THE LIBRARY 
 
 OF THE 
 
 NEW YORK STATE SCHOOL 
 
 OF 
 
 INDUSTRIAL AND LABOR 
 
 RELATIONS 
 
 AT 
 CORNELL UNIVERSITY 
 
The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924002400947 
 
THE 
 
 SCIENCE OF WEALTH 
 
 A MANUAL OF POLITICAL ECONOMY. 
 
 EMBBACntG 
 
 THE LAWS OF TRADE, CUERENCY, 
 AND FINANCE. 
 
 By AMASA walker, LL.D., 
 
 LECTUKBK ON PUBLIC ECONOMY IN AMHERST COLLEGE. 
 
 PR0PERT¥"5f=^O§kARY 
 
 BBVISED AND ENLABGBD. 
 
 NEW YORK STATE SCHOOL 
 INDUSTPIAL ACD LABOR RELATIONS 
 
 CORNELL UNIVERSITY 
 BOSTON: 
 
 LITTLE, BROWN, AND COMPANY, 
 
 1867. 
 
 W\TJ) 
 
Entered, according to Act of Congress, in tlie year 1866, by 
 
 AMASA WALKEIi, • 
 
 In ttie Clerk's Office of tlie District Court of tlie District of Massacliasetts. 
 
 CAMBKIDOE : 
 
 STEKBOTTPED AHD PKIHTED BY JOHN WILSON AND SON. 
 
PREFACE 
 
 TO THE FOURTH EDITION. 
 
 The demand for another issue of The Science op Wealth 
 gives the author an opportunity to express his high gratifi- 
 cation at the unexpected favor with which the work has 
 been received, not so much from any considerations per- 
 sonal to himself, as from the evidence it affords of the 
 greater interest now felt than formerly in the subjects of 
 which it treats. 
 
 Once the sale, within a few months, of even one hundred 
 copies of a work on Political Economy, would have been 
 regarded as remarkable ; * while at present it appears, not 
 only from the sale of this, but of similar cotemporary works, 
 that the reading public begins to appreciate the importance 
 of a science which a few years since was almost entirely 
 neglected ; and not only neglected, but contemned. 
 
 * It was a common saying of one of the trade in Boston, thirty years 
 ago, that " only three men ever purchased a new work on Political Econ- 
 omy ; and those were Nathan Appleton, Henry Lee, and Abbott Lawrence." 
 This was nearly the literal fact. An edition of one thousand copies of 
 J. S. Mill's admirable work, republished in this country in 1848, suppUed the 
 demand for some fifteen years, averaging a sale of about seventy copies per 
 annum! 
 
IV PREFACE. 
 
 To be sure, Political Economy has for many years 
 been placed in the curriculum of our colleges, but not 
 unfrequently as a matter of mere form ; the study being 
 superficially passed over, or, more frequently, omitted 
 altogether. 
 
 The author will further remark, that it has given him 
 great pleasure to learn that the demand for his work has 
 been largely from business men. Feeling as he does the 
 importance of the science to that class of persons ; knowing 
 how much perplexity and loss he enxjountered himself, while 
 in trade, from an entire ignorance of the laws of currency, 
 — the author cannot but believe that no rank or profession 
 has a greater pecuniary interest in the subject than those 
 engaged in the commerce and manufactures of the country. 
 
 Some additions have been made in an Appendix attached 
 to the present edition. 
 
 The great changes that have taken place in the produc- 
 tion and use of gold within the past few years, has induced 
 the author to insert an article showing its present position 
 in the commerce of the world, the fluctuations that have 
 taken place in the premium since the suspension of specie 
 payments in the United States, and the cause of those fluc- 
 tuations. A table is given of the monthly price of gold, 
 from Jan. 1, 1862, to the present time ; also, a table show- 
 ing the extreme quarterly fluctuations, for the same time, 
 illustrated by a diagram. The influence which the great 
 discoveries of gold have exerted upon the trade of India 
 and China is also exhibited ; and tables given of the prices 
 of the principal staples of those countries for the last 
 eighteen years. 
 
PREFACE. V 
 
 The peculiar relation of California, as a gold-producing 
 State, to the mixed-currency system of the United States, is 
 also described. Gold mining, as a means of discharging 
 the national indebtedness, is also considered ; together with 
 the effect of the present cxirrency expansion upon wages 
 and. salaries, and other matters of interest. 
 
 Corrections haye been made, in the present edition, of 
 errors discovered in previous ones, and some modifications 
 in the form of expression ; but no principle has been changed, 
 and the work, in all its essential features, remains intact. 
 
 A. W. 
 November, 1867. 
 
PREFACE. 
 
 In the preparation of the following work, it has been my 
 hope, while furnishing a Manual of Political Economy, 
 which should present clearly and intelligibly the leading 
 principles of the science, to afford a full and thorough 
 analysis and description of the different currencies used in 
 the commerce of the world, especially to exhibit the nature 
 and effects of the mixed-currency system of the United 
 States. 
 
