country, using the word "earnings" in its general and
-proper sense. The greater the earnings _per capita_, the easier are
-the taxes paid. Sir Richard Temple read an address not long since in
-the Section of Economic Science and Statistics of the British
-Association, some of whose results are not only interesting but also
-astonishing. For instance, taking the whole population of the United
-Kingdom (England, Scotland, and Ireland), without division into
-classes, he demonstrates that the average of yearly earnings per head
-of the population is £35 4_s._, or $171.28. This exceeds the average
-earnings in the United States by 30%, £27 4_s._:£35 4_s._ It exceeds
-also the average on the Continent of Europe by 95%, £18 1_s._:£35
-4_s._ It falls below that of Australia only, £43 4_s._:£35 4_s._, or
-19% less. Canada's average earnings _per capita_ are $126.80, or 5%
-less than those in the United States, £27 4_s._:£26 18_s._ According
-to the same unimpeachable authority in the same paper, the annual
-income from investments is in Great Britain and the United States as
-nearly as possible one-seventh of the aggregate Property in each (all
-kinds), or 14%. In Canada and Australia, 18% and 22% respectively.
-Undoubtedly the most profitable country in the world at present is
-Australia, and Great Britain stands next. The only apparent reason why
-the United States, whose natural resources of every kind are vastly
-superior to either, takes the third rank is, that profitable exchanges
-here are forcefully suppressed by law, and that to an enormous extent,
-neutralizing natural resources and glorious opportunities for easily
-acquired and widespread gains. This violent suppression of commerce by
-national legislation makes it just so much the harder for any man to
-pay his taxes, whether these be due to Nation, State, or Municipality.
-If the reservoir be diminished the flow from it through every pipe
-becomes feebler.
-
-3. In what PROPORTION ought the individual citizens to contribute to
-the fund annually necessary to be raised by Taxation? The usual
-answer has been, that a man should be taxed according to his
-_Property_. That is the radically correct answer, though most who have
-given it have not understood clearly the meaning of the word
-_property_. We have already seen that the ultimate idea of property is
-the power and right to render services in exchange, and defined it as
-_anything that can be bought and sold_. Robinson Crusoe, while
-solitary upon his island, did not and could not have property, in the
-true sense of that word. It is not the fact of appropriation that
-makes anything property; it is not the fact that a man has made it or
-transformed it, that makes anything property; it is not the fact that
-a man may rightfully give it away, that makes anything property; but
-it is the fact that a man has something, no matter what it is, for
-which something else may be obtained in exchange, that makes that
-something property, and gives government the right to tax it. In other
-words, property consists in Values, in a purchasing-power, and not in
-possession, or in appropriation, or in the esteem in which a man holds
-anything he has as long as it is his own.
-
-The test of property is a sale; that which will bring something when
-exposed for exchange is property; that which will bring nothing,
-either never was, or has now ceased to be, distinctively property.
-This view may not seem to be as novel as it is, or it may be
-prejudiced by its very novelty, but at any rate it carries along with
-it that strongest of the criteria of truth, that it simplifies and
-illumines a confused section of the field of human thinking; and at
-the same time justifies a practice which governments have reached, as
-it were through instinct, the practice, namely, of taxing men who have
-neither real estate nor chattels, on their incomes from industry and
-from credits.
-
-To the general question, then, in what proportions shall the citizens
-contribute in taxes to the support of government, the general answer
-comes, that they ought to contribute _in proportion to the gains of
-their exchanges_, of whatever kind they may be. The farm, the foundry,
-the mill, the railroad, the real estate of every name; personal
-property of every kind; and personal acquirements and efforts of all
-descriptions, best appear, for the purposes of taxation, _through the
-gains realized by means of them_. If, for any reason, any of these
-become unproductive, taxes should cease to be derived from them;
-indeed, must cease to be derived from them, because their owners can
-no longer pay by virtue of them. It may be objected that lands, for
-example, presently unproductive, may be held untaxed under this
-principle, held for the sake of a prospective rise of price. Very
-well; when they are sold at a profit, let the owner be taxed on that
-profit: it will be time enough then, especially as men do not like to
-hold unproductive forms of property. It may also be objected, that,
-under this principle, wages, the result of personal and professional
-exertion, would be taxed just the same as profits and rents, the
-result of previously accumulated property. Very well; they ought to be
-so taxed. Can anybody give a solid reason why they ought not to be so
-taxed? One may say, that a professional man earning a large income, on
-which taxes are paid the same as on a similar income of a land
-proprietor, dying, leaves to his children no further means of earning,
-while the land-proprietor, dying, does leave such means. Granted; but
-the land income continues to pay taxes, while that professional income
-does not! Other members of the profession will do the business which
-the former one would have done had he lived, and they will pay taxes
-on the income from it. What a man transmits to his children, whether a
-great name or a great estate, has nothing to do with the amount of
-taxes that he ought to pay while he lives.
-
-There is an illusion about lands and real property that needs to be
-dissipated before men will understand clearly the whole matter of
-Taxation. Without constant watchfulness and foresight, without
-constant efforts in improvements and repairs, almost every form of
-realized property will rapidly deteriorate and become unproductive.
-Land even in Great Britain, where land is scarce, is only worth about
-twenty-five years' rent; and without the exercise of intelligence and
-will property ceases to be. _Property has its birth in services
-exchanged; services exchanged give rise to gains; taxes can only be
-paid out of these gains; they ought to be proportioned to the amount
-of these gains without any reference to the class of exchanges
-producing them; while the right to tax on the part of the government
-is connected with a service rendered by government, and both grows out
-of and is limited by the right to exchange on the part of the
-citizens._ These considerations, though they may exclude the propriety
-of a poll-tax, are consistent with most other forms of taxation, and
-give unity to them.
-
-4. Does it not follow from all the preceding, that a single and
-universal INCOME-TAX would prove the best form of what is in its own
-nature a subtraction from the gains of the governed for the
-maintenance of Government? If the approximate amount of Income could
-in all cases be ascertained, and if no other form of tax were levied
-upon the same persons, this would seem to be a perfectly
-unexceptionable mode of Taxation. The only sources of Income are
-three: Wages, Profits, Rents. It does not seem that gifts are
-legitimately taxable; they lie outside the field of exchange; they
-spring from sympathy, from benevolence, from duty; and while exchange
-must claim all that fairly belongs to it, it must be careful not to
-throw discouragements into the adjacent but distinct fields of
-morals. Hence, it may well be questioned whether legacies,
-bequeathments, gifts to charitable and educational institutions, and
-gifts to individuals proceeding from friendship, gratitude, or other
-such impulse, are properly subject to taxation. The property is
-taxable in the hands of the donor, and may be in the hands of the
-recipient, but the passage from one to the other ought to be
-unobstructed by a tax. Gifts, then, excepted, and plunder, which is
-out of the question, the sources of income are few and simple, and
-there is no great difficulty in every man ascertaining about what his
-annual income is. Because this income, exactly ascertained, exactly
-measures the gains of his exchanges for that year, a tax upon that
-income is the fairest of all possible forms of taxation, and might be
-made with advantage, in time, to supersede all other forms.
-
-Superficial objections may be easily raised, and are raised constantly
-in the United States, against any form of an income-tax. Reference is
-often had to our national experience with such a tax during and just
-after the late Civil War. The truth is, that tax was thrown on in
-addition to, and in no proper relations with, a large number of other
-national taxes of all sorts, good and bad; it was no possible
-experiment in Taxation, because there was no opportunity of watching
-its operation separate from that of other and confused forms; industry
-of all kinds was demoralized by the war, and still more by a
-depreciated and abominable paper money made legal tender for all
-debts; and the tax became unpopular in influential quarters for
-certain reasons not inherent in the nature of the tax, and was
-discontinued in consequence. In order to be fairly tested, an
-income-tax should either be exclusive, all other taxes being
-intermitted for the time being; or at least levied simply in itself in
-connection with a few other simple taxes, each of which can be watched
-in its incidence and results separately from the others.
-
-Great Britain derives its national revenues almost wholly from five
-sources; namely, (1) Excises, say £27,000,000 annually; (2) Customs,
-say £20,000,000; (3) Incomes, say £12,000,000; (4) Stamps, say
-£12,000,000; (5) Postals, say £9,000,000. The remaining, say
-£10,000,000, come from miscellaneous sources. One feature of the
-English Income-tax is, that it is varied from time to time according
-to prevailing national needs, the rate having been lifted from 2_d._
-to 16_d._ per pound of income, according to estimated expenditures. In
-1857, it realized in our money $80,255,000. In 1866, the largest year,
-our own national income-tax realized $60,894,135. By varying the rate
-to the pound of income according to the prospective wants of the
-Exchequer, the English have found for about forty years their
-income-tax to be the most uniform, unfailing, expansive, and
-responsive to control, of all their fiscal expedients.
-
-The Prussians, too, are applying an income-tax as a means of raising
-revenue with good success. There, as in England it is somewhat
-complicated with other kinds of taxes, and cannot exhibit itself
-altogether in its own nature as if it were _exclusive_, such as all
-scientific economists would like to see it tried somewhere on a large
-scale; and the Germans have a different method from the English, of
-making the tax more or less flexible as circumstances vary. The
-English change the _rate_ of the tax to the unit of income: the
-Germans _graduate_ the tax to different classes of income-receivers.
-For example, those persons having an income between 420 and 660
-_marks_ a year pay 84 pennies (_pfennige_) as income-tax; persons in
-the next higher class pay 164 pennies a year; those in the class,
-whose maximum income is 6000 marks, pay 44 marks and 80 pennies a
-year; and all persons whose income does not rise above 420 marks are
-not subject to this tax. On account of hard times a few years ago,
-Bismarck brought it about, that all the classes included between 420
-and 6000 marks of income should be wholly exempted from one-quarter's
-taxes. A _mark_ is 23.82 of our cents; and a _pfennig_ is
-one-hundredth of a mark.
-
-Besides the complete harmony of an Income-tax with the general
-principles of Taxation, as already unfolded, it has several specific
-advantages over other forms of Taxes.
-
-a. It has no tendency _to disturb prices_. Were there no taxation
-except on Incomes, and were all the incomes rightly ascertained, the
-prices of everything would be just as if there were no taxes at all.
-Taxation would then be like the atmosphere, pressing equally on all
-points and consciously on none. It is through tricks wrought on
-Prices, that the greatest and most widely spread injustices have been
-done and suffered in this country during the past thirty years: a
-depreciated Money, whether of paper or silver, raises some prices and
-not others, and some prices before others, and thus distributes its
-mischiefs unequally; protectionist tariff-taxes play of design
-fantastic tricks with prices, raising some and depressing others, thus
-working monstrous injustice on a vast scale; and almost all forms of
-taxation become unequal and unjust through their diverse action on
-Prices. But a universal Income-tax exclusive of all others, properly
-levied and fully responded to by the payers, would have no influence
-at all upon prices, could by no possibility work essential injustice,
-and would be certain to be very productive without becoming
-burdensome.
-
-b. A second great advantage of such an Income-tax in such a country as
-this, would manifestly be, that all men would be obliged to keep exact
-pecuniary accounts; more orderly methods of Business would generally
-prevail; most men would know much better than they do now how they
-stand themselves, and whom of others to safely trust; sudden
-commercial failures, indeed failures at all, would be less frequent
-and severe; and everything in the business world would be more
-aboveboard and better known.
-
-c. A third advantage of such an Income-tax, and the chief, would be
-its tendencies _to fiscal simplicity_. Complexities in the Exchequer
-are always and in many ways expensive to the People. In this country,
-where distinct taxes have to be paid, first to the local municipality,
-then to the State, and last to the Nation, Income-taxes, were all
-others abolished, would have this striking advantage, that the local
-municipality might best ascertain the incomes of all its legal
-residents once for all, no matter from what sources local or other the
-incomes be derived; and, having collected its own local _per centum_,
-the State and then the Nation would each have to collect an additional
-_per centum_ on the same income for themselves. Or, better still, by
-an amicable arrangement, neither party yielding up its inherent right
-to tax, one set of officials might ascertain the incomes and also
-collect the tax for all three governments once for all. It may be
-long, it doubtless will be, before we shall ever come to such economy
-and simplicity and fiscal beauty as this is; for the pride of
-sovereignty is very strong both in State and Nation; each is jealous
-of the powers of the other, each is fond of the pelf and patronage and
-officialism connected with the gathering of the taxes, and each would
-be disinclined to yield anything to the other; but the fact remains,
-that, as it is of acknowledged moment to have the single Cæsar's image
-and inscription on every piece of the national Money, so it is of
-almost equal moment in point of cheapness and clearness and simplicity
-to have the hand of Cæsar seen but once in taking in the Taxes.
-
-Objection has been often raised to any form of Income-tax from the
-publicity of private affairs resulting from it. It was just this that
-proved fatal to our own first experiment along this line of national
-action. But there seems to be some confusion of ideas in connection
-with this phrase, "publicity of private affairs," for really, so far
-as taxation is concerned, there ought to be nothing "private" about
-the amount of any man's income, or the aggregate of all forms of his
-property, inasmuch as every man has a _right_ to know, that all his
-neighbors are contributing _pro rata_ with himself to support that
-Government, which is _common_ to him and them. There is nothing, at
-least there should be nothing, "private" in connection with
-Government; that is the one absolutely "_public_" thing of the world;
-least of all should there be anything private in the matter of public
-taxes, since in bearing up the burdens of Government all the citizens
-are alike copartners, and in this view and for this purpose each has a
-right to demand a look into the books of all the others.
-
-Another objection has often been raised, namely, that some men will
-never give in a true return of their Income. Ah! but they can be made
-to do so, as the forms are perfected, as fraudulent returns are
-promptly punished by additional assessment and collection, and as the
-memory and conscience of the payers are quickened by the action of a
-healthful public opinion brought to bear through the annual
-publication of the list of their returns. Men are not so isolated from
-each other as that a man's neighbors do not know pretty well the
-general amount of his income. There is the additional security of an
-oath, of the fear of punishment, and of the wish to stand well with
-one's class. At the worst, it may be said, that evasions and fraud
-accompany also all other forms of Taxation.
-
-5. What is the difference between DIRECT and INDIRECT Taxes? This is
-an old and proper division: we must now see what is the economical
-basis of it. A direct tax is levied on the very persons who are
-expected themselves to pay it; an indirect tax is demanded from one
-person in the expectation that he will pay it provisionally, but will
-indemnify himself in the higher price which he will receive from the
-ultimate consumer. Thus an income tax is direct, while duties laid on
-imported goods are indirect. There has been a great amount of
-discussion on the point whether direct or indirect taxation be the
-more eligible form; but the reader of penetration will perceive that
-there is not at bottom any very radical difference between them; each
-is alike a tax on actual or possible exchanges, with this main
-difference, that men pay indirect taxes as a part of the price of the
-goods they buy, without thinking perhaps that it is a tax they are
-paying, and consequently without any of the repugnance that is
-sometimes felt towards a tax-gatherer who comes with an unwelcome
-demand. Thus indirect taxes are conveniently and economically
-collected. Especially is this true of impost taxes; since one set of
-custom-house officers may collect easily and at once the government
-tax which is ultimately paid by consumers all over the country. The
-taxes also levied by the present United States internal revenue law
-are indirect taxes, whereby the government gets in a lump what is
-afterwards distributed over many subordinate exchanges. The
-countervailing disadvantage of indirect taxation, however, is, that
-the price of the commodity is usually enhanced to an extent much
-beyond the amount of the tax, partly because it is a cover under which
-dealers may put an unreasonable demand, and partly because the tax,
-having to be advanced over and over again by the intermediate dealers,
-profits rapidly accumulate as an element of the ultimate price.
-
-Direct taxes are laid either on Income or Expenditure. As the
-difficulty of a tax on a person's whole expenditure is much greater
-than one on his whole income, inasmuch as the items are more numerous
-and more diffused, it is only attempted to levy a few taxes on some
-special items of expenditure, such as those on horses, carriages,
-plate, watches, and so on; but as these do not reach all persons with
-any degree of quality, they are so far forth objectionable. A
-house-tax, levied on the occupier, and not on the owner, unless he be
-at the same time the occupier, would be a direct tax on expenditure
-every way unobjectionable. Taking society at large, the house a man
-lives in and its furniture are probably the most accurate index
-attainable of the size of his general expenditures. They are open to
-observation and current remark; they are that on which persons rely
-more perhaps than on anything else external for their consideration
-and station in life; the tax could be assessed with very little
-trouble on the part of the assessor; and it is well worthy the
-attention of our State and National Legislatures, whether such a tax,
-if more taxes should be needed, would not be more equal and more easy
-of collection than any others now open; or whether it might not with
-advantage take the place of some of the complicated and objectionable
-taxes now laid. Direct taxes have this general advantage over
-indirect, that they bring the people into more immediate contact with
-the government that lays the taxes, and subject it to a quicker
-supervision and more effectual curb, whenever its expenditures grow
-larger than the people think it desirable to incur; perhaps they have
-this general disadvantage over indirect taxes, especially over
-imposts, that the number of officials required to assess and collect
-them is larger, thus swallowing up a part of the proceeds of the
-taxes, with this liability also of bringing the people into an
-attitude of hostility to the government and to its contemplated
-expenditures. But whether the taxes be direct or indirect, or
-whatever be their form, except it be a poll-tax, which is questionable
-at best, they are laid upon Exchanges, and are designed to withdraw
-for the use of the government a part of the Gains of exchanges.