 Eegarding the instruments of exchange as essential, not 
 only to the largest production, but to an equitable distribu- 
 tion and advantageous consumption, of wealth, I have long 
 felt that a work was needed which should give more promi- 
 nence to the subject of money and currency than it has 
 heretofore received. I have searched in vain for any work 
 on Political Economy, domestic or foreign, which even 
 attempted such a complete view of the monetary question, in 
 all its bearings, as it appears to me to demand. Especially 
 does such a work seem to be called for at the present time, 
 when there are more conflicting views and wider differences 
 
viii P E B F A C E. 
 
 of opinion among professors of economic science on this 
 subject, and more popular ignorance and misconception, 
 tlian on any other. To pass lightly over a matter so impor- 
 tant, so interwoven with all the great interests of society, 
 has seemed to me a great wrong to those who, as scholars, 
 are expected to prepare themselves for active duties and 
 responsible positions, and, as citizens, are to decide by their 
 votes the financial policy of the country. 
 
 In 1857, 1 endeavored, in a series of articles iipon Politi- 
 cal Economy, in the (New York) " Merchants' Magazine," to 
 show the nature and effects of mixed currency, and its 
 practical influence upon trade and industry. This, so far 
 as I know, was the first attempt of the kind. These 
 articles, in connection with other matter appertaining to the 
 same subject, were published in pamphlet form in December 
 of that year.* In 1859, a small but excellent work on Politi- 
 cal Economy appeared, from the pen of Professor Bascom, 
 of Williams College, presenting the currency question with 
 great correctness, but with such brevity as not, in my view, 
 fully to meet the wants of the public. "Within the present 
 year, and since this work has been mostly in manuscript, a 
 manual has been published by Professor Perry, also of Wil- 
 liams College. It is a work of great merit ; the chapter on 
 Foreign Trade being the most able essay upon that siibject 
 which has fallen under my observation. The work contains 
 sound views in regard to currency, and a more extended 
 discussion than any that has preceded it ; yet it does not 
 give so full analysis as I had already prepared, such as it 
 seems to me one work, at least, should contain. 
 
 * Walker on Money and Mixed Currency, 83 pp. 
 
PREFACE. ix 
 
 And here I would recognize the earnest and efficient 
 labors of William M. Gouge, of Philadelphia, who published 
 in 1841-2 " A Journal of Banking," and subsequently " A 
 Short History of Paper Money," in both of which he pre- 
 sented an immense array of facts, statistics, and arguments, 
 calculated to awaken inquiry. He was the pioneer in the 
 great work of calling piiblic attention to the effects of such 
 a substitute for money ; and his labors are appreciated in 
 this country and Europe, by those acquainted with his 
 writings. 
 
 Nor would I fail to acknowledge the valuable services 
 rendered to this department of the science by a profound 
 student and able writer in our public journals, over the sig- 
 nature of " BuUionist," whose untiring efforts have done 
 very much to diffuse correct ideas in regard to the nature 
 of money and currency. 
 
 I presume many persons will feel that a larger space has 
 been given to currency than properly belongs to it. To this 
 I can only reply, that nothing is inserted not deemed rele- 
 vant and essential to a complete understanding of the 
 question at issue, in all its relations. Statistics, facts, and 
 diagrams have been introduced to substantiate the princi- 
 ples announced, and impress their truthfulness. 
 
 It may be thought, that too many and too minute details 
 have been given in regard to trade and business affairs ; but 
 experience has shown me, that we cannot safely assume 
 that the students of a college, or the masses of the people, 
 are so well informed in regard to these matters as to make 
 such explanations and illustrations unnecessary. 
 
 Another motive that has influenced my mind in the 
 
PREFACE. 
 
 preparation of this volume has been the desire to produce 
 a work especially accessible and useful to business men,, 
 merchants, manufacturers, &c. They have a deep and 
 immediate personal interest in all economical questions, and 
 need particularly to be fuUy informed of the character of 
 that instrumentality by which exchanges are made, and 
 obligations discharged. They are not prepared for the 
 responsibilities and hazards of their several callings, unless 
 they fully comprehend the causes which operate to increase 
 or depress trade, to assure or endanger credit, to expand or 
 contract currency. Political Economy may be considered 
 as emphatically a business science. 
 
 But, while a knowledge of the laws of wealth is especially 
 desirable and useful for particular classes and professions, 
 it is obvious that the masses of the people should have an 
 intelligent understanding of its principles. In a country 
 where sufirage is universal, every man is virtually a law- 
 giver. His opinions will influence his action in his choice 
 of those who are to decide the policy of the government, 
 which will be but the general expression of the popiilar wiE. 
 Every man has his ideas of currency, trade, and finance ; 
 and, however imperfect or mistaken, they influence his polit- 
 ical action. Hence the great desirableness of a general 
 difiusion of sound views upon all questions appertaining to 
 the economical interests of the country. 
 
 That Political Economy is "a science having nothing to do 
 with morals or religion, nor in any way appertaining to 
 human welfare, except so far as relates to the production 
 and accitmulation of wealth, is a common opinion ; but it 
 may be fearlessly asserted, that no other science is so inti- 
 
PREFACE. XI 
 
 mately connected with the destiny of the human race, in its 
 highest and most enduring interests. Such has been the 
 uniform testimony of those in the clerical profession who 
 have given special attention to its teachings. Dr., Chal- 
 mers, while he held , the chair of Divinity in the University 
 of Edinburgh, gave lectures upon Political Economy. In 
 the preface to the volume he published upon the subject, he 
 says, " We cannot bid adieu to Political Economy without 
 an earnest recommendation of its lessons to all who enter 
 upon the ecclesiastical profession." Eev. Dr. Bethune, in 
 his address before the Literary Society of Yale CoUege, 
 1845, spoke of Political Economy " as that philanthropic 
 science, which, next to the gospel, whose legitimate offspring 
 it is, will do more than any thing else for the elevation and 
 fraternization of our race." Bishop Whately was heard to 
 remark, a short time before his death, that " no theological 
 seminary should be without its chair of Political Economy." 
 Agreeing fully with the opinions expressed by these emi- 
 nent men, I have felt desirous, throughout the following 
 work, to show how perfectly the laws of wealth accord with 
 all those moral and social laws which appertain to the 
 higher nature and aspirations of man. 
 