-
-6. Are CREDITS a legitimate subject of Taxation? The answer is very
-easy. Unless this whole treatise from beginning to end be unsound,
-Credits stand upon the same economical grounds as Commodities and
-Services, and so may be taxed for the same reasons as those may be
-taxed. Whatever is bought and sold is properly enough taxed, if the
-needs of the government require it, and if such taxation would be
-productive and not too unequal. As Values always spring from the
-action of individuals, so the incidence of taxes is upon persons
-rather than upon things; and the question is what can a man sell, or
-what has he already sold, on the gains of which sale the government
-may lay some claim? If I have a note and mortgage on my neighbor's
-farm, I can sell it at any time to a third party; it pays me interest
-_ad interim_, and I can collect it at maturity. Government therefore
-properly taxes me for that credit in my possession. It is a part of my
-property. The holders of the government bonds occupy an economical
-position exactly similar. They have a lien on the national property
-and income. The credits they hold are vendible commodities. They are a
-paper bearing interest. They can be collected at maturity. They are
-indeed exempted by law from municipal and State taxation. That was a
-legitimate inducement held out to everybody alike to invest in the
-bonds. But there is no reason why the nation, having withdrawn them
-from town and State taxation, should not itself all the more subject
-them to their fair share of the national burdens, unless indeed it be
-claimed, as perhaps it fairly may be, that the exemption enables the
-government to borrow at a just so much lower rate of interest. The
-income at any rate derived from the bonds should be taxed as soon as
-any other income is. It is no longer any ground of merit, even if it
-ever has been, for persons to buy the government debt. It is a
-mercantile transaction, and should be so considered in relation to
-taxes. So of other mercantile credits. They are taxable. Massachusetts
-has had a great deal of trouble of late years both in the Legislature
-and otherwise about the taxation of mortgages on taxed Massachusetts
-farms and other real estate. The question is intricate and full of
-difficulty. Some things about it, however, are clear. The note and
-mortgage is a different _piece_ of property, and a different _kind_ of
-property, from the real estate. It is a peculiar sort of credit. The
-owner of it is a different person from the owner of the real estate.
-Either bit of property may change hands without changing the _status_
-of the other. The question of taxing the note and mortgage, like the
-question of taxing the bonds, seems to hinge on the effect it would
-have on the rate of interest of the obligation secured by the
-mortgage. If the holder of the mortgage expects to have to pay a tax
-upon it, he will try to get a higher rate of interest on his money
-loaned and thus secured. Whether mortgagees taxed as such _can_ throw
-off the tax upon the mortgagors in a higher rate of interest on the
-money loaned is a point much disputed and at least doubtful. General
-principles would lead us to favor the taxation of note and mortgages
-in the hands of their holders, so long as such cumbersome forms of
-taxing as prevail in Massachusetts are maintained. A universal
-income-tax would solve this difficulty also in a moment of time.
-
-7. Has Political Economy anything to say about the RATE of taxes per
-unit of that which is subject to tax? Yes; it has an important word to
-say upon that point. From the very nature of Taxes in general, and in
-order that they may be most productive in the long run, as well as
-discourage as little as possible the Exchanges which would otherwise
-go forward, the Rate of taxes ought always to be _low_ relatively to
-the amount of Values exchangeable. A high rate of tax not infrequently
-stops exchanges in the taxed articles altogether, and of course the
-tax then realizes nothing to the government. As the only motive to an
-exchange is the gain of it, the exchange ceases whenever the
-government cuts so deeply into the gain as to leave little margin to
-the exchangers. The greater the gain left to the parties, after the
-tax is abstracted, the more numerous will the exchanges become, and
-the greater the number of times will the tax fall into the coffers of
-the government. In almost all articles, consumption increases from a
-lowered price in even a greater ratio than the diminution of the rate
-of tax; so that the interests of consumers and of the revenue are not
-antagonistic but harmonious. On articles of luxury and ostentation,
-and on those, such as liquors and tobaccos, whose moral effects are
-clearly questionable, very high taxes may properly enough be laid,
-because their incidence will hardly tend to diminish consumption, and
-it would scarcely be regretted if it did; but with this exception,
-duties and taxes should be levied at a low rate _per centum_ as well
-for the interest of revenue as of consumers. It is to be added,
-however, that the taxes even on these articles may be too high to meet
-either a revenue or a moral purpose. The internal tax of two dollars a
-gallon upon distilled spirits was of this character. Experience has
-demonstrated that a less tax will produce more revenue, and the
-drinking of whiskey, bad as that is, is less culpable than the endless
-frauds on the government provoked by the high tax.
-
-8. What is the difference between SPECIFIC and ADVALOREM Taxes, and
-why should the student take careful note of these both singly and
-combined? These terms are used more particularly in relation to
-Tariff-taxes, but there is nothing in the distinction itself so to
-limit its application. A Specific tax is a tax of so many cents or
-dollars on the pound, yard, gallon, or other _quantity_ measurable: an
-Advalorem tax is a tax of so much _per centum_ on the invoiced or
-appraised _money value_ of the goods subject to the tax. Specific
-taxes, accordingly, are far simpler and steadier in their operation
-than the others; it is easy to ascertain the weight or number or other
-quantity of valuables, and then to apply a fixed ratio to them in the
-way of tax; the payer knows or may know beforehand precisely how much
-the tax will amount to, and consequently just how it is to affect the
-profitableness of his current trade; and on these and other grounds
-specific taxes are preferable to advalorem ones. To be sure, this form
-of tax involves that high-priced grades of an article pay no higher
-taxes than low-priced grades of the same, but this consideration is
-largely overbalanced by those of convenience and productiveness.
-
-Advalorem taxes, on the other hand, are never calculable beforehand;
-because Values from their nature are variable, and as a matter of fact
-do constantly vary. Imported goods, for instance, bring with them the
-invoice of the seller giving the values at the place of exportation.
-But the importer is by no means sure that the tax will be levied upon
-that valuation. The home valuation will of course be higher, otherwise
-the goods would not be imported. Whenever it becomes the policy of a
-country, as of the United States at present, to keep foreign goods
-_out_ to the utmost extent possible under the law, which law is itself
-devised on purpose to keep them out, there will always be suspicions
-and charges of undervaluations at the place of export; there will
-always be a motive on the part of the foreign seller or agent thus to
-undervalue the goods in the interest of the importer, so as to lessen
-his tax, and so increase the seller's market; such abnormal
-tariff-taxes are the enemy of mankind in general, and, therefore,
-there will be no end of deceits and evasions at both terminals of the
-ocean-route, and "custom-house oaths" will become a by-word of course;
-the importing, or rather the non-importing, country will keep in pay
-an army of spies and informers on both sides of the water in order to
-prevent what is called "frauds," and another army of "appraisers" at
-its custom-houses in order to discredit the invoices, and to jump at a
-valuation of the goods, on which the tax shall be levied; and
-honorable merchants and importers, without any fault of their own, are
-liable to get entangled in the miserable meshes of such goings-on, as
-happened in a memorable case in New York a few years ago, and be
-mulcted in fines (perhaps to immense amounts) one-half of which shall
-go to the informer.
-
-There are too many practical difficulties connected with either of
-these two forms of tax to make it proper to combine the two upon the
-same article of merchandise. To combine them thus is one of the tricks
-and traps of Protectionism. That makes it next to impossible for any
-importer to tell beforehand what the two taxes will aggregate, and
-quite impossible for any ultimate consumer to tell how much of his
-price paid is due to the demands of his Government. Opening the
-official tax-book at random, we quote as follows from a single page:
-"Webbings, pound 50 cents, and 50 per cent"; "Buttons, pound 50 cents,
-and 50 per cent"; "Suspenders, pound 50 cents, and 50 per cent";
-"Mohair cloth, pound 30 cents, and 50 per cent"; "Dress trimmings,
-pound 50 cents, and 50 per cent." Besides these, on that same page,
-there are 14 other articles under similar compound taxes, mostly at
-50 cents a pound and 50 per cent additional, this as under the Tariff
-as it was 1874-83; but all these 18 articles were put in 1883 at
-"_pound 30 cents, and 50 per cent_."
-
-9. What are the economical reasons for an EXCISE or INTERNAL-TAX in
-connection with Tariff-taxes for revenue? A tariff-tax, whether for
-revenue or other purpose, raises the price by so much of the article
-subjected to it and actually imported; now, if similar articles of the
-same quality be made or grown at home, and be not subjected to a
-corresponding tax, these will inevitably rise to the price of the
-foreign, with the tariff-tax added, for there is no possible
-competition or conceivable impulse that can keep it lower than that;
-so that, in that case, the government gets in revenue, only the taxes
-paid on the part imported, while the people are compelled to pay in
-addition virtually the same taxes on all that part produced at home.
-Why should not the government have the proceeds of the last as well as
-of the first? The last is the direct result of the first. If now, a
-corresponding excise-tax be put on the domestic product also, the
-government will get in revenue all that the people are obliged to pay
-in consequence of government-tax. This is just: the other is wantonly
-unjust.
-
-Take an illustration, please. The national Census of 1890 gives the
-Pig-iron production of the Census year as 9,579,779 tons of 2000 lbs.
-each. This is an increase over the production of the Census year,
-1880, of 255 _per centum_,--3,781,021:9,579,779. Fortunately the
-present Census adds the net imports for the two years respectively,
-with these results: the _per capita_ consumption of Pig-iron in 1880
-was 196 lbs., of which 126 was home production, and 70 of foreign
-import; while in 1890 the consumption was 320 lbs. _per capita_, of
-which 299 was domestic, and 21 foreign. That is to say, in 1880, 65%
-of the pig-iron consumed in this country was of home production, and
-35% was of foreign production. At that time the tariff-tax on imported
-pig was $7 per ton. Government secured this tax on a little more than
-one-third of what was consumed, while a small circle of citizens
-banded together for that purpose secured for themselves this tax on
-the remaining two-thirds of all pig-iron consumed that year, _and the
-whole people paid the tax on the entire three-thirds_. As we shall see
-fully a little further on, our national Government has no
-constitutional or other right to tax the people one penny except to
-supply its own needs as such; if, therefore, the $7 impost per ton
-were put on as a legitimate tax, there should have been an _excise_ or
-internal-tax to the same amount put on the pig-iron produced at home.
-That would have cost the people no more, and the Government would have
-gotten twice as much more as it did get from the tax. If there be an
-axiom in Taxation, one point indisputable by any rational human being,
-it is this: _The Treasury should receive all that the people are made
-to give up under a public tax._
-
-In 1890, this particular matter came to be much more flagrant. Only 21
-parts out of 320 parts were in that year foreign pig-iron; that is, a
-little less than 7%, while 93% was domestic pig-iron; the tariff-tax
-at that date was .3 of a cent per pound, or $6.72 per ton of 2240
-lbs.; the tax was sufficient practically to exclude foreign pig,
-although the Scotch pig as more fluent is very much desired here in
-some branches of the iron manufacture, particularly in making steel
-rails; Government received the proceeds of its own tax on only
-one-fourteenth of that, which really paid the tax on its whole
-fourteen-fourteenths; where did the tax on the thirteen-thirteenths go
-to? If this were a matter of genuine taxation, ought there not to have
-been an _excise_ on the domestic corresponding to the _impost_ on the
-foreign?
-
-Precisely that is what we do in the case of other articles not
-_protectionized_. For example, in the fiscal year 1889, the excise or
-internal-tax on "distilled spirits and wines" realized to the Treasury
-$74,312,200, and the tariff-tax on the same realized $7,123,062,
-total, $81,435,268; on "malt or fermented liquors" the same year, the
-excise was $23,723,835, the impost only $663,337, total, $24,387,172;
-and on "tobacco" the excise was $31,866,860, the impost $11,194,486,
-total, $43,061,346. These figures are official.
-
-An ostentatious display of private figures and price-lists is often
-made, with a design to show that the prices of home-made products
-protectionized are not lifted so high to consumers or buyers as those
-of foreign-made products with the tariff-taxes added. The main
-sophistry in these figures is this: the pure assumption, that the
-_quality_ of the home-made products alleged to be cheaper than the
-tax-added price of the foreign, is _the same_ as that of the foreign.
-Unluckily, things are often called by the same names, and even
-described by the same technical terms, which are very different sorts
-of things in reality. A subordinate sophistry in these figures, often
-allowed to pass, but not requiring any sharp insight to detect, is,
-that the selected price-lists are not the results of an average
-extending throughout years, but are _picked_ at points when (owing to
-other causes than the taxes) the current prices of protectionized home
-products are lower than the average of the years. One easy way to
-expose the putters-forth of these figures, as not themselves really
-believing in them, is, gravely to propose to lower or remove the
-tariff-taxes, which (it is alleged) do not have the effect to lift
-much, if any, domestic prices. This simple experiment has several
-times been tried, with ludicrous effect upon the figure-mongers; they
-cannot spare one iota of present taxes on foreign products: if the
-smallest fraction be removed, they can no longer make and vend their
-wares; indeed, heavier tariff-taxes are needed at this very moment, in
-order to lift the domestic prices higher; and, presto! another set of
-figures are forthcoming at once to prove the disabilities, either in
-respect to Labor or Capital, under which the poor protectionized
-producers are staggering in order to keep the home market!
-
-Another complete refutation of the false position of the
-protectionists, namely, that the domestics are not lifted in price on
-the average to the price of the foreigns of the same quality with the
-tariff-taxes added, is their utter failure and inability to project
-any reason in the nature of things or the motives of men, why the
-_home-prices should_ NOT _be thus lifted_! What impulse, pray, on the
-earth or under the earth, can serve to depress them on the whole
-average _below_ that point? Does any one say, that "domestic
-competition" will depress and keep depressed the prices of home goods
-of the same grade below the prices of the foreign taxes paid? Did this
-astute objector ever hear of "domestic combination" to keep prices up
-to the highest possible point? To shut down mills and factories, to
-avoid depressing prices? To sell surplus stocks abroad for what can be
-gotten for them, in order to make prices at home up to the usual
-scarcity point? In July, 1890, the Boston Commercial Bulletin, the
-special organ of Protectionism in New England, and special spokesman
-for the wool-and-woollens industry, spoke thus of that industry, after
-30 years of public hiring the growers and manufacturers to carry it on
-with a _bonus_, just at a time when the worsted tariff-taxes had been
-advanced, alleged custom-house frauds stopped, and still higher
-tariff-taxes on their way from the so-called McKinley Bill in
-Congress: "_The woollen goods industry was probably never in much
-worse condition in this country. The slowness of its development may
-be judged from the fact, that, despite an average yearly increase of
-over a million in population, the increase in the number of wool cards
-in this country is less than a hundred a year, while the proportion of
-woollen machinery shut down between June 1 and September 1 bids fair
-to be the largest ever known. The market is dull, deadly dull. The
-large amount of silent machinery is making its presence felt. The
-sluggish sales of wool are due to most of the big mills being closed.
-Depression in business is the cause of so many woollen mills closing,
-and the news comes this week of four woollen mills, three in the Bay
-State and one in Pennsylvania, that will close for periods ranging
-from two weeks to several months._"
-
-Not only is it true, that the purpose and usual effect of tariff-taxes
-is to hoist the price of domestics protectionized up to the limit of
-the corresponding foreigns with the taxes added, but it sometimes
-happens that the home products are carried for considerable periods at
-a level a good deal above that. A conspicuous instance of this,
-commented on at the time by all the Boston papers, was brought to
-notice a couple of years ago in connection with the steel beams
-purchased by the city for the new and noble Boston Court-House. The
-beams were bought in Belgium at $28 a ton, paid at the Boston
-Custom-house "_one and one-fourth cents a pound_," that is, just $28 a
-ton, making their cost to the city $56 a ton. But domestic steel beams
-of the same general description were selling here at $73 a ton. Their
-price had been raised here twice in one summer, about fifty cents a
-ton each time. One of the conglomerated curses of cutting off by law
-the natural competition in such products is, that the unnatural
-competition still permitted by law is sluggish in coming into
-operation, and the monopoly becomes even more such than was intended
-by the law.