 Taxation in all its forms, as imposed by national, state, or 
 municipal authority, has received a large share of attention 
 in this work. The great change that has taken place in the 
 fiscal condition of the country, by whic!h the different modes 
 of raising revenue have become matters of the first impor- 
 tance to every citizen, has been an inducement to enter 
 more fully into details than usual with writers on the 
 general science of public economy. The American system 
 
xii P E B P A E. 
 
 of taxation is more complex, perhaps, than any other, from 
 the fact of its triple character ; that on the part of the 
 general government being both direct and indirect, while 
 that by State and municipal authorities is, in the main, 
 direct, upon property and polls. The National Debt and 
 Public Finances occupy that position in the present work 
 which their importance seems to require. The subject may 
 almost be regarded as a new one in this country. 
 
 References are made in this work to the writings of the 
 late M. Frederick Bastiat. No author of tlae present age 
 has done more to dispel popular delusions, and expose pop- 
 ular sophisms, — especially in his own country. Prance. It 
 would be well if his writings were more extensively read in 
 this country ; and the republication of his " Harmonies of 
 Political Economy " here would be a great benefaction to 
 the public. 
 
 We are already furnished with the valuable work of John 
 Stuart Mill, who is undoubtedly the ablest of living writers. 
 Though more especially adapted to European than American 
 use in the application of economic principles, it is exten- 
 sively read in this country. While the science of wealth 
 is always and everywhere the same, it is equally true that 
 certain subjects of which it treats have a more practical 
 interest in one country than another ; and, of course, the 
 importance attached to different topics will be determined 
 by that consideration. Pauperism, and the economy of the 
 poor-laws, may be a matter of deep concern where a fright- 
 ful proportion of the people are dependent upon public 
 charity, but of little consequence where very few, as in this 
 country, are found in that condition. It is for this reason, 
 
PREFACE. xiii 
 
 that each community, while recognizing precisely the same 
 economic laws, finds that the subjects to which they may be 
 applied vary greatly in import&-nce. 
 
 I cannot claim for myself any peculiar qualifications for 
 the work I have undertaken. Some twenty years of my 
 early life were devoted to pursuits connected with the trade 
 and manufacturing industry of the country, while a longer 
 period has since been devoted to the study of the laws of 
 wealth. A practical knowledge of business and banking 
 affairs generally, and a most earnest and persistent search 
 for the truth in all matters appertaining to my favorite sci- 
 ence, are the only claims I have to the attention of the 
 public. 
 
 I should do injustice to my own feelings, if I did' not 
 acknowledge the valuable assistance of my son, General 
 Francis A. Walker, late of the volunteer service of the 
 United States, without whose aid it would have been nearly 
 impossible, amid other avocations, to complete this work. 
 
 A. W. 
 
 KoHTH Bbookfiels, Mass., 1866. 
 
TABLE OF CONTENTS. 
 
 BOOK L— DEFINITIONS. 
 
 Chaptek I. — GTiaracter of the Bcience. — Distinguished from politics, 1. 
 — The economical circle, 2. — Man's wants and nature's supply being 
 constant, political economy a positive science, 3. — How far affected 
 by legislation, 4. — Prejudices which retard its progress, 5. 
 
 Chapter n. — Definition of WeaUh. — Includes all articles of value, and 
 nothing else, 7. 
 
 Chapter III. — Definition of Value. Objects of human desire, obtained 
 by human effort, have' value, and none else. Value is power in 
 exchange, and nothing else, 8. — Illustrations, chiefly from F. 
 Bastiat, 9. 
 
 Chapter IV. — Distinction between Value and Utility. — One of kind, 
 and not of degree, 14. — Material wealth assumed to be a good, 15. 
 — Nature gives value to nothing, 16. 
 
 Chapter V. — Definition of Labor. — Services of slaves not labor, 18. 
 
 Chapter VT. — Definition of Capital, — The labor of the past, 19. — 
 Growth of capital illustrated, 20. 
 
 Chapter VII. — Belation of Capital and Labor. — Should be competi- 
 tors, not antagonists, 21. — Results of their hostility in France, 22. 
 
 Chapter VHI. — General Division of the Science. — Production, ex- 
 change, 22. — Distribution, consumption, 23. 
 
XVI CONTENTS. 
 
 BOOK n.— PRODUCTION. 
 
 Chapter I. — Forms of ProdMction. — Transmutation chiefly work of 
 agriculturist, 24. — Agriculture supplies men and materials for 
 other industries, 25. — Includes mining and fisheries, 26. — Trans- 
 formation chiefly work of manufacturer, 26. — Distribution of manu- 
 factures, not so generally as agriculture, governed by the industrial 
 genius of peoples, 27.^ By territorial advantages; by great acci- 
 dents, 28. — Manufacturers employ fewer laborers, but greater 
 machine power, 29. — Transportation chiefly work of merchant, 29. 
 — Where does the chemist belong? this division arbitrary; their 
 forms generally united, 30. 
 
 Chapter II. — Conditions of tJie Eighest Production. — Division of 
 labor; co-operation of capital; economic culture, 31. 
 
 Chapter HI. — Division of Labor. — Illustrated; does this saving of 
 time promote indolence ? 32. — How far carried in fact ? 33. 
 
 Chapter IV. — The Advantages of Division of Labor. — Increased dex- 
 terity; better knowledge of business, 34. — Time saved in tran- 
 sition; invention facilitated, as in American manufactures, 35. — 
 Individual abilities adapted to work; the weakest employed, 36. 
 — Power of capital increased; manufactures concentrated; profits 
 reduced, 37. — Apprenticeship shortened, 38. — Social development 
 facilitated, and influence of laboring classes increased, 39. 
 
 Chapter V. — The LAmitations to the Division of Labor. — When the 
 operation can no longer be subdivided; when interested personal 
 supervision fails ; when the operations cannot be sufficiently local- 
 ized, 40. — By the necessities of the seasons; for example, agricul- 
 ture, 41. — Hence tendency of agricultural products to rise in price ; 
 division of labor applied to sciences and professions, 42. — Special- 
 ties recommended, 43. 
 
 Chapter VI. — The Disadvantages of Division of Labor. — Tends to 
 enervate the laborer, 43. — This may be avoided, 44. — Lesson of 
 the recent war ; tends to cramp and enfeeble the mind ; this com- 
 pensated, in part, by the greater communicativeness, 45. — By the 
 intimate connection of mental faculties, and by opportunities outside 
 
CONTENTS. XVil 
 
 of labor for culture, 46. — Tends to lower average of health, shorten 
 life, and diminish reproduction, 47. — Table showing average of life 
 in different occupations; inaccuracies in vital statistics, 48. — Check- 
 ing propagation in cities not an evil ; lessens the number doing 
 business for themselves ; relation of this to the formation of character, 
 49. — To the fairness of remuneration; to steadiness of employ- 
 ment, 50. — The last disadvantage being removed by the mutual 
 system in trade, insurance, fisheries, &c., 52. 
 
 Chapter VII. — TJie Division of Labor (concluded). — Balance of re- 
 sults in favor of extension of the principle, 53. — The mercantile 
 tieory, 54. 
 
 Chapter Vm. — The Go-operation of Qapital. — Capital is wealth 
 employed in reproduction, 56. — Distinction between capital and 
 wealth; capital comes/from savings of labor, 66. — Fixed and cir- 
 culating, 57. 
 
 Chapter IX. — The Co-operation of Capital (continued). — No unpro- 
 ductive capital, 68. 
 
 Chapter X. — The Co-operation of Capital (continued). — The union 
 of capital and labor effective when in just proportions ; labor to 
 decide the amount, 60. — That amount varies in different coun- 
 tries, 61. — What in United States? 62. — In Great Britain? why 
 Ireland is so depressed, 63. — Call there be a surplus of capital? 
 lesson from Genoa and Venice, 64. — Capital checked by luxury, 65. 
 — Emigration of capital, 66. 
 
 Chapter XI. — The Co-operation of Capital (concluded). — Its union 
 with labor effective, again, when each is sure of its reward ; injustice 
 the death of industry, 66. — Warning from France, 67. — From 
 Spanish conquests ; from Asia ; again, when capital is well distribu- 
 ted, 68. — Limits to its aggregation; American error in regard to 
 corporations; again, when there is freedom of industry, 69. — Mis- 
 chief of multiplied restrictions ; work of politician impertinent, 70. 
 
 Chapter XII. — Economic Culture. — Is the distinction between pro- 
 ductive and unproductive labor real ? Adam Smith's list of unpro- 
 ductive laborers, 71. — All labor productive, 72. — Examples, 73. 
 Economic culture concerned with secondary influences of produc- 
 tion, the rebound from consumption, 74. — Here production touches 
 
 consumption. 75. 
 
 b 
 
XVIU CONTENTS. 
 
 BOOK ni.— EXCHANGE. 
 
 Paet I. — Trade. 
 
 Chapter I. — The Principle of Trade. — Arises from division of labor ; 
 illustrated by savage life, 77. — Divided as domestic, carrying, and 
 foreign, 78. — Its amount governed by surplus production, 79. — 
 Those trade most together whose productions differ ; kind of pro- 
 ducts determined by soU, 80. — Climate, social condition, ethnical 
 peculiarities ; territorial division of labor, 81. — Has few limitations 
 and no disadvantages, 82. — General principles of trade are neces- 
 sity of surplus, community of interests ; that community often in- 
 dependent of direct exchange, 83. — Largest production and best 
 distribution effected by territorial division of labor ; international 
 unity secured; wars diminished in number, malignity, and dura- 
 tion, 84. 
 
 Chapter II. — Obstructions to Trade. — May be regarded as protection 
 to local industry; protection from physical obstructions, 85. — 
 Measured chiefly by bulk and weight ; diminished by improved 
 transportation, 86. — But never annihilated, 87. — Protection from 
 social obstructions; illustrated by American civil war, 88. — Legal 
 protection; this of three kinds, — prohibition, bounties, imposts, 89. 
 - Only necessary to discuss the last, 90. 
 