-
-The tariff-tax on steel rails is $17 a ton, formerly $28 a ton,
-proposed in the McKinley bill to be reduced to $11.20 a ton. That
-even this last is wholly needless, or any tax at all on steel rails,
-is proven by the fact, that in March, 1890, Pittsburg rail-makers sold
-5000 tons of rails at Vera Cruz at lower prices than the corresponding
-European rails were offered for in Mexico. Another fact that proves
-the same thing is this: James M. Swank, the mouth-piece of the
-Pennsylvania iron and steel interests, describes the year 1885 as one
-of unprecedented prosperity in the steel-rail industry, and gives a
-formidable list of new establishments opened in that year. But steel
-rails were much lower in that exceptional year than in any year before
-or since. A tariff-tax of $5 a ton would have been in that year
-absolutely prohibitory, for steel rails were worth less than $28 a ton
-the greater part of that year. Yet that very year was the year of
-greatest prosperity, Mr. Swank being the competent witness! But the
-fact in general, which ought to overwhelm the iron and steel
-protectionists with confusion, if they were capable of any such
-emotion, is, that iron and steel in every form of both, owing to the
-unprecedented bounty of God to this good land, costs less both in
-labor and capital here than in any other country in the world. The
-official figures of the current Census demonstrate this, authentic
-statements of practical operators at the iron mines and furnaces and
-foundries throughout the Tennessee Valley confirm it, and there is not
-one particle of evidence to the contrary of any name or nature.
-
-Let the reader notice carefully the following quotation from a private
-letter to the writer, dated July 30, 1890, written by a graduate of
-this college, in whom all who know him have the fullest confidence:
-
-"_We began to open the mines here just three years ago this Fall, and
-began shipping the following Spring. Our price for the ore was then
-about $1.50 a ton, depending on the analysis. We mined in the
-old-fashioned way--with picks and shovels--and I am safe in saying it
-cost us all we got for it. I know I was continually making drafts on
-my father to keep me out of debt. I did not figure on the cost at that
-time--I was afraid of the figures. My only thought was how to reduce
-the cost. We had a Steam Shovel in Pennsylvania, and I got my father
-to send it to me for trial in this ore. We found we could use it to
-advantage by using also plenty of powder, and I was soon able to buy
-the second shovel. Of course that reduced the cost of production still
-lower, and as there was a market for all I could do, I got the third,
-and am now putting in the fourth, and the fifth is bought and to be
-delivered inside of 60 days. This doubling up of the shovels made me
-get locomotives to carry the ore in the mines instead of mules. I have
-now two locomotives. You will understand how it would make a saving at
-that point. It would require 15 mules to do that work, and it could
-not be done so promptly._
-
-_During the month of May we shipped about 14,500 tons with the use of
-three shovels, and at a cost per ton for labor and fuel and powder of
-33 cents. We have reduced the cost on a week's run, in good weather
-and with no lack of empty cars, to 29 cents, but it never came lower
-on the month's average than 33. I expect this Fall, with five shovels
-instead of three, and two locomotives instead of one, to lower the
-cost of production._
-
-_Our average price at the mines is $1.20; we sell some higher. I have
-just now taken a contract for 40,000 tons to be delivered between now
-and the 1st of February, 1891, at $1.12-1/2. This is the lowest
-contract price we have ever made, and likely that has ever been made
-in this locality; but I did it to get into a different market. That
-ore is to go to Nashville--a distance of 120 miles. The reason for
-cutting the price to get the increased quantity I will not need to
-explain to you. You taught it to me. The freight to Nashville is 75
-cents. To our other furnaces in Alabama, at Sheffield and Florence,
-the freight is only 35 cents. What other contracts I have at present
-are at $1.25._
-
-_With three shovels we make from 600 to 800 tons a day. With one
-shovel we made from 150 to 250 a day. The variation from day to day
-depends on the quality of the material we handle._
-
-_The ore is all washed and picked and screened before it is loaded on
-the cars. A very important part of the work is the work done in the
-washer. It requires very expensive machinery, and the wear and tear is
-enormous._
-
-_We pay unskilled laborers ten cents an hour, skilled men as high as
-twenty-five. We work eleven hours a day. Our general foreman gets $100
-a month._"
-
-Sugar and Molasses brought in through the tariff in the fiscal year
-1889, $55,995,137. The quantity of domestic sugar and molasses
-relatively to the quantity imported is so small, that an excise upon
-it in accordance with the general principle of these paragraphs is not
-worth while, but would be far more just and rational than to offer
-bounties to the domestic producers out of the taxes paid by the
-consumers of foreign sugar. A "bounty" in this sense is at once an
-abuse of a good word, and an abomination in point of fact. For any
-Government, which is nothing but a Committee of all the citizens to
-attend to certain joint concerns of all, to abstract money through
-taxes from the pockets of a part of these citizens in order to reward
-another part for carrying on an unprofitable branch of business, is
-something equally repugnant to Economy and Equality.
-
-10. What, then, is the BOTTOM-PRINCIPLE in the Mode of Taxation? It is
-this: _Relatively low taxes so adjusted on comparatively few things as
-not to disturb natural prices_. The principle is simple: the problem
-is difficult; but wonderfully less so the moment all attempts are
-given up to foster any branch of industry whatever. Our legislators
-are not called upon to foster any industries. It is out of their beat.
-They cannot permanently do it, if they try; and they do immense harm
-while they try. Their "bounty," instead of being a gift, as the word
-imports, is a haphazard bestowment of other people's money extorted
-from them by public taxes. The problem becomes simpler every year of
-public experience under the practical design of so laying the public
-burdens as to realize to the Treasury the most money with the least
-possible interference with what would otherwise be the on-going of
-Exchanges in all directions. So relatively simple and easy has the
-English taxing system become, under this one leading design, that
-Gladstone performed without difficulty the functions of Chancellor of
-the Exchequer in conjunction with the far more arduous and complicated
-duties of Prime Minister.
-
-_Low taxes on few things._ The opposite of this principle at either of
-its two points becomes at once pernicious. High taxes in general
-prevent exchanges altogether, by cutting in too deeply in the gain of
-them, which is the sole motive to them; high imposts prevent
-importations, and of course destroy the profitable exportations
-consequent to, and conditioned on, such importations; high taxes even
-on few things are apt to raise prices of other articles than those on
-which they are directly levied, and so become objectionable always,
-and unbearable whenever it is their purpose to raise such prices:
-taxes on many things, and even on few things every time they change
-hands, throw an indefinite burden on Exchange, whose weight cannot
-well be calculated beforehand, either by the consumer or by the
-government, through uncertainty as to the number of transfers. Once
-for all, and then an end. Exchanges are indeed the only legitimate
-subject of taxation, but not every specific and subordinate exchange.
-An attempt to tax all sales whatever was followed in Spain, and will
-be followed everywhere, by a sluggish indisposition to trade at all.
-Let the amount of the tax be definite, and let everybody be sure that
-when it is once paid government will produce no further claim, and
-industry will go along under heavy taxes better than under those
-nominally lighter to which uncertainty as to time or amount attaches.
-All the more advanced governments have been simplifying of late years
-their systems of taxation, and collecting their revenue at fewer
-points, and under more tangible conditions, in order to interfere as
-little as possible with a free industry and free exchange.
-
-The subsidiary principle is important, namely, that all taxes should
-be collected by the government in as economical a manner as possible,
-inasmuch as all direct and indirect costs of collection are so much
-added to the burdens of the People. This covers two practical points:
-(1) the number and efficiency of the tax-gatherers, and the whole
-outward machinery of collection, such as the custom-houses, offices of
-internal revenue, and so on. These, as they concern the whole people
-equally, should be separated as far as possible from party politics,
-and the inevitable corruptions thereupon attendant. All the fiscal
-officers of the United States, from the Secretary of the Treasury down
-to the lowest tide-waiter, are liable to be changed every four years,
-and as a matter of fact are usually to a very large extent so changed,
-to the great detriment of the service and ultimate expense of the
-people, to say nothing of the moral losses and crevasses involved.
-(2) The tax-money should be kept out of the pockets of the people as
-short a time as possible, disbursement following quick upon collection.
-It is poor policy to gather taxes at the beginning of the year which
-will not be disbursed till the end of the year. Let the people use
-their funds till they are wanted at the treasury; and if the taxes
-do not then come in as fast as wanted, it is better to issue what
-are called in England exchequer-bills, and in the United States
-certificates of indebtedness, to be redeemed at the end of the year
-from the proceeds of the taxes, than to let the people's money lie idle
-in the treasury. The Secretary of the Treasury should have nothing to
-do or say about the circulating medium of the country, or the loanable
-price of the units of it, under any circumstances whatever. He is
-neither competent enough in Knowledge nor enough established in
-Integrity to be trusted with any such functions.
-
-11. Should there be any EXEMPTIONS from Taxation? If the necessities
-of the State require it, government has the right to demand from all
-persons who are capable of making exchanges, and who do make them,
-something in the form of taxes. But it is every way better, when
-possible, that people of very moderate means should be exempted
-altogether from direct taxes; and the payment of indirect taxes is a
-matter more in their own option, since they are at liberty to buy much
-or little of those commodities subjected to an indirect tax. In the
-State of Massachusetts, incomes not exceeding $2000 are exempted by
-the law. If a house-tax should be levied, all houses below a certain
-grade of style and comfort should be exempted, and the tax pass up by
-easy gradations from those just taxed to the palatial residences of
-the rich. In the present age of the world, the well-to-do citizens of
-every country are able to bear without too great difficulty the
-burdens of the government, and nothing tests better the degree of
-civilization which a nation has reached than the care and solicitude
-it displays for the welfare of its poorer citizens.
-
-12. Who pays the INDIRECT TAXES? At a court ball, Napoleon the First
-once observed a lady noticeable as richly dressed and as wearing
-splendid diamonds, and on asking her name, found that she was the wife
-of a tobacco manufacturer of Paris; it occurred at once to the quick
-mind of the French ruler, that the State might just as well have those
-profits as an individual; and the sale of tobacco in all its forms
-became accordingly a State monopoly, which now yields about
-400,000,000 francs a year. That is indirect taxation. So is the
-British and United States tariff and excise on tobacco. Producers and
-dealers and bankers and companies add the tax demanded from them, and
-sometimes more than the tax under color of it, to the price of their
-wares. But it is not true that they can always realize the whole of
-this enhanced price. Generally they can, sometimes they cannot. If the
-article be one of necessity, or a luxury that has become equivalent to
-a necessity, and there be no other source of supply than the taxed
-one, then, as a rule, the tax falls wholly on the consumer, and is a
-matter of indifference to the producer or dealer. But the usual effect
-of an enhanced price is to lessen demand, and if the article is
-dispensable, or its consumption can be lessened, or it can be obtained
-elsewhere, the market will be sluggish under the tax, and producers or
-dealers will be likely to tempt it by lowering prices, in other words,
-by sharing the tax with consumers, and paying that share out of
-profits. This is the principle. Producers and dealers would rather the
-tax were off. Consumers generally, but do not always, pay the whole of
-it.
-
-13. What is to be said about the DIFFUSION of Taxes? David A. Wells,
-an admirable and indefatigable authority on all practical questions in
-Economics, though perhaps less skilled in scientific classification
-and generalizations, several years ago made somewhat prominent in
-public discussion the tendency of Taxes _to diffuse themselves_. Much
-more has been written about this than is actually known about it. By
-Diffusion is meant that it does not make so much difference upon what
-or upon whom a tax is originally levied, because the tendency of
-things is to _diffuse it_, that is, to compel others to assist in
-paying the tax. The result of much personal reading and reflection on
-this point is the conclusion that taxes do not "diffuse themselves"
-nearly so much as has been sometimes supposed; and that, at any rate,
-it is a good deal better to take the taxes from those who ought to pay
-them, than to lay them at random, and then to trust some unknown
-forces to make them afterwards just. It is certain that _some_ unjust
-taxes cannot be diffused; for example, the protective tariff-taxes
-paid by the farmers upon articles of necessary consumption. These
-taxes have no tendency to raise the price of the farmers' produce, for
-_that_ is determined by the foreign market, to which large parts of
-the produce are exported. For such taxes the farmers cannot reimburse
-themselves. Taxes that affect no prices are the best of all; taxes
-that affect prices the least are the next best; and taxes that are
-_designed_ to affect prices are the very worst.
-
-14. What are the bearings of the UNITED STATES CONSTITUTION on the
-whole matter of Taxation in this country? We have now seen pretty
-fully, what the science of Economics has to say about the sources and
-modes and results of tax-laying: but we are bound to tell also, what
-the kindred but much less developed science of Politics, and
-particularly what the Constitution of the Fathers, has to say upon the
-same vitally important topics.
-
-(1) The first power granted by the People to Congress, which is simply
-their agent, in that Instrument from which each of the three great
-Departments of Government derives all its authority, is in these
-words, exactly copied from the original and official parchment in
-every particular: "_The Congress shall have Power to lay and collect
-Taxes, Duties, Imposts and Excises, to pay the Debts and provide for
-the common Defence and general Welfare of the United States; but all
-Duties, Imposts and Excises shall be uniform throughout the United
-States._" This grant of power, which stands first in order, is
-followed by seventeen other express powers granted to Congress in the
-same eighth Section of the first Article.
-
-There never has been any difference of opinion, and there cannot be
-under such completely explicit language as this, among competent
-Statesmen and Commentators, as to the exact meaning of this clause,
-namely, Congress is given power to lay taxes in order to get money,
-with which to pay the debts and provide for the common defence and
-general welfare of the United States. That was the opinion and purpose
-of every member of the Federal Convention, that framed the
-Constitution in the summer of 1787; of Alexander Hamilton, who was
-first called on as Secretary of the Treasury officially to interpret
-it; of Daniel Webster, often called the "great expounder" of the
-Constitution; of John Marshall, the great Chief Justice of the Supreme
-Court; of Judge Story, the first copious and most distinguished
-commentator upon the Text; of George Bancroft and George T. Curtis,
-the learned and elaborate historians of the Text; and in short, of
-everybody else, who has earned any right in any way to have an opinion
-on any such matter of political interpretation.
-
-Why, then, has there been from the first until now, a feeble flutter
-of butterfly wings around the clause, as if, somehow or other, it gave
-Congress by hook or by crook some power or other to do something
-_else_ than to lay taxes in order to get money for the maintenance of
-the national Government? As if there lay concealed in the language
-somewhere a power to lay taxes for a purpose precisely opposite to
-that expressed in the text, namely, _nominal taxes designed to
-prohibit any money being gotten under them_? And why did Hamilton
-himself, whose wings were those of an eagle, sweep low and hover
-uncertainly about these words, and so give color to the political
-historians of our time to say: "_Once more laying hold of the "general
-welfare" clause of the Constitution, Hamilton here argued, under color
-of giving bounties to manufactures, as though Congress might take
-under its own management every thing which that body should pronounce
-to be for the general welfare, provided only it was susceptible of the
-application of money. Though he limited this central discretion to the
-application of money, and stated some restrictions rather vaguely, the
-insidious tenor of his report was to show that the Federal power of
-raising money was plenary and indefinitely great._"
-
-The true answer to these questions is a point of Grammar. The simple
-English infinitive, unlike the simple infinitive of any other language
-with which the writer is acquainted, _often expresses purpose_, as
-well as the action of the verb without limitation of person or number;
-so that, it is perfectly good English to say, "To lay taxes to pay,"
-when the only possible sense of it is, "To lay taxes _in order to
-pay_." Greek, Latin, and German would use here with the infinitive the
-particle expressing the purpose: the English language does not. It is
-not true to say, that ambiguity enters this clause, through the common
-and elegant use of the simple infinitive in English to express the
-purpose; but it _is_ true to say, that superficial confusion has
-entered here, and a mess of bad logic. What makes it absolutely
-certain, beyond the possibility of a controversy, that Congress can
-levy taxes only in order to get money by means of them, is, (a) that
-is the only English of the clause; (b) the "debts" of the United
-States can only be paid in money; and (c) if this be _not_ the
-meaning of the clause, its meaning must then be plenary, and there
-would be no need or place for the remaining seventeen powers, "and all
-other powers vested by this Constitution in the Government of the
-United States or in any Department or Officer thereof"; in other
-words, any other interpretation of the taxing clause than the plain
-one would destroy the Constitution root and branch; for, if Congress
-have the general power "to pay the debts and provide for the common
-defence and general welfare of the United States," all other possible
-powers are included in this, and President and Court disappear, and
-all other clauses of the Text are a nullity.
-
-If the above course of reasoning be sound, and he would be a bold
-logician who should openly dispute it, then taxes laid for any other
-end than revenue are clearly unconstitutional. The Supreme Court has
-never passed upon this bald point, for it has never been mooted in
-this form; but one would think, there can be little doubt how the
-judges would decide in any "case" directly involving the
-constitutional power of Congress to levy prohibitory tariff-taxes,
-whose avowed or clearly inferrible design it is, _not_ to get money
-with which to pay the debts and so on, but to cut off the possibility
-of getting any money thereby. The general trend of the decisions of
-the Supreme Court has wisely been, to leave in their interpretations
-of the Text the widest margin of discretion to the Legislative branch
-as to the best means of _raising_ revenue; but when it comes to face
-the question of allowing as constitutional the best means of
-_preventing_ revenue,--well, may we be there to see and hear!
-
-(2) There are prohibitions on Congress in the Constitution, as well as
-powers conferred, and among these this: "_No tax or duty shall be laid
-on Articles exported from any State._" This is a part of the third
-great Compromise of the Constitution, and was a concession to the
-southern and planting States to make more palatable to them the power
-"to regulate commerce," that was expected to be used (and was used) in
-behalf of the northern and navigating States. But the concession was
-more nominal than real, as the southerners found out in time to their
-vexation. To prohibit taxes on exports, and to leave in full vigor the
-power to tax imports, though consonant with the then prevailing
-delusion of Mercantilism, is no boon to commerce in general; because,
-any restriction on buying products is equally and instantly a
-restriction on selling products. Exemption from taxes on exports is a
-good thing in itself, but the only reason for selling exports is to
-take in profitable pay the imports naturally offered against them; and
-if these be restricted or prohibited, the restriction or prohibition
-applies instantaneously and inevitably to the would-be exports. A
-reasonable liberty of exporting is nothing, unless accompanied by a
-reasonable liberty of importing, because the imports pay for the
-exports and the exports buy the imports.
-
-The southern States rejoiced for a time in this exemption-clause of
-the Constitution, for their rice and cotton and indigo found no
-obstacles in going out; but the only motive in sending them out was to
-buy something with them to bring back; and after the snare of
-Protectionism entangled the People in 1816, 1824, and specially in
-1828, when the "Tariff of Abominations" was passed, the southern
-people saw only too distinctly, that taxes on imports which they
-wished to bring in were the same in effect as taxes on their own
-exports would have been. Mr. Calhoun and the others were effectually
-undeceived by the customary on-goings of commerce; and as the northern
-statesmen unwisely and unpatriotically determined to crowd this iron
-home in 1828, the party of the other part developed under great
-provocation the doctrines of Nullification and Secession, which have
-since caused a plenty of tears and bloodshed. One wrong ever begets
-other wrongs. The wretched Greed of one section of the country was own
-father to the wrongful Secession of the other section.
-
-The Farmers of this country have often been congratulated on their
-privilege under the constitution of exporting their agricultural
-products without a tax. The congratulation is hollow. Of what use is
-it to go out free and come back manacled? The ultimate is always the
-return-service. The farmers are cheated. Their agricultural exports
-are falling off year by year solely in consequence of outrageous
-tariff-taxes on imports. In 1881, farmers' produce was exported to the
-amount of $730,394,943, and that was not one-half what it would have
-been under a simple and adequate Tariff for Revenues; but in 1889,
-these exports only reached $532,141,490, a falling off of nearly
-$200,000,000. This decline was chiefly in meats and breadstuffs. No
-wonder the farmers have been complaining of terribly hard times of
-late years: no wonder they are organizing "Alliances" and other
-machinery for reaching a remedy: they must see clearly first where the
-disease lies: the truth is, they are tariff-taxed to death: their foes
-are they of their own household: Vermont, a purely agricultural State,
-is the only one in the Union, that has actually _retrograded_ in
-property and population in the last census-decade: those excellent
-people have hugged the Tariff-delusion to their ruin; their senior
-Senator, whose name is unpleasantly connected with the national
-tax-laws of a generation, has never yet in the course of a long and
-reputable life gained a glimmer of the commercial truth,--if men
-_will_ not buy they _can_ not sell.
-
-(3) The only other clause of the Constitution, which, as students of
-Taxation, we are bound to examine, is the following: "_No Capitation,
-or other direct, Tax shall be laid, unless in Proportion to the Census
-or Enumeration herein before directed to be taken._" A capitation tax
-is a poll-tax, which may be easily "proportioned" to the Census. It is
-not clear, what is the meaning of the words "or other direct tax"; the
-Supreme Court early struggled with that question, to this apparent
-result, that _lands_, as the only form of property that can be
-"proportioned" in their appraised value to population with any
-considerable degree of accuracy, are the only "other" subject of
-"direct" Taxation. However this may be, it is of considerable
-consequence to note, that the term, "direct tax," as used in the
-Constitution, does not correspond in its meaning to the significance
-of the same term as employed in Economics. With us, a "direct tax"
-means one demanded from and paid by the person on whom it is
-ostensibly levied, and cannot be thrown off or forward on anybody
-else; while an "indirect tax" is one which can be so thrown off or
-forward.
-
-Attention is called to the distinction here, in order to show that an
-Income-tax, while in the Economical sense it is a "direct tax," is not
-such in the sense of the Constitution. Objections were urged against
-the late Income-tax in this country, that it was a "direct tax," and
-so, because it could not be proportioned to the population, was
-unconstitutional. The point is not well taken. It remains, and will
-remain, after the most searching scrutiny, that an universal
-Income-tax, all other taxes being abolished, is the form most
-consonant with the principles of Political Economy, and not at all
-repugnant to the Constitution of the United States.
-
-15. Finally, are there any hints and guides to thought and
-legislation in the matter of Taxation through an extremely brief
-summary of the HISTORY of Taxes? So far as the Greeks are concerned,
-they showed a practical good sense in their laws of Property in
-general, and in their laws relating to Taxes in particular. The
-natural march of industry and commerce was not hindered by taxation:
-there was no forbidding the export of raw materials or specie; no
-favoring of manufactures at the expense of agriculture; no hint of the
-future Mercantilism in any efforts to preserve an artificial balance
-of trade; and no taxes on imports except for purposes of Revenue.
-These at Athens itself were usually 2% of the value of the goods, at
-the ports of her subject-allies 5%, and exceptional cases of higher
-rates than these were regarded as extortionate.
-
-The Romans also were sensible and moderate in their modes of Taxation.
-They laid taxes for the sake of getting money for the public treasury,
-and had no other end in view. They knew nothing of what has since
-become famous under the name of "Protectionism." Their taxes were both
-direct and indirect, but especially the latter. The chief direct tax
-was the land-tax, that is, a claim to the tenth part of the sheaves
-and of other field produce, such as grapes and olives; and also
-pasture-money (_scriptura_) demanded of those who made use of the
-public pastures and woods. In Macedonia and the other larger
-Provinces, in lieu of the land-tax a fixed sum of money (_tributum_)
-was paid to Rome each year by each community in its own way. The
-grain-tenths and pasture-moneys were always farmed out to private
-contractors or companies on condition of their paying fixed quantities
-of grain or fixed sums of money. The chief indirect tax was
-customs-duties. There never was at any time a general tariff for the
-whole empire, but there were customs-districts, such as Italy, Sicily,
-proconsular Asia, the province of Narbo in Gaul, and others, each
-with a sort of tariff of its own, and some with special immunities.
-Goods imported by sea into Italy, for example, not for the personal
-use of the importer, were subject to a tax, which seems to have been
-mainly a tax on luxuries, since pepper, cinnamon, myrrh, ginger,
-perfumes, ivory and diamonds, are among the dutiable goods mentioned
-in one of these tariffs. Sicily had a tariff-tax quite distinct from
-this, since one-twentieth of the value of the goods (5%) was levied on
-the frontier on _all_ imports and exports; and a similar tax of
-one-fortieth was laid by the Sempronian law on the province of Asia.
-These imposts, too, were leased to contractors, which gave, of course,
-some chance of fraud and wrong. There were other temporary taxes, like
-those, for instance, which Augustus laid of 5% on legacies and
-inheritances, and of 1% on articles publicly exposed for sale.
-
-Green's History of England (I., 322 _et seq._) gives an outline of the
-taxes there from the beginning of the monarchy. As land was almost the
-only source of salable things in the early time, so it was almost the
-only thing on which taxes were levied. Danegeld and scutage and feudal
-aids fastened only on the land. "But a new principle of taxation was
-disclosed in the tithe levied for a Crusade at the close of Henry
-Second's reign. Land was no longer the only source of wealth. The
-growth of national prosperity, of trade and commerce, was creating a
-mass of personal property which offered irresistible temptations to
-the Angevin financiers. No usage fettered the Crown in dealing with
-personal property, and its growth in value promised a growing revenue.
-Grants of from a seventh to a thirtieth of movables, household
-property, and stock were demanded. The right of the king to grant
-licenses to bring goods into or to trade within the realm, a right
-springing from the need of his protection, felt by the strangers who
-came there for purposes of traffic, laid the foundation for our taxes
-on imports. Those on exports were only a part of the general system of
-taxing personal property. How tempting this source of revenue was
-proving, we see from a provision of the Great Charter, which forbids
-the levy of more than the ancient customs on merchants entering or
-leaving the realm. Commerce was in fact growing with the growing
-wealth of the people." This passage shows, that, as a matter of fact,
-_taxes_ have always hinged, and must hinge, on _trade_.
-
-A few facts in the most recent movements of national Taxation in the
-United States may fitly conclude this Chapter and this Volume. Since
-1867, Wool and Woollens have been the ass, upon whose breaking back
-the most conspicuous burdens have been piled; and the "McKinley Bill"
-so-called, still pending at the present writing in the Senate, heaps
-up still higher the groaning loads. The following table shows how
-futile is the attempt to keep out wools and woollens from such a
-country as ours, even by the most exaggerated barriers:--
-
-  IMPORTS OF WOOLS AND WOOLLENS.
-  (Calendar Years.)
-
-  --------------------------------------
-  | Years. |    Wools.   |  Woollens.  |
-  |--------+-------------+-------------|
-  |  1886  | $17,403,099 | $43,995,641 |
-  |  1887  |  15,645,020 |  45,065,986 |
-  |  1888  |  14,542,244 |  49,984,298 |
-  |  1889  |  18,696,277 |  54,080,159 |
-  |  1890  |(fiscal year)|  56,582,000 |
-  --------------------------------------
-
-Roger Q. Mills of Texas stated from his place in the House of
-Representatives in 1888, that the United States grows but about
-265,000,000 lbs. of wool yearly, while it takes about 600,000,000
-lbs. to clothe our own people. Why should more than half the wool
-needed to clothe the people be taxed in such a way as to double (in
-general) the cost of the people's clothing? And why should Benjamin
-Harrison, now President of the United States, have said in that same
-year, in view of these elsewhere unheard-of taxes, and in view of the
-average climate of his country, that somehow it seemed to him _that
-cheap clothing implied a cheap man_? In view of the enormous natural
-demand for woollens, in order to keep comfortable day and night
-64,000,000 of inhabitants, is it not strange, and must there not be
-artificial causes for it in the kind and mode of national Taxation,
-that the United States has but 16 sheep to the square mile, while
-Germany has 92, France 111, and Great Britain 339?
-
-Senator John Sherman stated in his place in August, 1888, and again in
-substance Sept. 2, 1890, that a line of custom-houses on our
-joint-frontier with Canada was "_the height of nonsense, and almost a
-crime against civilization_." Well might he say this in view of what
-his colleague, Allison of Iowa, has recently said, namely, that the
-Dominion bought in 1880 of the United States 8% of its brass goods,
-86% of its copper manufactures, 94% of its cordage, 88% of its
-gingham, 65% of its glasswares, 99% of its rubber goods, 94% of its
-printing ink, 92% of wooden wares, 91% of tinware, 90% of wall-paper,
-72% of paper wares, 98% of ploughs, 97% of engines, 99% of
-sewing-machines, and 90% of miscellaneous machinery.
-
-The imports and exports of the United States for the last two fiscal
-years are as follows:--
-
-  -------------------------------------------------------
-  |                         |    1889.    |    1890.    |
-  |-------------------------+-------------+-------------|
-  |Imports, free            |$256,487,078 |$265,588,499 |
-  |Imports, dutiable        | 488,644,574 | 523,633,729 |
-  |Total                    | 745,131,652 | 789,222,228 |
-  |Exports                  | 742,401,375 | 857,824,834 |
-  |Gold and Silver {Imports |  28,963,073 |  33,976,326 |
-  |                {Exports |  96,641,533 |  52,148,420 |
-  |Total Imports            | 774,094,725 | 823,198,554 |
-  |Total Exports            | 839,042,908 | 909,973,254 |
-  -------------------------------------------------------
-
-There two or three noticeable points from this table. First, the large
-relative increase of free imports over those of former years. Free
-articles in 1867 were less than 5% of the whole; in 1882, 30%; and in
-1890, 33.9%. The Free List, so-called, has indeed been enlarged in the
-interval, but free goods tend naturally to swell over the taxed goods,
-so that in 1890 the free were almost exactly one-half of the taxed.
-Second, of the large total of merchandise exports, it is to be
-sorrowfully noted, that more than 82% of the whole is made up of the
-products of agriculture and forests and mines (not gold and silver);
-while manufactures compose only 17.8%. What ails our manufactures,
-that we cannot sell them abroad? We have been for 30 years under a
-vaunted scheme warranted to develop manufactures,--expressly designed
-and recommended to make them cheap and good,--under an elaborate and
-artificial scheme that makes everything bend, even the backs of the
-toiling millions, to foster and propel manufactures! But we do not
-succeed in selling much of them abroad, except some fractions of them
-to Canada. The ratio of them to the total of exports of merchandise
-seems to be growing less: in 1889, 18.9%; in 1890, 17.8%.
-
-The simple truth is, that we are able to sell abroad even this
-beggarly proportion of manufactures to the total exports of
-merchandise, only in consequence of a shrewd device working within the
-Grand Device, namely, the so-called "Free List." Some of the little
-wheels within the big wheel revolve rapidly. Manufacturers do not like
-to pay protectionist tariff-taxes _themselves_ any better than other
-people like to pay them. They have by their own open confession in
-overt act precisely the same opinion of their deadening influence,
-that other people have. If, however, they can escape such taxes on the
-things they have to buy, especially their raw material, and _keep_
-them on their own finished goods offered for sale in a monopoly
-market, they would be happy. Hence, the Free List. Hear Senator Dawes
-before the Paper-makers' Convention at Saratoga in 1887: "_There is
-one other feature of tariff revision much discussed at the present
-time which must not escape our attention, and that is free raw
-material. No industrial policy will promote the highest prosperity of
-both labor and capital in this country, which fails to lay down the
-raw material at the door of the manufactory at the lowest possible
-cost. In any new revision of the tariff this rule of preference for
-our own raw material must be adhered to by those who do not propose to
-give up the American for the indifferent policy in legislating between
-ourselves and foreigners._ IT WILL BE FOUND, HOWEVER, TO ADD VERY FEW
-RAW MATERIALS TO THE FREE LIST, FOR THE REVISIONS OF 1874 AND 1883
-HAVE ALREADY MADE FREE ALL SUCH NON-COMPETING RAW MATERIALS AS AT THE
-TIME OF THE PASSAGE OF THOSE ACTS WERE ENTERING TO ANY CONSIDERABLE
-EXTENT INTO THE CONSUMPTION OR PRODUCTION OF THE COUNTRY."
-
-Till now, we have been dealing in facts, and figures, and in careful
-generalizations after the inductive manner: let us, at the very last,
-indulge in a freak of fancy. Suppose for a moment, that all taxes of
-every name could be abolished instantaneously, and the Governments,
-like the Israelites, live on manna for forty years. What harm would
-ensue? What industry would decline? Who would be impoverished? What
-stimulus to work and save and grow rich would be weakened thereby?
-Would not wages, and profits, and rents, all be lifted thereby, with
-no damage to anybody? A child can see that Taxes from their very
-nature are a burden, are a subtraction from income, are a _minus_ and
-not a _plus_. Who, then, except from sinister motives, can imagine and
-represent, that Taxes are a good in themselves, a positive blessing, a
-spur to the progress of Society?
-
-Taxes of some sort there must be for the maintenance of Governments,
-which are established for the good of all. Why, then, should not the
-Taxes be just as few, just as simple, just as comprehensible, just as
-universal and equitable, as is consonant with the single end of their
-existence at all?
-
-
-
-
-INDEX.
-
-
-    A.
-
-    Abraham, 9, 384.
-
-    Abstinence, 93, 191, 338, 445.
-
-    Abyssinia, 386.
-
-    Activities of men, 1.
-
-    Actors, 4.
-
-    Act of Parliament, 127.
-
-    Act of 1624, 135.
-
-    Adams's inauguration suit, 510.
-
-    Administration, 358.
-
-    Advalorem rates of tariff tax, 489, 558.
-
-    Advantages of credit, 271.
-
-    Advantages of discount, 302.
-
-    African _macoute_, 388.
-
-    "African, the," 158.
-
-    Agent of the mill, 4.
-
-    Age of iron, 95.
-
-    Ages of stone, 95.
-
-    Agreeableness of rendering, 218.