 'Chapter HI. — Protection. — May be for four causes, — revenue, to 
 encourage home production, to stipport capital already enlisted, 
 to secure commercial independence; for revenue, considered; a 
 species of taxation, 90. — Should be governed by what shall be 
 decided in regard to protection; to encourage home production, 
 considered; the battle-field of protection ; two propositions, 91. — 
 Reducible to one, i.e. man's economic desires need government by 
 law; that, false, 92. — Illustrated by American manufacture of iron; 
 best example, for six reasons stated ; yet we do not produce success- 
 fully; why? not for want of knowledge, 93.— Nor of capital: 
 business creates its own; nor of facilities and material, 94. Im- 
 portance of juxtaposition; example from India; nor of natural 
 protection ; why, then ? we can do better ; superior profitableness of 
 agriculture, 95. — Yet protection was applied, 96. — Effect? iron 
 produced; a great loss to general production, 97. — Wasteful ex- 
 periments, 98.— Excluded country suffers less than the protected, 
 
CONTENTS. XIX 
 
 99. — Folly of anticipating agricultural glut; the natural growth of 
 manufactures, 100. 
 
 CiLiVPTER rV. — Fallacies of (he Protection Theory. — That it is necessary 
 to protect infant manufacturers, 101. — Answer, this protects good 
 and bad alike, and encourages the birth and growth of worthless 
 enterprises ; the infant may cost more than the man will be worth ; 
 example, beet-root sugar in France, 102. — That it will protect us 
 against the pauper labor of Europe ; answer, this system started the 
 immigration, and has continued it, 104. — That it raises the average 
 of profits, which is simply absurd, 105. — That manufacturing coun- 
 tries are, somehow, richer than agricultural ; answer, they are older, 
 105. — Besides, only those are richer which have taken to manufac- 
 tures by reason of natural adaptations, 106. — Manufactures, to a 
 certain extent, arise by natural protection in every country; to 
 attempt more than this is simply waste of power, 107. — That it is 
 necessary to develop our resources ; answer, American labor has 
 always been fully occupied, and, when let alone, in the most profitable 
 business ; it can do no more by force of law ; our ores will not spoil 
 by waiting, 108. 
 
 CiLVPTBR V. — Protection {continued'). — Have discussed two reasons 
 given in chap. iii. ; next, to support existing manufactures, on the 
 ground of justice ; answer, not a question of economy ; better, how- 
 ever, to pay outright for them than repeat and continue mistakes by 
 false legislation ; allowing all the protectionist claims, protection is 
 an absurdity in American politics, \Q^. — Fourth reason, to secure 
 independence ; answer, simple barbarism ; rejoinder, it is necessary 
 to safetj' in war, 110. — Examined and found untrue, 111. — Final 
 claim of the protectionist, retaliation ; found to be more injurious to 
 the protected than the excluded, 112. — French treaty of Mr. Cobden, 
 lis. — The natural industry of the United States is agricultui-e ; 
 some sections would manufacture without protection, as they began 
 to do, 115. — "Let us alone," the policy of trade, 115. — Was the 
 original policy of New England; protection the disease of in- 
 dustry, 117. 
 
 Chapter VI. — Balance of Trade.— The true state of trade cannot be 
 ascertained by inspection of official returns ; the profit of exporta- 
 tion and importation generally make the difference between an adverse 
 or favorable trade; our foreign trade in 1863, 118. — Frauds at 
 Custom House sufficient to change the balance from one side to the 
 other, 120. 
 
XX CONTENTS. 
 
 BOOK m. 
 
 Paet n. — Ihstkcments of Exchamoe 
 
 Chapter I. — Barter and the different forms of Currency. — Three in- 
 struments of exchange, viz. barter, currency, different forms of 
 credit; difficulties attending barter, 121. — A currency wanted to 
 act as a medium of exchange, 122. — And as a standard of value ; 
 requirements of such a standard, 123. — Currency of four kinds, 
 viz. money, credit, mixed, and mercantile currency, 124. 
 
 Chaptbk n. — Money. — Forms used in different ages and countries, 
 126. — Advantages of gold and silver; possess value, are stable in 
 value, 127. — Conveniently portable, malleable, of uniform quality 
 everywhere, can be readily alloyed or refined, are indestructible by 
 accident, generally diffused, sufficiently plentiful for trade, 128. — 
 And nearly inconsumable by use, 129. — Coinage, its advantages, 
 130. — United States Government seigniorage, 130 ; government gives 
 no value to coin, only certifies weight and fineness, 131. 
 
 Chapter m. — Credit Currency. — Transfers debts, does not pay them ; 
 inevitably at a discount ; folly of gold biU by Congress, 132. — Occa- 
 sions rise of prices ; effect on United States during Rebellion ; 
 depreciates fixed incomes and real estate, 133. — ^Vitiates contracts 
 (see American Revolution and Rebellion), 134. — Never kept to the 
 natural volume of currency; seldom paid, 135. — In effect a forced 
 loan ; a direct tax, 136. — Government does not get fuU value, 137. — 
 Loss to United States during late war from use of credit currency, 138. 
 