-
-    Agriculture, 149, 538.
-
-    Allison of Iowa, 582.
-
-    Alloy, 416.
-
-    America, 3.
-
-    American capital, 166.
-
-    Ames, Fisher, 538.
-
-    Amsterdam, 165, 311, 421.
-
-    Analysis, 15.
-
-    Ancient Romans, 2.
-
-    Annual earnings, 543.
-
-    Apprenticeship, 186, 203.
-
-    Arbitration, 266.
-
-    Aristophanes, 420.
-
-    Aristotle, 47, 98, 158, 248, 381, 402.
-
-    Aristotle's Logic, 63.
-
-    Arkwright, Richard, 108.
-
-    Arlington Mills, 516.
-
-    Artisans of every name, 2.
-
-    Ascertainment, 15, 246.
-
-    Asia, 19.
-
-    Asia Minor, 333.
-
-    Asia, pro-consular, 579.
-
-    Association, 99.
-
-    Assyria and Babylonia, 330.
-
-    Astor, J. J., 180.
-
-    Astronomy, 63.
-
-    Auction, 57.
-
-    Augustus Cæsar, 392, 580.
-
-    Australia, 252, 399.
-
-    Axe, 90.
-
-    Axioms, 69.
-
-
-    B.
-
-    Babylonian tablets, 332.
-
-    Bacon, Lord, 63, 64.
-
-    Bailee, 278.
-
-    "_Balance of trade_," 312, 406, 452.
-
-    Bales of cotton, 345.
-
-    Ball, John, 228.
-
-    Balloon of promise, 343.
-
-    Bancroft, historian, 512, 573.
-
-    Bangor, 454.
-
-    Bank bills, 286.
-
-    Bank defined, 291.
-
-    Bank deposits, 291.
-
-    Bank discount, 299.
-
-    Bank messengers, 5.
-
-    Banker defined, 6.
-
-    "Bankers' bills," 315.
-
-    Bank of Amsterdam, 280.
-
-    Bank of England, 82, 287, 292, 350, 396, 448.
-
-    Bank of Massachusetts, 288.
-
-    Bank of New York, 288.
-
-    "Bank of North America," 288.
-
-    Bank of Scotland, 325.
-
-    Banks of Newfoundland, 180.
-
-    Barter, 364.
-
-    Bascom, John, 71.
-
-    Bastiat, 47.
-
-    Beauty of gold and silver coins, 413.
-
-    Beck, Senator, 491.
-
-    Benevolence and impertinence in trade, 239.
-
-    Bentham, Jeremy, 252, 448.
-
-    Benton, Thomas H., 494.
-
-    Berkshire Co., Mass., 260, 533.
-
-    Berlin, 3.
-
-    Berlin Geographical Society, 27.
-
-    Bernhardt, 211.
-
-    Bessemer Steel Co., 487, 491.
-
-    Best money, 395.
-
-    Best tenure of lands, 155.
-
-    Betterments on land, 173.
-
-    Bill-discounters, 300.
-
-    Bill of exchange, 278, 300, 303.
-
-    Bill of lading, 277.
-
-    "Bills of credit," 435.
-
-    Bimetallism, 415.
-
-    Bismarck, 210.
-
-    "Black Death," 227.
-
-    Blacksmith's capacity, 118.
-
-    Blades of the shears, 249.
-
-    Blaine, Secretary, 507.
-
-    "Blanket" mortgage, 284.
-
-    Blunders in economics, 75.
-
-    "Body," 78.
-
-    Bombay spinner, 201.
-
-    Bonnieres quarry, 164.
-
-    "Book of Trades," 114.
-
-    Borrow, 277.
-
-    Boston Commercial Bulletin, 563.
-
-    Boston Custom House, 564.
-
-    Botany, 63.
-
-    Bottom-principle in taxes, 567.
-
-    Bounty of God, 43.
-
-    Bradford, Governor, 391.
-
-    Bradley, Mr. Justice, 359.
-
-    Breadth of contracts, 241.
-
-    Bright, John, 199.
-
-    British colonies, 313.
-
-    British Isles, 84.
-
-    British Provinces, 527.
-
-    British Revenue Tariff, 485.
-
-    British statesman, 153.
-
-    Brokers' board, 302.
-
-    Broker's office, 6.
-
-    Bronson, 434, 436.
-
-    Brotherhoods, 226.
-
-    Buchanan, James, 447.
-
-    Bullets as money, 392.
-
-    Bullion theory, 403, 451, 453.
-
-    Bureau of Statistics, 264.
-
-    Burman Empire, 385.
-
-    Buying, 14.
-
-    Buying and selling, 4, 15, 236.
-
-
-    C.
-
-    Cakes of tea, 386.
-
-    Calhoun, Senator, 497, 499.
-
-    Calicoes, 105.
-
-    Canada, 179.
-
-    Capital, 92, 96, 246.
-
-    Capital defined, 93.
-
-    Capital wears out, 171.
-
-    Capitalists as a class, 233.
-
-    Capitalists of Boston, 4.
-
-    Captains of industry, 196, 244.
-
-    Carey, H. C., 103.
-
-    Carpenter's square, 38.
-
-    Carthage, 21, 84.
-
-    Carthaginians, 387.
-
-    Cartwright, Edmund, 111.
-
-    Cases and classes, 68.
-
-    "Cash accounts," 333.
-
-    Cash credits, 324, 327.
-
-    Cattle, 80.
-
-    Cattle as money, 383.
-
-    Causes of labor troubles, 238.
-
-    Cavour, 210.
-
-    Cecil, Robert, 126.
-
-    Cedars, 23, 40.
-
-    Census, 75.
-
-    Central America, 27.
-
-    Chadwick, Sir Edwin, 197, 200.
-
-    Chaldean tablets, 331.
-
-    Chalmers, Thomas, 137, 215.
-
-    Chase, Chief Justice, 356, 357.
-
-    Chatham, 210.
-
-    Chattels, 93.
-
-    Checks on market rate, 56.
-
-    Chemistry, 63.
-
-    Cheque-Bank, 321, 329.
-
-    Cheques, 303, 317.
-
-    Chevalier, 399.
-
-    Chicago, 278, 477, 501.
-
-    Chicago, fire in, 500.
-
-    China, 19, 387.
-
-    Chinese-wall policy, 474.
-
-    Christianity, 22, 30.
-
-    Christians, 10.
-
-    Church relations, 241.
-
-    Cicero, 97, 189, 248, 333, 403.
-
-    Circular credits, 327.
-
-    "Circular notes," 328.
-
-    Circulating capital defined, 99.
-
-    Civil Law of Rome, 206.
-
-    Civil war, 353.
-
-    Civil wars, 260.
-
-    Civilization, 10, 89, 252, 366.
-
-    Claims of conscience, 243.
-
-    Classes of facts, 66.
-
-    Classes of salable things, 7.
-
-    Classes of valuable things, 5, 62.
-
-    "Clearing house," 318, 321.
-
-    Cleon, 421.
-
-    Clergyman, 4.
-
-    Clerks at the clearing, 320.
-
-    Clifford, Mr. Justice, 357.
-
-    Clog of economy, 33.
-
-    "Cloth-workers' guild," 258.
-
-    Coal, 497, 527.
-
-    Cobden, Richard, 202.
-
-    Codification, 206.
-
-    Coffee and tea, 488.
-
-    Cog-wheel railway, 1.
-
-    Cohoes, 3.
-
-    COIN, 429.
-
-    Coined money of two kinds, 426.
-
-    Coke, Lord, 89.
-
-    Colbert, 404.
-
-    Colonies of New England, 249.
-
-    Columbus, 26.
-
-    Commerce, 17, 402.
-
-    Commercial credits, 49, 271.
-
-    Commercial crises, 347.
-
-    Commercial treaty of 1860, 30.
-
-    _Commodatum_, 276, 340.
-
-    Commodities, 2, 8, 20.
-
-    Commodities defined, 80.
-
-    Common law, 9, 88, 130, 205.
-
-    "Company," 4.
-
-    COMPANY OF THE INDIES, 438.
-
-    "Compete," 464.
-
-    Competition, 44, 121, 175.
-
-    "Compromise Silver Bill," 475.
-
-    Conditions of production, 99.
-
-    Conditions of a science, 67.
-
-    Conditions of trade, 15.
-
-    Congress, 256, 288, 450.
-
-    Connecticut, 100, 435.
-
-    Conrad, John, 183.
-
-    "Consolidated annuities," 274.
-
-    Consols, 285.
-
-    Constancy of employment, 219.
-
-    Constitution of the United States, 133, 178, 256, 358, 444, 474,
-        494, 572, 578.
-
-    Constitutional law, 429.
-
-    Continental Congress, 441.
-
-    Cooley, Judge, 113.
-
-    Co-operation, 268.
-
-    Cooper Union, 222.
-
-    Copper skewers, 385.
-
-    Copyrights, 132.
-
-    Core of money, 378.
-
-    Corn laws, 58, 177, 217.
-
-    Cost by railway mile run, 233.
-
-    Cost of capital, 161, 165, 231.
-
-    Cost of labor, 161, 231.
-
-    Costs of carriage, 466.
-
-    Costs of production, 159, 165, 397, 462.
-
-    Cotton, 105.
-
-    "Cotton City," 498.
-
-    Cotton-gin, 100.
-
-    Cottons and silks, 457.
-
-    Coupons, 337.
-
-    Court calendars, 254.
-
-    Craft-box, 226.
-
-    Craftsmen, 259.
-
-    Credit, 372.
-
-    Credit-claims, 6.
-
-    Credit defined, 275.
-
-    Credits, 8, 20, 58.
-
-    Credits are capital, 338.
-
-    Credits as taxable, 555.
-
-    Crompton, Samuel, 110.
-
-    Crossed cheques, 321.
-
-    Current rate per centum, 165.
-
-    Curtis, George T., 573.
-
-    Custom, 224.
-
-    Customs-taxes, 238, 474.
-
-
-    D.
-
-    Damascus, 8.
-
-    Davis, Mr. Justice, 357.
-
-    Dawes, Senator, 584.
-
-    Dawn of history, 8.
-
-    Dealer in services, 6.
-
-    Debits at the bank, 6.
-
-    Debt, its etymology, 275.
-
-    Debts of the bank, 6.
-
-    Decatur, Commodore, 482.
-
-    Decennial Census, 519.
-
-    Deduction, 62, 69.
-
-    Deductive sciences, 63.
-
-    De Foe, 100.
-
-    Demand acts upon value, 54.
-
-    Demand and supply, 369.
-
-    Demand defined, 52, 190.
-
-    Denarius of Rome, 238, 385.
-
-    Denomination-dollar, 388, 390.
-
-    Denominations of money, 372, 388.
-
-    "Depositaries," 295.
-
-    Deposit-banking, 293, 295, 297.
-
-    Deposits, 296.
-
-    Descartes, 68.
-
-    Desires, 18, 64, 75, 138.
-
-    Detroit, 491.
-
-    Dey of Algiers, 482.
-
-    Diffusion of taxes, 571.
-
-    Diminishing profits, 228.
-
-    Direct taxation, 553.
-
-    Disadvantages of credit, 271, 343.
-
-    Discount, 273.
-
-    Discount defined, 301.
-
-    Diversity of advantage, 25, 102, 117, 131, 136, 262, 455, 458.
-
-    Divine purpose, 26.
-
-    Division of labor, 252, 257, 374.
-
-    Dock laborers' strike, 313.
-
-    Doctors' fees, 204.
-
-    Doctrine of chances, 221.
-
-    Doctrine of rent, 146.
-
-    Dollar-bill, 427.
-
-    "Dollars," 359.
-
-    Domestic trade, 481.
-
-    Dorsetshire laborer, 223.
-
-    Drachm, 385.
-
-    Drawee, 329.
-
-    Drawer and bearer, 330.
-
-    Duke of Orleans, 437.
-
-    Durability of machinery, 168.
-
-    Dutch capital, 166.
-
-    Dutch East India Co., 280.
-
-    Duty, 65.
-
-
-    E.
-
-    Easiness of learning, 219.
-
-    East India Co., 114, 132.
-
-    Economics, 31, 40, 64.
-
-    Efficiency, 164.
-
-    Efforts, 20, 59.
-
-    Efforts and renderings, 32.
-
-    Egypt, 9, 11, 24.
-
-    Electricity and lightning, 70.
-
-    Elliott, Ebenezer, 202.
-
-    Ely, Professor, 251.
-
-    "Empire State," 286.
-
-    English recoinage, 422.
-
-    English shilling, 317.
-
-    Enlarging wages, 228.
-
-    Ephron, 9, 384.
-
-    Equation of international demand, 468.
-
-    Erie Canal, 286.
-
-    Estimates, 22, 34, 39, 43, 60.
-
-    Ethics, 64, 75.
-
-    Etymology, 37.
-
-    Etymology of "credit," 275.
-
-    Euphrates country, 392.
-
-    Euripides, 237.
-
-    Europe, 9.
-
-    Evarts, William M., 73.
-
-    Exact sciences, 63, 65.
-
-    "Exchange against," 314.
-
-    "Exchange in favor," 315.
-
-    Exchequer, 549, 568.
-
-    Excise tax, 560.
-
-    Exemption from taxes, 570.
-
-    Experience and experiments, 65.
-
-    Exports, 462.
-
-    Exposure, 15.
-
-    Ezekiel the prophet, 11, 83.
-
-
-    F.
-
-    Fallacies of protectionism, 503.
-
-    Fallacy A, 504.
-
-    Fallacy B, 508.
-
-    Fallacy C, 516.
-
-    Fallacy D, 520.
-
-    Fallacy E, 524.
-
-    Fallacy F, 529.
-
-    Fallen market rate, 55.
-
-    Fall of valuables, 49, 77.
-
-    Falsities of protectionism, 535.
-
-    "Farmer," 156.
-
-    "Farmers' Alliances," 519.
-
-    Farmers of United States, 577.
-
-    Fawcett, Professor, 223.
-
-    Federalists, the, 537.
-
-    Fees of preachers, 207.
-
-    Feigned cases, 65, 73.
-
-    Feudalism, 248.
-
-    Field, David Dudley, 206.
-
-    Field, Mr. Justice, 357, 360.
-
-    Field of investigation, 1.
-
-    Field of the science, 540.
-
-    Fire Insurance Co., 298.
-
-    First difficulty in money, 361.
-
-    "Five articles," 485.
-
-    "Five-twenties," 285, 355.
-
-    Fixed capital defined, 99.
-
-    Fluency of gold and silver, 401, 407.
-
-    Foreign bills of exchange, 306, 336.
-
-    Foreign trade, 454, 462.
-
-    Forms of credit, 271.
-
-    France and England, 30.
-
-    France and England in trade, 456.
-
-    Franklin, Benjamin, 436, 538.
-
-    Franklin's experiment, 69.
-
-    Fraud, 16.
-
-    Freak of fancy, 584.
-
-    "_Free breakfast table_," 488.
-
-    Free list, 583.
-
-    Freedom, 99, 112.
-
-    French "francs," 316.
-
-    French government, 56.
-
-    French lands, 156.
-
-    Fruit dealer, 366.
-
-    Funds, British, 284.
-
-    Future time in credit, 273.
-
-
-    G.
-
-    Gambling, 347.
-
-    Gangs of slaves, 100.
-
-    Garibaldi, 211.
-
-    General rise of prices, 348.
-
-    Generalizations, 7, 67.
-
-    Genesis, Book of, 143.
-
-    _Genus_, 7.
-
-    George, Henry, 142, 147, 151, 174.
-
-    Georgia, 441.
-
-    German Empire, 133.
-
-    German "Mark," 317, 393, 413.
-
-    Germans in Italy, 292.
-
-    Gibbon, historian, 130.
-
-    Gift, 16.
-
-    Gifts of God, 85.
-
-    Giving, 15.
-
-    Gladstone, W. E., 151, 153, 172, 568.
-
-    Glasgow, 137.
-
-    Gloversville, 103.
-
-    Glut of products, 140.
-
-    Gold and silver divisible, 412.
-
-    Gold and silver impressible, 412.
-
-    Gold coins, 409.
-
-    Gold eagle, 35.
-
-    Gold eagle of United States, 389.
-
-    Gold in greenbacks, 356.
-
-    Goodhue of Massachusetts, 496.
-
-    Gould, Jay, 204.
-
-    Government a committee, 252, 481.
-
-    Governments, 29, 267, 409.
-
-    Gradual occupation of the earth, 154.
-
-    Graduated income tax, 549, 550.
-
-    Grains, 57, 87.
-
-    Grand Device, 583.
-
-    Grand Trunk Railway, 163.
-
-    Grant, General, 358, 359, 408, 500.
-
-    Gratuitous elements, 144.
-
-    Gravitation, 363.
-
-    Great Britain, 313.