 Chapter IV. — Mixed Currency. — A modern invention; Bank of 
 England, 138. — Composition; called mixed, because consisting of 
 value and credit ; its quality the proportion between the two ele- 
 ments, 139. — Convertibility distinguished from redeemableness, 140. 
 — Inconvertible currency annihilated by being redeemed; analysis 
 of bank returns ; definition of terms, 141. — Bank balances the most 
 dangerous element; agency in suspension of banks of New York and 
 Bank of England, 142. — Resources of banks; definition of terms, 
 144. — What the source of profit? motive power in expansion, 145. — 
 Quality of the United States currency 1860, 146. — Grand problem 
 of banking, 147 
 
CONTENTS. XXI 
 
 ChapteeV. — Analysis of Deposits. — Already defined; arise in five 
 ways, 148. — May be classified as compulsory, fiduciary, and active; 
 the first kept to secure discounts, 149. — Highly dangerous to the 
 currency ; not known in England, as there are no usury laws, 150. — 
 Other kinds legitimate ; are deposits currency ? opinion of Lord 
 Overstone, 161. — Of New-York Board of Currency; they are -as 
 much ^n instrumentality of exchange as bank-notes, 152. — Indeed, 
 more active ; stocks not immediate resources to a bank ; cannot be 
 realized in panic or pressure, 153. 
 
 Chapteb VI. — Mixed Currency, Fluctuations in Quantity and Quality. 
 
 — We have two great questions : 1st, does mixed currency perform 
 satisfactorily the functions of money .' 2d, what its efiects upon public 
 interests ? 164. — Only one of these at present (see chap, x.) ; mixed 
 currency not governed by laws of value, beoause it has not value ; 
 can be increased without labor, and must be withdrawn for reasons 
 not affecting articles costing labor, 155. — Expansion always in ex- 
 cess, because it creates speculation and a feverish demand, 166. — 
 Because, also, banks are interested to crowd it out ; contraction takes 
 place from any cause which affects credit ; hence without regard to 
 laws of value, 157. — Export of specie withdraws only its own amount 
 of value currency, but of credit currency that amount multiplied by a 
 factor expressing proportion of credit to value, 158. — Sound banks 
 
 ^no better than unsound in panic ; movement of expansion begins with 
 the banks, not from want of trade, 159. — Tides of business need 
 not be ruinous, 160. 
 
 Chapter VH. — Tables and Diagrams of Mixed- Currency Fluctua- 
 tions. — Table I., in absolute quantity. United States, 1834-69, 161. 
 — Diagram 1, in currency and proportion of specie per capita, same 
 period; Table II., extremes of fluctuation, currency United States per 
 capita, and quality of same, 1834-59, 162. — Table HI., quality of 
 currencies in the several States, 1860 ; Table IV., of currency of Mas- 
 sachusetts, different dates ; currency of New England a unit under 
 Suffolk system, 163. 
 
 Ch^ipter Vm. — Mixed Currency as a Medium of Exchange (see chap, 
 vi.). — Two ofiicesof such a medium; to transfer commodities, 164. 
 
 — Mixed cun-ency satisfactory for this ; to discharge indebtedness , 
 coin always reliable, 165. — The best trader cannot rely on mixed 
 currency, for it may be withdrawn when his obligations mature, 166. — 
 He must fail; credit not reliaWe for money, 167. — DUemma of banks 
 in panic ; they choose suspension, 168. 
 
XXU CONTENTS. 
 
 Chaptek IX. — Mixed Currmaj as a Standard of Value. — Vast impor- 
 tance of this function, 169. — Denial by some of a standard; answer, 
 170. — Legal tender, what? 171. — The fluctuations shown in 
 tables and diagrams prove mixed currency to be unjust and mis- 
 chievous as a standard, 172. — Immense transfers of value without 
 an equivalent, 173. — Extract from " North- American Review;" 
 Price, what is it? 174. — Distinction between price and value, 175 
 — Elustrated from Confederate States, 176.— Table V., average prict 
 often commodities for twenty-six years, 177. — Diagram 2, corre- 
 spondence of prices and currency circulation, except as explained by- 
 law of speculations, 179. — Cotton and flour omitted for reasons after 
 given ; these calculations per capita f these fluctuations greater than 
 possible with value currency, 180. — Effect on former illustrated, 
 181. — Who gains by aU this? not the laborer, 182. — What is 
 gained ? only price ; who gains it ? debtor or creditor, as the case 
 may be ; distinction between general and special prices, 183. 
 
 Chapter X. — Effects of a Mixed Currency (see chap. vi.). — 1st, En- 
 dangers domestic tranquillity ; puts the finances at the mercy of a 
 faction, 184. — Currency of Massachusetts, Diagram No. 3 ; sav- 
 ings banks complicate the matter, 185. — Elements of our population 
 make this highly dangerous, 186. — 2d, Demoralizes society and 
 industry, by exciting to speculation, enriching without merit, and 
 ruining without blame, 187. — 3d, Endangers national safety in w^r, 
 187. — Obliges a nation to carry on war with broken-down currency ; 
 England against Xapoleon; United States in great Rebellion, 188. — 
 If any gain can be made by substitution of credit, it should be 
 reserved till the emergency, 189. — 4th, DiscDurages domestic manu- 
 factures, and puts a nation at a disadvantage in commerce, 191. — 
 Has always neutralized our tariff, 192. — Distresses of American 
 manufactures due to the currency; popular error, that high duties 
 restrict importations, disproved by Diagram 4 ; want of corre- 
 spondence in two lines, 193. — Another cause needed; Diagram 5 
 shows relation between currency and imports ; exact correspondence, 
 195. — Extract from " Bankers' Magazine," 186. 
 