-
-    Greek cities, 384.
-
-    Greek language, 298.
-
-    Greeks, 73.
-
-    Greeley, Horace, 129.
-
-    Greenback dollar, 476.
-
-    Greenbacks, 51, 280, 290, 409, 425, 432.
-
-    Green Mountains, 519.
-
-    Green's History, 9, 580.
-
-    Gresham's Law, 421.
-
-    Gresham, Sir Thomas, 421.
-
-    Grier, Mr. Justice, 357.
-
-    Ground of taxes, 542.
-
-    Ground of trade, 25.
-
-    Grounds of production, 116.
-
-    Guild of Armorers, 226.
-
-    "Guildhall," 226.
-
-    Guilds of the Middle Ages, 258.
-
-
-    H.
-
-    Hamilton, Alexander, 288, 393, 415, 511, 536, 573.
-
-    "Handsome is that handsome does," 250.
-
-    Hargreaves, John, 106.
-
-    Harrison, President, 582.
-
-    Harrison's inaugural suit, 511.
-
-    Hartley of Pennsylvania, 495.
-
-    Health, 113.
-
-    Hebron, 9, 81, 83.
-
-    Henry II., 580.
-
-    Hepburn _vs._ Griswold, 356.
-
-    Herodotus, 386.
-
-    Heyd, Dr. W., 27.
-
-    Hildreth, historian, 512.
-
-    Hills of Judah, 25.
-
-    Hindoo rice, 393.
-
-    Hired men lack motives, 255, 208.
-
-    History of taxes, 579.
-
-    Hoar, Judge E, R., 358.
-
-    Holland, 280.
-
-    "Home Market Club," 516.
-
-    Home Rule, 173.
-
-    Homer, 81, 383.
-
-    Homer, Sidney, 351.
-
-    Hoosac River, 27.
-
-    Hoosac Tunnel, 286.
-
-    Horse-leech cry, 514.
-
-    House-tax, 555, 570.
-
-    Hudson's Bay Company, 114, 180.
-
-    Hull, John, 434.
-
-    Human efforts, 89.
-
-    Human nature, 363.
-
-    Hume, David, 121, 124, 326, 373.
-
-    "Hymn to the Nativity," 149.
-
-
-    I.
-
-    Ideal dollar, 426.
-
-    Idle capital, 191.
-
-    Iliad, 81, 383.
-
-    Illinois Central Railway, 232.
-
-    Impeachments, 253.
-
-    Imports, 474.
-
-    Improvements in machinery, 465.
-
-    Income bonds, 284.
-
-    Income tax, 547, 549, 578.
-
-    Indented servants, 248.
-
-    India, 26.
-
-    Indirect taxation, 553, 570.
-
-    Individuals _vs._ Government, 253.
-
-    Indorsements, 304.
-
-    Induction, 62, 397.
-
-    "Infant industries," 514.
-
-    Infinite Mind at work, 363.
-
-    "In God we Trust," 413.
-
-    Inland bills of exchange, 306, 336.
-
-    Inquiry, 78.
-
-    Internal taxes, 560.
-
-    International demand, 460.
-
-    "International Copyright," 212.
-
-    International exchange, 330.
-
-    Introspection, 65, 67, 71, 77.
-
-    Invention, 99, 104.
-
-    Invention of money, 366.
-
-    Ireland, 386.
-
-    Irish banks, 288.
-
-    Irish Land Bill, 151.
-
-    Irish leases, 173.
-
-    Iron Mountain, 526.
-
-    Iron in Tennessee Valley, 565.
-
-    Irving, Washington, 180.
-
-    Israelites, 584.
-
-    Issuer and bearer, 355, 427.
-
-    Italy, 150.
-
-
-    J.
-
-    Jack-knife, 94.
-
-    Jacob, 9.
-
-    Jacobites, 292, 422, 431.
-
-    Jamaica rum, 496.
-
-    Jamestown, Va., 162.
-
-    Jay, John, 537.
-
-    "Jealousy of Trade," 121.
-
-    Jefferson, Thomas, 415, 424, 442.
-
-    Jerusalem, 12, 24.
-
-    Jevons, Professor, 319, 381, 399.
-
-    Jews, 9, 10, 21, 24, 240, 333, 443.
-
-    Job, the Book of, 83, 397.
-
-    Jonson, Ben, 88.
-
-    Joppa, 22, 23.
-
-    Judges, 4.
-
-
-    K.
-
-    Kay, father and son, 106.
-
-    Kentucky, 491.
-
-    Key to unlock difficulties, 364.
-
-    Kinds of tariffs, two, 483.
-
-    Kinds of utility, 44.
-
-    King Hiram, 11, 16, 364.
-
-    King Philip's victories, 392.
-
-    King Solomon, 11, 16, 364.
-
-    _Kinkiness_, 105.
-
-    "Knit-goods Bill," 488.
-
-    Knox, Comptroller, 433.
-
-    Knox _vs._ Lee, 359.
-
-    Kountze Brothers, 328.
-
-
-    L.
-
-    Labor, 182.
-
-    "Labor and Capital," 183.
-
-    Labor defined, 90, 161, 184.
-
-    Laborers, 4, 184, 186.
-
-    Laborers as a class, 233.
-
-    Labor-troubles, 237.
-
-    _Laissez faire_, 252.
-
-    Land Bill, 1881, 172.
-
-    Land parcels, 146, 170.
-
-    Lands, 141.
-
-    Lapoint, Alfred, 130.
-
-    Latin Union, 414.
-
-    Law, John, 341, 436, 439.
-
-    Law of diminishing returns, 153, 172.
-
-    Law of supply and demand, 52, 53.
-
-    Laws of Moses, 443.
-
-    Lawyers, 4.
-
-    Layard, 331, 384.
-
-    Legal rate of interest, 234.
-
-    Legal ratio of gold and silver, 393.
-
-    Legal restrictions, 225.
-
-    Legal tender, 355, 356, 359.
-
-    Legislators, 4, 270, 377, 451.
-
-    Life Insurance Co., 298.
-
-    Lightning-rod, 70.
-
-    Limestone, 527.
-
-    Limits of production, 136.
-
-    Limits of value, 58.
-
-    Lincoln, Abraham, 210.
-
-    Lind, Jennie, 187.
-
-    Liverpool, 455, 528.
-
-    Loan, 276.
-
-    Loaves of bread, 379.
-
-    Locke and Newton, 423.
-
-    Lockouts, 247, 266, 521.
-
-    Locomotives, 233.
-
-    Logic, 63.
-
-    Logical fallacies, 534.
-
-    London bills, 310.
-
-    London bills of exchange, 469.
-
-    London Bridge, 2, 3, 313.
-
-    Lord Mayor of London, 265.
-
-    Losses from depreciated money, 478.
-
-    Louisiana, 438.
-
-    Lowell, 3.
-
-    Lowell and Jackson, 497.
-
-    Lowell mill, 7.
-
-    Lowell on the Merrimack, 498.
-
-    Lowering rates of interest, 234.
-
-    Lowndes, Congressman, 498.
-
-    Low taxes on few things, 568.
-
-    Lucretius, 95.
-
-
-    M.
-
-    Macaulay, 123, 422.
-
-    McCulloch, Hugh, 359.
-
-    Macedonia, 579.
-
-    Machinery, 197, 200.
-
-    McKinley, 508, 516, 563, 581.
-
-    Macleod, Henry Dunning, 47, 278, 292, 382, 383.
-
-    Machpelah, 82, 365.
-
-    Madison, James, 494, 537.
-
-    Magellan, 26.
-
-    Magna Charta, 444, 581.
-
-    Major Premise, 63.
-
-    Malthus, T. R., 215.
-
-    Manager at the Clearing, 5, 320.
-
-    Mania, 16.
-
-    Market defined, 137.
-
-    Market for products, 54.
-
-    Market value, 54.
-
-    MARKETS, 195.
-
-    Marshall, Mr. Justice, 358, 573.
-
-    Mason's trowel, 38, 98.
-
-    Massachusetts, 286.
-
-    Material commodities, 49.
-
-    Maximum value, 61.
-
-    Mechanics, 42.
-
-    Mediterranean, 23.
-
-    Mercantile sagacity, 140.
-
-    Mercantile system, 115, 312.
-
-    Mercantile Theory, 403, 452.
-
-    Mercantilism, 576.
-
-    Merchant defined, 6.
-
-    Merchants as a class, 9.
-
-    Messengers at the Clearing, 320.
-
-    Metaphysics, 64, 75, 242.
-
-    Methods and motives in foreign trade, 481.
-
-    Methods of mining, 398.
-
-    Metric system, 419.
-
-    Metropolitan Museum, 332.
-
-    Mexican exports, 479.
-
-    Mexican imports, 479.
-
-    Mexicans, 105.
-
-    Mill, John Stuart, 32, 63.
-
-    Miller, Mr. Justice, 47, 357.
-
-    Mills, Roger Q., 581.
-
-    Milton, 149.
-
-    "Mind-cure," 263.
-
-    Mint of Amsterdam, 422.
-
-    Mississippi Valley, 519.
-
-    Mobility of laborers, 221.
-
-    Molasses, 496.
-
-    Molasses tax, 538.
-
-    Mommsen, 238.
-
-    Monetary Conference at Paris, 73, 74.
-
-    Monetary "par," 471.
-
-    Money, 77, 361, 367.
-
-    Money a measure, 380, 415.
-
-    Money a "medium," 370.
-
-    Money a tool, 377.
-
-    Money, current, 51.
-
-    Money defined, 380.
-
-    Money divisible, 374.
-
-    Money is capital, 374.
-
-    Monopoly, 88, 122.
-
-    Montesquieu, 388.
-
-    Moody's "power-loom," 497.
-
-    Moors from Africa, 481.
-
-    Moral sciences, 63.
-
-    Morals, 113, 248.
-
-    More, Sir Thomas, 536.
-
-    Morrill, Senator, 518.
-
-    "Morrill Tariff," 521, 533.
-
-    Morris, Gouverneur, 539.
-
-    Morris, Robert, 415.
-
-    Moses, 11.
-
-    Motives of Protectionists, 493.
-
-    Motives to trade, 77.
-
-    Mountain view, 1.
-
-    Mountains of Israel, 25.
-
-    Mount Lebanon, 23, 364.
-
-    Mozart, 211.
-
-    Munn, Dr., 204.
-
-    Murillo, 56.
-
-    Muscular effort, 189.
-
-    Musicians, 4.
-
-    _Mutuum_, 276.
-
-    Myers, P. V. N., 332.
-
-
-    N.
-
-    Names on notes, 301.
-
-    Napoleon, the First, 134, 570.
-
-    Narbo in Gaul, 579.
-
-    National Bank, 289.
-
-    National Banks of United States, 428.
-
-    National Debt, 351.
-
-    National Labor Commissioner, 528.
-
-    Nationalism, 251, 256.
-
-    Nature, 102.
-
-    Nature of Credit, 271.
-
-    Natural agents, 85, 86.
-
-    "Natural monopolies," 136.
-
-    Nebuchadnezzar, 332.
-
-    Nelson, Mr. Justice, 357.
-
-    Nevada mines, 411.
-
-    New England, 145.
-
-    New Hampshire, 36, 441.
-
-    New Jersey, 502.
-
-    New Orleans, 438, 454.
-
-    New Testament, 12.
-
-    New York, 165, 477.
-
-    New York Central Railway Co., 491.
-
-    New York Clearing-House, 5, 7, 319.
-
-    "New York Public," 350.
-
-    Nickel pieces, 394.
-
-    Non-capital, 97.
-
-    North Carolina, 92.
-
-    Nottinghamshire, 163.
-
-    Novgorod, in Russia, 386.
-
-    Nullification, 577.
-
-
-    O.
-
-    Objective and subjective, 31.
-
-    Objective realities, 76.
-
-    Obligation in credit, 275.
-
-    Ocean freights, 474.
-
-    O'Connell, Daniel, 177.
-
-    Ohio sheep, 530.
-
-    "Oil Trust," 179.
-
-    Oklahoma, 221
-
-    Old Testament, 11.
-
-    Open ports of Great Britain, 474.
-
-    Operatives, 4.
-
-    Opinions on Protectionism, 535.
-
-    Orders to pay, 328.
-
-    O'Reilly's poem, 208.
-
-    Oresme, Nicole, 98.
-
-    Origin of capital, 95.
-
-    Oscillations of demand, 408.
-
-    "_Ought_," 65.
-
-    Ounce of silver, 36.
-
-    Our Lord, 12.
-
-    Outlying cases, 142.
-
-    Overseers of the mill, 4.
-
-    Owners, 38.
-
-    Oxford University, 338.
-
-    Oxus River, 27.
-
-
-    P.
-
-    Pacific States, 418.
-
-    Paganini, 187.
-
-    Palermo, 455.
-
-    Palfrey, historian, 512.
-
-    Paper-makers, 197.
-
-    Paper-makers' convention, 584.
-
-    Paper money, 427, 429.
-
-    Par of Exchange, 307, 316.
-
-    Par of foreign exchange, 468.
-
-    Paradise Lost, 88.
-
-    Parcels in the Clearing, 6.
-
-    Paris, 3, 57.
-
-    Paris bills of exchange, 470.
-
-    Parliament, 284.
-
-    Past time in commodities, 274.
-
-    Patent rights, 132.
-
-    Paul, Lewis, 109.
-
-    Pauper labor of Europe, 528.
-
-    Payer and payee, 329.
-
-    Peace, 29.
-
-    Peas and potatoes, 272.
-
-    Peasant proprietor, 157.
-
-    Peculiarities of Credit, 271.
-
-    _Pecunia_, 81, 384.
-
-    Pence and pound, 389.
-
-    Pennsylvania, 436, 490.
-
-    Personal services, 181.
-
-    Personal slavery, 80.
-
-    _Persons_ in credit, 275.
-
-    Petals of flowers, 70.
-
-    Pheidon, King of Argos, 384.
-
-    Philip le Bel, 404.
-
-    Philpott, editor, 521.
-
-    Phoenicians, 21.
-
-    Physical sciences, 32, 63, 64, 71.
-
-    Physicians, 4.
-
-    "Physiocrats," 141.
-
-    Physiology, 216.
-
-    Pierre and Company of Paris, 307.
-
-    Piers Ploughman, 228.
-
-    Pig-iron production, 560.
-
-    Pilgrims, 391.
-
-    Pillars of Hercules, 84.
-
-    Pine-tree shillings, 392.
-
-    Plato, 248.
-
-    Pliny, 384.
-
-    "Political Economy," 15, 174.
-
-    Polo, the traveller, 387.
-
-    "Pool," the, 2.
-
-    Poor Richard's Almanack, 158, 243.
-
-    Poor's Railroad Manual, 229.
-
-    Popular remedies for low wages, 251.
-
-    Portability of money, 411.
-
-    Porter, Dr. Samuel, 28.
-
-    Porters, 2.
-
-    Portfolio of governments, 254.
-
-    _Post hoc ergo propter hoc_, 534.
-
-    Post Offices, 256.
-
-    Potosi, silver of, 398.
-
-    Pottery wares, 502.
-
-    Pounds sterling, 310.
-
-    "Power," 91.
-
-    "Power-loom," 111.
-
-    Preamble of the Constitution, 256.
-
-    Present time in services, 274.
-
-    President Jackson, 289.
-
-    Press and Pulpit, 244.
-
-    Price, 50.
-
-    Price, Bonamy, 338, 382.
-
-    "Prices current," 50.
-
-    Prices of services, 375.
-
-    Prices under taxation, 549.
-
-    Principle of taxes, 546.
-
-    Privy Council, 350.
-
-    Probabilities, 347.
-
-    Probability of success, 220.
-
-    _Procullus_, 451.
-
-    Production defined, 84.
-
-    Products in market, 54.
-
-    Profitable exchanges, 473.
-
-    Profits, 94.
-
-    Profits the leavings of wages, 235.
-
-    Progress of civilization, 10.
-
-    Promise to pay, 279.
-
-    Promissory notes, 300.
-
-    Property, 101, 275, 545.
-
-    "Property is theft," 148.
-
-    Proportion of taxes, 544.
-
-    "Protectionism," 309, 453, 493.
-
-    Protectionism is prohibition, 486.
-
-    Proverbs, 12.
-
-    Providential elements in Economics, 362.
-
-    Prudhon, 148.
-
-    Prussians, 549.
-
-    Public opinion, 451.
-
-    "Pulpit or Platform," 22.
-
-
-    Q.
-
-    Quality of gold uniform, 411.
-
-    Quantity of metals, 399.
-
-    Queen Elizabeth, 123.
-
-    Questions of taxes, 541.
-
-    "Quick sales and small profits," 344.
-
-    Quittance, 354.
-
-
-    R.
-
-    Randolph, John, 498.
-
-    Rapidity of circulation, 372, 409.
-
-    Rate of interest in Holland, 234.
-
-    Rate of taxes, 556.
-
-    Rates of discount, 316.
-
-    Ratio of gold and silver, 74.
-
-    Raw materials, 526.
-
-    Redemption of greenbacks, 291.
-
-    Religion higher than morals, 263.
-
-    Remedies for labor troubles, 238.
-
-    Renderings, 26, 59, 76, 78.
-
-    Rent, 160, 169.
-
-    Rent defined, 170.
-
-    Republic of Mexico, 478.
-
-    Republic of Venice, 291.
-
-    Requisites of production, 84.
-
-    Return services, 138.
-
-    Revenue, 113.
-
-    Revenue rights, 134.
-
-    Ricardo, David, 146, 153, 169, 176.
-
-    Right and wrong, 65.
-
-    Rise in market rate, 55, 77.
-
-    Rise of prices, 408.
-
-    Rise of valuables, 49.
-
-    "River and Harbor Bill," 488.
-
-    Roach, John, 516.
-
-    Robinson Crusoe, 100.
-
-    "Rogues' Island," 441.
-
-    Roman coins, 385.
-
-    Roman Law, 277.
-
-    Roman mercantile transactions, 238.
-
-    Roman taxes, 579.
-
-    Romans, 313, 402, 579.
-
-    Royal Bank of France, 438.
-
-    Royal library at Nineveh, 384.
-
-    Ruggles, S. B., 74, 418.
-
-    Rupee, 386.
-
-    Russia, 150.
-
-
-    S.
-
-    _Sabinus and Cassius_, 451.
-
-    Salary-class, 184.
-
-    Salt, 178.
-
-    San Francisco, 455.
-
-    Sandal-wood, 23.
-
-    Sardanapalus, 331.
-
-    Satisfactions, 28, 75, 115.
-
-    Savannah, 527.
-
-    Savings banks, 270, 334.
-
-    Saxon ancestors, 93.
-
-    Say, J. B., 137.
-
-    Scandinavian "crown," 317, 393.
-
-    "Scarcity" of money, 440.
-
-    Schouler, James, 511.
-
-    Science as prophetic, 450.
-
-    Science defined, 62.
-
-    Science of buying and selling, 61.
-
-    Science of value, 42.
-
-    Scotch banking, 325.
-
-    Scotch banks, 288.
-
-    Scotland, 437.
-
-    Scott, W. L., 265.
-
-    Screw of Discount, 316.
-
-    Scriptures, 9, 14.
-
-    Scudder, M. L., 478.
-
-    Secession, 577.
-
-    Second difficulty in money, 362.
-
-    Secretary of the Treasury, 296.
-
-    Sempronian law, 580.
-
-    Services, 7.
-
-    Servius Tullius, 384.
-
-    "Seven-thirties," 285.
-
-    Shakspeare, 88, 98, 211.
-
-    Shears, 91.
-
-    Shekels, 9.
-
-    Sherman, Senator, 48, 490, 582.
-
-    Shoddy, 130.
-
-    "Shoemakers' Guild," 258.
-
-    Shut-downs, 521.
-
-    Shuttle, 91.
-
-    Shylock, 98.
-
-    Sicily, 580.
-
-    Silks and cottons, 457.
-
-    Silo, 155.
-
-    Silver certificates, 279.
-
-    "Silver Colony," 392, 442.
-
-    Silver dollar, 418.
-
-    Six kinds of exchanges, 8.
-
-    Skilled laborers, 186.
-
-    Smith, Adam, 114, 385, 398, 448, 536.
-
-    Smith, Captain John, 162.
-
-    Smith, Jonathan, 205.
-
-    Smithson, James, 214.
-
-    Social relations, 241.
-
-    Society, 5, 18.
-
-    Sociology, 242.
-
-    Solomon, 18.
-
-    Somers and Montague, 423.
-
-    Sons of Heth, 9.
-
-    Source of taxes, 543.
-
-    Sources of income, three, 547.
-
-    South Carolina, 435, 497.
-
-    Spain, taxes in, 569.
-
-    Spanish-Mexican dollar, 424.
-
-    Spanish milled dollar, 415.
-
-    Spaulding, E. G., 354.
-
-    Speaker of Commons, 126.
-
-    Specialties, 103.
-
-    Species, 8.
-
-    Specific rates of tariff-tax, 489.
-
-    Specific taxes, 558.
-
-    Speculation, 476.
-
-    Speculation proper, 346.
-
-    Spencer, Herbert, 342.
-
-    Spinning, 106.
-
-    Spinning-Jenny, 108.
-
-    "Springfield Republican," 265.
-
-    St. Louis, 114.
-
-    St. Petersburg, 455.
-
-    St. Timothy, 242.
-
-    Standard of comparison, 377.
-
-    Stanford, Senator, 439.
-
-    "Star Route Frauds," 256.
-
-    State banks, 288.
-
-    States and nation, 68.
-
-    Statistics, 230.
-
-    Statute law, 9.
-
-    Stealing, 15.
-
-    Steel beams, 564.
-
-    Steel rails, 487, 490.
-
-    Sterling exchange, 472.
-
-    Stephenson, Robert, 129.
-
-    Stock, 284.
-
-    Stock Exchange, 347.
-
-    Stockholm, 455.
-
-    Storrs, Dan, 303.
-
-    Story, Mr. Justice, 573.
-
-    "Straddles," 347.
-
-    Straits of Gibraltar, 481.
-
-    Strikes, 247, 261, 521.
-
-    Strong, Mr. Justice, 359.
-
-    "Subdue," 144.
-
-    Sub-forms of capital, 99.
-
-    Subject of money clear, 361.
-
-    Subject of Political Economy, 1.
-
-    Subjective elements, 39.
-
-    Subsidiary coins, 394, 418, 425, 433.
-
-    Sub-treasury of United States, 319.
-
-    Sugar and molasses, as taxed, 567.
-
-    "Suppliants" of Euripides, 237.
-
-    Supply and demand, 36, 445.
-
-    Supply defined, 53.
-
-    Supply of laborers, 219.
-
-    Supreme Court, 575.
-
-    Supreme Court of United States, 360.
-
-    Suspension of specie payment, 431.
-
-    Swank, James M., 565.
-
-    Swayne, Mr. Justice, 357.
-
-    Syllogism, 69.
-
-
-    T.
-
-    Taconics, 27.
-
-    Tailor's capacity, 119.
-
-    Talents, Parable of, 13.
-
-    Tariff, 128, 481.
-
-    Tariff defined, 483.
-
-    Tariff delusion, 577.
-
-    Tariff for revenue, 483.
-
-    Tariff Monopolies, 134.
-
-    "Tariff of Abominations," 576.
-
-    Tariff of United States, 487.
-
-    Taussig, Professor, 128, 488.
-
-    Taxation, 363, 540.
-
-    Tea and coffee, 488, 492.
-
-    Teachers, 4.
-
-    Temple at Jerusalem, 364.
-
-    Temple, Lord Richard, 199, 202, 544.
-
-    "Thaler," 393.
-
-    Theft, 16.
-
-    Thing-dollar, 427.
-
-    Third nation in trade, 459.
-
-    Thompson, Professor, 516.
-
-    Thoughts, 64.
-
-    Ticket, a general, 371.
-
-    Time of advance, 166.
-
-    Tobacco of Virginia, 369.
-
-    Tobacco taxes, 571.
-
-    Tools, 95.
-
-    Trade, 10, 72.
-
-    Trades-unions, 226, 258.
-
-    Treasurer of the mill, 4.
-
-    Trebizond, 27.
-
-    Tree-wool, 105.
-
-    Troughton's inch, 390.
-
-    Trust, 10.
-
-    Trustee, 278.
-
-    Tubal Cain, 95.
-
-    Tunis and Tripoli, 482.
-
-    Tyre, 11, 83.
-
-    Tyrians, 19, 22.
-
-
-    U.
-
-    Ulpian, 277.
-
-    "Ulster right," 224.
-
-    Ultimate elements, 30.
-
-    Union Bank of London, 328.
-
-    Unique cases, 46.
-
-    United Kingdom, 171, 203, 393, 406.
-
-    United States, 139, 165, 247, 288, 380, 405, 415, 450.
-
-    United States Bank, 288, 289, 293.
-
-    United States Money, 310.
-
-    United States Treasury, 279.
-
-    Universal income tax, 556.
-
-    University, Johns Hopkins, 251.
-
-    Unprofitable exchanges, 473.
-
-    Unseen elements, 31.
-
-    Unvalued lands, 143.
-
-    "Ur of the Chaldees," 384.
-
-    Usury laws, 442, 448.
-
-    Utility, 144, 161.
-
-    Utility and Value, 43, 147.
-
-
-    V.
-
-    Vale of Sharon, 26.
-
-    Valuable lands, 143.
-
-    Valuables, 7, 49, 368, 378.
-
-    Value, 32, 65.
-
-    Value acts upon demand, 54.
-
-    Value defined, 46.
-
-    Value of cottons and silks, 459.
-
-    Vasco da Gama, 27.
-
-    Vermont, 577.
-
-    Vermont wools, 530.
-
-    Vice-President Clinton, 289.
-
-    Virginia in 1755, 436.
-
-    Vital principles of a protective tariff, three, 486.
-
-    Vital principles of a revenue tariff, three, 483.
-
-    Voluntary associations, 226.
-
-
-    W.
-
-    "Wages," 161, 184.
-
-    Wages-portion, 192, 257.
-
-    "Wages-question," 163.
-
-    Wages, the leavings of profits, 235.
-
-    Walker, Francis A., 163, 184.
-
-    Walker, J. H., 340.
-
-    Walker's "Money," 382.
-
-    "Walking-delegate," 265.
-
-    Waltham, 497.
-
-    Wampum, 386.
-
-    War debt, 353.
-
-    Washington, 210.
-
-    Washington's inauguration suit, 510.
-
-    Water from the spring, 59.
-
-    Waterfall, 87.
-
-    "Water-twist," 109.
-
-    Ways and means, 355, 487.
-
-    "Wealth," 32.
-
-    "Wealth of Nations," 398, 536.
-
-    Webster, Daniel, 88, 187, 573.
-
-    Wells, David A., 571.
-
-    West of Europe, 19.
-
-    Whigs, 292.
-
-    Whitman, William, 516.
-
-    Whittier, 258, 500.
-
-    Will, 64.
-
-    William and Mary, reign of, 292, 392, 423.
-
-    Wiltshire laborer, 223.
-
-    Wolfe, General, 207.
-
-    Wool, 105.
-
-    Wool and woollen industry, 563, 581.
-
-    Wool and woollens tariff, 529, 533.
-
-    Wool manufacturers, 516.
-
-    Worn-out farms of New England, 155.
-
-    Wright, C. D., 267, 528.
-
-
-    Y.
-
-    Yard-stick, 378.
-
-    York shilling, 424.
-
-
-    Typography by J. S. Cushing & Co., Boston.
-    Presswork by Berwick & Smith, Boston.
-
-
-       *       *       *       *       *
-
-
-Two Earlier Works
-
-By PROF. PERRY.
-
-    INTRODUCTION TO POLITICAL ECONOMY.
-
-      Revised Edition. 12mo, $1.50.
-
-    POLITICAL ECONOMY.
-
-      Eighteenth Edition. Rewritten and Enlarged. Crown 8vo, $2.50.
-
-Prof. Perry's most elementary text-book, Introduction to Political
-Economy, presents the subjects of Value, Production, Commerce, Money,
-Credit, and Taxation, in a way plain and easily grasped by young
-minds, but at the same time scientifically exact. In his preface the
-author says: "I have endeavored so to lay the foundations of Political
-Economy in their whole circuit, that they will never need to be
-disturbed afterwards by persons resorting to it for their early
-instruction, however long and however far these persons may pursue
-their studies in this science."
-
-     "This work is not meant in any way to take the place of its
-     author's larger treatise, but rather to occupy a field which,
-     in the nature of the case, that work cannot occupy. It is not
-     an abridgment of that work but a separate treatise, intended
-     primarily for the use of students and readers whose time for
-     study is small, but who wish to learn the broad principles of
-     the science thoroughly and well, especially with reference to
-     the scientific principles which are involved in the practical
-     discussions of our time.... We need scarcely add, with
-     respect to a writer so well known as he, that his thinking is
-     sound as well as acute, or that his doctrines are those which
-     the greatest masters of political science have approved."
-
-                                 --_The N. Y. Evening Post._
-
-
-_Prof. Perry's Advanced Work._
-
-    POLITICAL ECONOMY.
-
-      Eighteenth Edition.
-
-      _Rewritten and Enlarged, 1 vol., Crown 8vo. $2.50._
-
-This book has passed through several revisions, to the most thorough
-of which it was subjected in 1883. It has grown in size, in symmetry
-and in maturity of thought and expression, so that it is a complete
-exposition of the science, both historically and topically. The
-distinctive feature of the work is its discarding the term _Wealth_
-and making _Value_ the subject of the science. Original light is
-thrown on the vexed questions of Land, Money, and Credit, and the
-whole trend of the book is on the side of sound currency and
-unrestricted trade.
-
-Professor Perry's style is admirably clear and racy; his illustrations
-are forcible and well chosen, and he has made a subject interesting
-and open to the comprehension of any diligent student, which has often
-been left by writers vague and befogged and bewildering. This work has
-stood excellently the test of the class room, and has been adopted by
-many of the chief educational institutions in this country. Among them
-are Yale College, Bowdoin College, Dartmouth, Trinity, Wesleyan,
-University of Wooster, Dennison University, Rutgers College, New York
-University, Union College, Seton Hall College, Hampden-Sidney, and
-many other colleges and normal and high schools.
-
-       *       *       *       *       *
-
-CRITICAL NOTICES.
-
-     "This edition has the marks of mature power and complete
-     grasp of the subject, and that finished style in which
-     thought and language have become perfectly adjusted to each
-     other. The statements and illustrations convey the thought
-     clearly and aptly."--_Boston Watchman._
-
-     "You have made an exceedingly valuable contribution to the
-     science of political economy. I am not a little surprised
-     that a college professor should have written a book so
-     intelligible to the common mind, and so eminently practical
-     and instructive. Accept my thanks for your kindness in
-     sending me the book, and my grateful acknowledgments as your
-     fellow-citizen for the service you have rendered the country.
-     It is, in my judgment, the ablest and most valuable work yet
-     published upon the science of which it treats. I do not see
-     where it could be improved in matter, or style, or
-     arrangement."--_Hon. H. McCullough, Secretary of the U. S.
-     Treasury._
-
-     "Your book interests students more than any I have ever
-     instructed from."--_President T. D. Woolsey, Yale College._
-
-     "So far as I have been able to read it, it seems to my humble
-     judgment remarkably clear, as well as well-timed and
-     sound."--_Hon. W. E. Forster, M.P., Leeds, Eng._
-
-     "The gem of your work is 'foreign trade.' It is the best
-     thing I have ever seen, the most clear and satisfactory. If
-     my friend Cobden were alive, he would send you his
-     congratulations and thanks."--_Hon. Amasa Walker, M.C.,
-     Lecturer on Political Economy, Amherst College._
-
-     "As a manual for general reading and popular instruction,
-     Prof. Perry's book is far superior to any work on this
-     subject before issued in the United States."--_New York
-     Times._
-
-     "We cordially recommend this book to all, of whatever school
-     of political economy, who enjoy candid statement and full and
-     logical discussion."--_New York Nation._
-
-     "There is more common sense in this book than in any of the
-     more elaborate works on the same subject that have preceded
-     it. It is the most interesting and valuable one that has been
-     given to the American public on this important
-     subject."--_New York Independent._
-
-     "In all the portions of the book which we have read the
-     author shows himself to be a clear, strong, bold, and
-     generally sound thinker."--_New Englander._
-
-     "Prof. Perry has certainly produced one of the best
-     elementary treatises on political economy that we have ever
-     met with in any language."--_New York Commercial._
-
-     "Prof. Perry is a vigorous thinker, a clear and forcible
-     writer."--_Princeton Review._
-
-
-.*. _Full Descriptive Catalogue of distinguished works in all
-departments of education sent free. Introductory and examination rates
-furnished on application._
-
-
-    CHARLES SCRIBNER'S SONS, Publishers,
-      743 and 745 Broadway, New York.
-
-
-
-
-       *       *       *       *       *
-
-
-
-
-Transcriber's note:
-
-Obvious typographical errors were corrected. Unusual spelling (for
-example: estop, Shakspeare), grammatical usage, and hyphenation
-variants present in the original (including co-operate and coöperate)
-have been retained.
-
-Alphanumerical paragraph labels and their formats were inconsistent in
-the original. These inconsistencies have been retained.
-
-P. 351, Table in original did not include data for 1877.
-
-P. 385, ~dragma~, original appeared in Greek script (script included
-in html version)
-
-Several index entry page number references were incorrect--in some
-cases up to 100 pages. These have been corrected.