 Chapter XI. — Effects of Mixed Cun-ency (concluded). — 5th, Disturbs 
 and enhances interest, 196. — This the natural result of its raising 
 prices and increasing indebtedness, while itself falls away at the 
 moment of need ; Diagram 6, 197. — Frequent and extreme fluctu- 
 ations ; highest interest with greatest expansion ; lowest with least 
 currency, 198. — Interest in United States and Great Britain com- 
 pared 199. — Table VI., fluctuation in interest. United States and 
 
CONTENTS. Xxiii 
 
 Great Britain, 1844^58, 200.— Table VII., fluctuations at Bank of 
 England, 160 years ; effects of great revolutions indicated, 201. — 
 Currency of Great Britain compared to that of tlie United States as 
 to circulation and deposits ; superior quality of British, 202. — Irish 
 anfl Scotch currency ; estimated specie in United Kingdom ; numerous 
 failures in Scotland, 203. — Failures in United States ; British bank 
 reserve; Table VIII., fluctuations in bank reserve, 204. ^Diagram 
 No. 7 ; effects of mixed currency on American agriculture ; its pro- 
 ducts sold at gold prices, while the farmer purchases at currency 
 prices, 205. — Table IX., price of wheat and flour from 1846-69, with 
 currency ; compared with general prices (see chap, ix.) ; no corres- 
 pondence ; suffering of Western farmers, 206. — Interest of the West 
 for value money, 207. 
 
 Chapter XII. — Fallacies regarding a Mixed Currency. — 1st, That it 
 increases capital, 207. — Credit not capital ; 2d, that it cost less than 
 money, 208. — Instruments, to be cheap, must be efficient ; mixed 
 currency is not ; cost of value currency, 209. — Damage of mixed 
 currency estimated ; greatly exceeds the saving, 210. — Gold circu- 
 lates itself; mixed currency requires machinery and great expense to 
 keep it out, 211. — Adam Smith's figure, and comments; 3d, that it 
 has caused the prosperity of the United States, 212. — No grounds 
 for the supposition ; 4th, that there is not gold and silver enough ; 
 absurd since discovery of Australia and California, 213. — Never 
 was true ; much gold never used as money ; amount used in United 
 States not greatly increased by yield of California, 214. — Has been 
 exported ; quotation from J. S. Mill ; 5th, that it is favorable to young 
 men, 215. — Particularly injurious to them, enhancing the risks of 
 credit, which they especially need ; 6th, that we could not have banks 
 without it, 216. — Banking may be profitable without ; illustrated from 
 British joint-stock banks, 217. — Do not object to banks, but only to 
 manufacture of currency, 218. — Banks used to be safe and bene- 
 ficial ; Bank of Hamburg ; 7th, that it can be regulated by law ; 
 the only cause of the evil is want of value ; the only cure, to supply 
 that; no remedy but revolution, 219. — 8th, That banks ought to 
 "stave off " suspension ; suspension the only relief the public can 
 have; is a wrong, but one included in the original wrong of fictitious 
 currency, 220. — 9th, That at least stockholders are enriched by ex- 
 pansion; not always or generally, 221. — How stockholders maybe 
 affected, 222. — Nothing but price gained, and that unjustly and to 
 the prejudice of one party ; it is swindling, 223. 
 
XXIV CONTENTS. 
 
 Ch4PT1!K Xin. — Mercantile Currency. — A substitute for the precious 
 metals ; combines reliability with the convenience of paper ; not a 
 novelty, 224. — First substitute currency ; Bank of Genoa, bills based 
 on full specie ; Bank of Amsterdam, 225. — Bank of Hamburg ; Eng- 
 land needs such a currency, 226. — English finance continually 
 disturbed, and millions of annual loss involved, for a paltry saving ; 
 United States still worse, 227. — The change of currency easy to 
 effect ; issue of small notes, 228. — Amount of paper money required 
 in United States; legitimate banking profitable, 229. — Needs no 
 legislation ; transition easy ; some banks would be superseded ; bank- 
 ing should be free, but not the maniifaeture of currency, 230. — 
 Government should furnish a certified currency, 231. — This would 
 not give the government any control over the currency, 232. 
 
 Chapter XIV. — The National Currency of iJie United States. — Differs 
 from the old system ; is under national control ; ultimate redemption 
 of notes secured, 233. — Legal tender ; uniform value through the 
 States ; provision made for banks holding ' ' lawful money " with 
 which to redeem, 234. — Last provision frustrated by allowing 
 " balances " to be counted ; these banks have no capital to lend, 235. 
 
 — Resembles the old system in liability to expand and contract; fur- 
 nishes a standard of value equally delusive ; raises prices and creates 
 speculation ; extends credit ; increases imports ; counteracts protec- 
 tion, and discourages home manufactures ; will continue to cause 
 stringency and panic ; guaranty of ultimate redemption no securitj' 
 against a " run," 236. — Operations of the new system ; where the 
 profit is made, 237. — Quality of the new currency, 238. — Illustrated 
 from an individual bank, 239. — New system better, as more suscep- 
 tible of reform, 240. 
 
 Chapter XV. — Evidences of Debt. — Three kinds ; book accounts, 240. 
 