-
-At the end of the advertisements, ".*." indicates an asterism.
-
-
-
-***END OF THE PROJECT GUTENBERG EBOOK PRINCIPLES OF POLITICAL ECONOMY***
-
-
-******* This file should be named 41936-8.txt or 41936-8.zip *******
-
-
-This and all associated files of various formats will be found in:
-http://www.gutenberg.org/dirs/4/1/9/3/41936
-
-
-
-Updated editions will replace the previous one--the old editions
-will be renamed.
-
-Creating the works from public domain print editions means that no
-one owns a United States copyright in these works, so the Foundation
-(and you!) can copy and distribute it in the United States without
-permission and without paying copyright royalties.  Special rules,
-set forth in the General Terms of Use part of this license, apply to
-copying and distributing Project Gutenberg-tm electronic works to
-protect the PROJECT GUTENBERG-tm concept and trademark.  Project
-Gutenberg is a registered trademark, and may not be used if you
-charge for the eBooks, unless you receive specific permission.  If you
-do not charge anything for copies of this eBook, complying with the
-rules is very easy.  You may use this eBook for nearly any purpose
-such as creation of derivative works, reports, performances and
-research.  They may be modified and printed and given away--you may do
-practically ANYTHING with public domain eBooks.  Redistribution is
-subject to the trademark license, especially commercial
-redistribution.
-
-
-
-*** START: FULL LICENSE ***
-
-THE FULL PROJECT GUTENBERG LICENSE
-PLEASE READ THIS BEFORE YOU DISTRIBUTE OR USE THIS WORK
-
-To protect the Project Gutenberg-tm mission of promoting the free
-distribution of electronic works, by using or distributing this work
-(or any other work associated in any way with the phrase "Project
-Gutenberg"), you agree to comply with all the terms of the Full Project
-Gutenberg-tm License available with this file or online at
-  www.gutenberg.org/license.
-
-
-Section 1.  General Terms of Use and Redistributing Project Gutenberg-tm
-electronic works
-
-1.A.  By reading or using any part of this Project Gutenberg-tm
-electronic work, you indicate that you have read, understand, agree to
-and accept all the terms of this license and intellectual property
-(trademark/copyright) agreement.  If you do not agree to abide by all
-the terms of this agreement, you must cease using and return or destroy
-all copies of Project Gutenberg-tm electronic works in your possession.
-If you paid a fee for obtaining a copy of or access to a Project
-Gutenberg-tm electronic work and you do not agree to be bound by the
-terms of this agreement, you may obtain a refund from the person or
-entity to whom you paid the fee as set forth in paragraph 1.E.8.
-
-1.B.  "Project Gutenberg" is a registered trademark.  It may only be
-used on or associated in any way with an electronic work by people who
-agree to be bound by the terms of this agreement.  There are a few
-things that you can do with most Project Gutenberg-tm electronic works
-even without complying with the full terms of this agreement.  See
-paragraph 1.C below.  There are a lot of things you can do with Project
-Gutenberg-tm electronic works if you follow the terms of this agreement
-and help preserve free future access to Project Gutenberg-tm electronic
-works.  See paragraph 1.E below.
-
-1.C.  The Project Gutenberg Literary Archive Foundation ("the Foundation"
-or PGLAF), owns a compilation copyright in the collection of Project
-Gutenberg-tm electronic works.  Nearly all the individual works in the
-collection are in the public domain in the United States.  If an
-individual work is in the public domain in the United States and you are
-located in the United States, we do not claim a right to prevent you from
-copying, distributing, performing, displaying or creating derivative
-works based on the work as long as all references to Project Gutenberg
-are removed.  Of course, we hope that you will support the Project
-Gutenberg-tm mission of promoting free access to electronic works by
-freely sharing Project Gutenberg-tm works in compliance with the terms of
-this agreement for keeping the Project Gutenberg-tm name associated with
-the work.  You can easily comply with the terms of this agreement by
-keeping this work in the same format with its attached full Project
-Gutenberg-tm License when you share it without charge with others.
-
-1.D.  The copyright laws of the place where you are located also govern
-what you can do with this work.  Copyright laws in most countries are in
-a constant state of change.  If you are outside the United States, check
-the laws of your country in addition to the terms of this agreement
-before downloading, copying, displaying, performing, distributing or
-creating derivative works based on this work or any other Project
-Gutenberg-tm work.  The Foundation makes no representations concerning
-the copyright status of any work in any country outside the United
-States.
-
-1.E.  Unless you have removed all references to Project Gutenberg:
-
-1.E.1.  The following sentence, with active links to, or other immediate
-access to, the full Project Gutenberg-tm License must appear prominently
-whenever any copy of a Project Gutenberg-tm work (any work on which the
-phrase "Project Gutenberg" appears, or with which the phrase "Project
-Gutenberg" is associated) is accessed, displayed, performed, viewed,
-copied or distributed:
-
-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 included
-with this eBook or online at www.gutenberg.org
-
-1.E.2.  If an individual Project Gutenberg-tm electronic work is derived
-from the public domain (does not contain a notice indicating that it is
-posted with permission of the copyright holder), the work can be copied
-and distributed to anyone in the United States without paying any fees
-or charges.  If you are redistributing or providing access to a work
-with the phrase "Project Gutenberg" associated with or appearing on the
-work, you must comply either with the requirements of paragraphs 1.E.1
-through 1.E.7 or obtain permission for the use of the work and the
-Project Gutenberg-tm trademark as set forth in paragraphs 1.E.8 or
-1.E.9.
-
-1.E.3.  If an individual Project Gutenberg-tm electronic work is posted
-with the permission of the copyright holder, your use and distribution
-must comply with both paragraphs 1.E.1 through 1.E.7 and any additional
-terms imposed by the copyright holder.  Additional terms will be linked
-to the Project Gutenberg-tm License for all works posted with the
-permission of the copyright holder found at the beginning of this work.
-
-1.E.4.  Do not unlink or detach or remove the full Project Gutenberg-tm
-License terms from this work, or any files containing a part of this
-work or any other work associated with Project Gutenberg-tm.
-
-1.E.5.  Do not copy, display, perform, distribute or redistribute this
-electronic work, or any part of this electronic work, without
-prominently displaying the sentence set forth in paragraph 1.E.1 with
-active links or immediate access to the full terms of the Project
-Gutenberg-tm License.
-
-1.E.6.  You may convert to and distribute this work in any binary,
-compressed, marked up, nonproprietary or proprietary form, including any
-word processing or hypertext form.  However, if you provide access to or
-distribute copies of a Project Gutenberg-tm work in a format other than
-"Plain Vanilla ASCII" or other format used in the official version
-posted on the official Project Gutenberg-tm web site (www.gutenberg.org),
-you must, at no additional cost, fee or expense to the user, provide a
-copy, a means of exporting a copy, or a means of obtaining a copy upon
-request, of the work in its original "Plain Vanilla ASCII" or other
-form.  Any alternate format must include the full Project Gutenberg-tm
-License as specified in paragraph 1.E.1.
-
-1.E.7.  Do not charge a fee for access to, viewing, displaying,
-performing, copying or distributing any Project Gutenberg-tm works
-unless you comply with paragraph 1.E.8 or 1.E.9.
-
-1.E.8.  You may charge a reasonable fee for copies of or providing
-access to or distributing Project Gutenberg-tm electronic works provided
-that
-
-- You pay a royalty fee of 20% of the gross profits you derive from
-     the use of Project Gutenberg-tm works calculated using the method
-     you already use to calculate your applicable taxes.  The fee is
-     owed to the owner of the Project Gutenberg-tm trademark, but he
-     has agreed to donate royalties under this paragraph to the
-     Project Gutenberg Literary Archive Foundation.  Royalty payments
-     must be paid within 60 days following each date on which you
-     prepare (or are legally required to prepare) your periodic tax
-     returns.  Royalty payments should be clearly marked as such and
-     sent to the Project Gutenberg Literary Archive Foundation at the
-     address specified in Section 4, "Information about donations to
-     the Project Gutenberg Literary Archive Foundation."
-
-- You provide a full refund of any money paid by a user who notifies
-     you in writing (or by e-mail) within 30 days of receipt that s/he
-     does not agree to the terms of the full Project Gutenberg-tm
-     License.  You must require such a user to return or
-     destroy all copies of the works possessed in a physical medium
-     and discontinue all use of and all access to other copies of
-     Project Gutenberg-tm works.
-
-- You provide, in accordance with paragraph 1.F.3, a full refund of any
-     money paid for a work or a replacement copy, if a defect in the
-     electronic work is discovered and reported to you within 90 days
-     of receipt of the work.
-
-- You comply with all other terms of this agreement for free
-     distribution of Project Gutenberg-tm works.
-
-1.E.9.  If you wish to charge a fee or distribute a Project Gutenberg-tm
-electronic work or group of works on different terms than are set
-forth in this agreement, you must obtain permission in writing from
-both the Project Gutenberg Literary Archive Foundation and Michael
-Hart, the owner of the Project Gutenberg-tm trademark.  Contact the
-Foundation as set forth in Section 3 below.
-
-1.F.
-
-1.F.1.  Project Gutenberg volunteers and employees expend considerable
-effort to identify, do copyright research on, transcribe and proofread
-public domain works in creating the Project Gutenberg-tm
-collection.  Despite these efforts, Project Gutenberg-tm electronic
-works, and the medium on which they may be stored, may contain
-"Defects," such as, but not limited to, incomplete, inaccurate or
-corrupt data, transcription errors, a copyright or other intellectual
-property infringement, a defective or damaged disk or other medium, a
-computer virus, or computer codes that damage or cannot be read by
-your equipment.
-
-1.F.2.  LIMITED WARRANTY, DISCLAIMER OF DAMAGES - Except for the "Right
-of Replacement or Refund" described in paragraph 1.F.3, the Project
-Gutenberg Literary Archive Foundation, the owner of the Project
-Gutenberg-tm trademark, and any other party distributing a Project
-Gutenberg-tm electronic work under this agreement, disclaim all
-liability to you for damages, costs and expenses, including legal
-fees.  YOU AGREE THAT YOU HAVE NO REMEDIES FOR NEGLIGENCE, STRICT
-LIABILITY, BREACH OF WARRANTY OR BREACH OF CONTRACT EXCEPT THOSE
-PROVIDED IN PARAGRAPH 1.F.3.  YOU AGREE THAT THE FOUNDATION, THE
-TRADEMARK OWNER, AND ANY DISTRIBUTOR UNDER THIS AGREEMENT WILL NOT BE
-LIABLE TO YOU FOR ACTUAL, DIRECT, INDIRECT, CONSEQUENTIAL, PUNITIVE OR
-INCIDENTAL DAMAGES EVEN IF YOU GIVE NOTICE OF THE POSSIBILITY OF SUCH
-DAMAGE.
-
-1.F.3.  LIMITED RIGHT OF REPLACEMENT OR REFUND - If you discover a
-defect in this electronic work within 90 days of receiving it, you can
-receive a refund of the money (if any) you paid for it by sending a
-written explanation to the person you received the work from.  If you
-received the work on a physical medium, you must return the medium with
-your written explanation.  The person or entity that provided you with
-the defective work may elect to provide a replacement copy in lieu of a
-refund.  If you received the work electronically, the person or entity
-providing it to you may choose to give you a second opportunity to
-receive the work electronically in lieu of a refund.  If the second copy
-is also defective, you may demand a refund in writing without further
-opportunities to fix the problem.
-
-1.F.4.  Except for the limited right of replacement or refund set forth
-in paragraph 1.F.3, this work is provided to you 'AS-IS', WITH NO OTHER
-WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
-WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE.
-
-1.F.5.  Some states do not allow disclaimers of certain implied
-warranties or the exclusion or limitation of certain types of damages.
-If any disclaimer or limitation set forth in this agreement violates the
-law of the state applicable to this agreement, the agreement shall be
-interpreted to make the maximum disclaimer or limitation permitted by
-the applicable state law.  The invalidity or unenforceability of any
-provision of this agreement shall not void the remaining provisions.
-
-1.F.6.  INDEMNITY - You agree to indemnify and hold the Foundation, the
-trademark owner, any agent or employee of the Foundation, anyone
-providing copies of Project Gutenberg-tm electronic works in accordance
-with this agreement, and any volunteers associated with the production,
-promotion and distribution of Project Gutenberg-tm electronic works,
-harmless from all liability, costs and expenses, including legal fees,
-that arise directly or indirectly from any of the following which you do
-or cause to occur: (a) distribution of this or any Project Gutenberg-tm
-work, (b) alteration, modification, or additions or deletions to any
-Project Gutenberg-tm work, and (c) any Defect you cause.
-
-
-Section  2.  Information about the Mission of Project Gutenberg-tm
-
-Project Gutenberg-tm is synonymous with the free distribution of
-electronic works in formats readable by the widest variety of computers
-including obsolete, old, middle-aged and new computers.  It exists
-because of the efforts of hundreds of volunteers and donations from
-people in all walks of life.
-
-Volunteers and financial support to provide volunteers with the
-assistance they need are critical to reaching Project Gutenberg-tm's
-goals and ensuring that the Project Gutenberg-tm collection will
-remain freely available for generations to come.  In 2001, the Project
-Gutenberg Literary Archive Foundation was created to provide a secure
-and permanent future for Project Gutenberg-tm and future generations.
-To learn more about the Project Gutenberg Literary Archive Foundation
-and how your efforts and donations can help, see Sections 3 and 4
-and the Foundation information page at www.gutenberg.org
-
-
-Section 3.  Information about the Project Gutenberg Literary Archive
-Foundation
-
-The Project Gutenberg Literary Archive Foundation is a non profit
-501(c)(3) educational corporation organized under the laws of the
-state of Mississippi and granted tax exempt status by the Internal
-Revenue Service.  The Foundation's EIN or federal tax identification
-number is 64-6221541.  Contributions to the Project Gutenberg
-Literary Archive Foundation are tax deductible to the full extent
-permitted by U.S. federal laws and your state's laws.
-
-The Foundation's principal office is located at 4557 Melan Dr. S.
-Fairbanks, AK, 99712., but its volunteers and employees are scattered
-throughout numerous locations.  Its business office is located at 809
-North 1500 West, Salt Lake City, UT 84116, (801) 596-1887.  Email
-contact links and up to date contact information can be found at the
-Foundation's web site and official page at www.gutenberg.org/contact
-
-For additional contact information:
-     Dr. Gregory B. Newby
-     Chief Executive and Director
-     gbnewby@pglaf.org
-
-Section 4.  Information about Donations to the Project Gutenberg
-Literary Archive Foundation
-
-Project Gutenberg-tm depends upon and cannot survive without wide
-spread public support and donations to carry out its mission of
-increasing the number of public domain and licensed works that can be
-freely distributed in machine readable form accessible by the widest
-array of equipment including outdated equipment.  Many small donations
-($1 to $5,000) are particularly important to maintaining tax exempt
-status with the IRS.
-
-The Foundation is committed to complying with the laws regulating
-charities and charitable donations in all 50 states of the United
-States.  Compliance requirements are not uniform and it takes a
-considerable effort, much paperwork and many fees to meet and keep up
-with these requirements.  We do not solicit donations in locations
-where we have not received written confirmation of compliance.  To
-SEND DONATIONS or determine the status of compliance for any
-particular state visit www.gutenberg.org/donate
-
-While we cannot and do not solicit contributions from states where we
-have not met the solicitation requirements, we know of no prohibition
-against accepting unsolicited donations from donors in such states who
-approach us with offers to donate.
-
-International donations are gratefully accepted, but we cannot make
-any statements concerning tax treatment of donations received from
-outside the United States.  U.S. laws alone swamp our small staff.
-
-Please check the Project Gutenberg Web pages for current donation
-methods and addresses.  Donations are accepted in a number of other
-ways including checks, online payments and credit card donations.
-To donate, please visit:  www.gutenberg.org/donate
-
-
-Section 5.  General Information About Project Gutenberg-tm electronic
-works.
-
-Professor Michael S. Hart was the originator of the Project Gutenberg-tm
-concept of a library of electronic works that could be freely shared
-with anyone.  For forty years, he produced and distributed Project
-Gutenberg-tm eBooks with only a loose network of volunteer support.
-
-Project Gutenberg-tm eBooks are often created from several printed
-editions, all of which are confirmed as Public Domain in the U.S.
-unless a copyright notice is included.  Thus, we do not necessarily
-keep eBooks in compliance with any particular paper edition.
-
-Most people start at our Web site which has the main PG search facility:
-
-     www.gutenberg.org
-
-This Web site includes information about Project Gutenberg-tm,
-including how to make donations to the Project Gutenberg Literary
-Archive Foundation, how to help produce our new eBooks, and how to
-subscribe to our email newsletter to hear about new eBooks.