 — Ex parte, and not negotiable ; notes ; bills of exchange, 241. — Il- 
 lustrated ; exchange, foreign and domestic, 242. — Great savmg of 
 expense ; indirect exchange, 243. — Foreign exchange illustrated, 
 244. — Saving calculated; indirect foreign exchange illustrated; 
 trade of United States 1857, 245. — Natural rate of exchange, 246. — 
 Exchange the barometer of trade ; rate of British exchange explained ; 
 value of the pound sterling, 247. — Expense of shipping gold, 248. — 
 Rectification of the legal value of pound sterling ; are bills of ex- 
 change currency ? do not pass from hand to hand, 249. — Are them- 
 selves discharged by currency ; are generally on time ; not proper 
 
 tender; if dishonored, do not reduce amount of currency, 250. Do 
 
 not affect prices; their scarcity cannot create panic, therefore not 
 currency, 251. 
 
CONTENTS. XXV 
 
 BOOK IV.— DISTRIBUTION. 
 
 Chapter I. — Divisions of the Subject. — Distribution arises out of divi" 
 sion of labor, 252. — Labor, physical, mental, and subsidiary, all 
 receive wages ; capital loaned in two forms, one receiving interest, the 
 other rent, 253. — Government claims a share ; we have therefore to 
 provide for wages, profit, interest, rent, and taxation. 
 
 Chapter II. — Wages. — Governed by laws of value ; vary in different 
 countries and ages, 254. — Importance of freedom and equality in 
 securing fair wages; necessary wages, 255. — Wages depend on 
 business enterprise ; distinction between real and nominal wages ; 
 illustrated, 256. — Facts in point, 257. 
 
 Chapter HI. — Proportionate Rise and Fall of Wages. — Do not rise 
 so soon or high as commodities generally; reason, no speculative 
 demand ; fall sooner ; difficult to ascertain rise or fall of real wages ; 
 unquestionably have a tendency to advance ; 1810 compared with 
 1860, 259. — Difference from character of employments; danger; 
 disgrace, 260. — Unhealthy trades ; compensation should be made ; 
 agricultural wages, for this reason, lowest of all, 261. — Education of 
 the laborer ; makes him more efficient, and commands a reward ; fru- 
 gality of the laborer; makes him independent, 262. — Neutralizes 
 the advantage of the employer ; distinction of sex influences wages ; 
 rate of difference, 263. — Equality of numbers; industrial sphere of 
 woman closely circumscribed ; her products more dispensable ; hence 
 inferiority of compensation, 264. — Caimotbe increased by mere phil- 
 anthropic efforts ; change must be effected on economic principles ; 
 her occupations must be increased, 265. — Another classification of 
 wages, paid respectively for physical, mental, moral power, 266. — 
 Gradation of wages on this plan ; economical importance and value of 
 integrity; high rewards, 267. — Objected, confounds moral and eco- 
 nomical philosophy; answer, they do meet, and this groimd is 
 common to both, 268. 
 
 Chapter IV. — Labor Combinations. — Laborers have same right 
 to combine as capitalists; friendly associations of England, 269. — 
 Their agency; official registration; moral influence, 270. — Trades' 
 unions ; lawful, but no coercion may be employed within or without 
 these unions, 271. — Strikes lawful within the same restrictions, 272. 
 
XXVI CONTENTS. 
 
 — Do not permanently raise wages ; freedom, intelligence, and virtue 
 must do this, 273. — Co-operative associations ; account at length by 
 Professor Fawcett, 274. 
 
 Chapter V. — Profits. — The remuneration of the business man, 279. — 
 Must not be confounded with interest, wages, or rent, 280. — The 
 forms may be united ; freedom necessary to secure fair profits, 281. — 
 Profits of capital an inaccurate term, 282. — Rate of profit tends to 
 decline, from acceleration of exchanges, increasing competition, and 
 more rapid intercourse ; difference in rate of profits in same commu- 
 nity, 283. — Rapidity of exchange ; its effect on profit illustrated, 284. 
 
 — Profits large in new countries ; Western States of America ; prof- 
 its governed by demand and supply, 285. — Tendency to reduce 
 profits further discussed ; effect on profit of temporary rise of wages 
 illustrated, 286. — Dividends, how classified ? 287. 
 
 Chapter VI. — Interest. — Reward of circulating capital; justified by 
 right of property, 228. — By human wants ; interest dependent on 
 productiveness of labor, 289. — Governed by demand and supply ; abo- 
 lition of British usury laws; usury laws ineffective, 290. — Increase 
 expense of borrowing, by danger and secrecy of transaction ; create 
 fictitious exchange, 291. — 'Create compulsory deposits; interest 
 still further influenced by hazard of capital ; this depends on honesty 
 and thrift of a people, and efiiciency of laws affecting property ; 
 interest influenced by unsoundness of currency, 292. — Illustrations 
 from Europe and America ; legal rate should be fixed in the absence 
 of any agreement, 293. 
 
 Chapter VII. — Bent. — Reward of fixed capital; not of great impor- 
 tance in United States ; implies ownership ; implies society, 294. 
 
 — Land the foundation of rent ; does not appear in hunter or 
 shepherd state ; begins with agriculture, 295. -^ Location the first 
 element ; rent would appear though there were enough land for ail, 
 with no difference of quality ; illustrated, 296. — Fertility the second 
 element; illustrated, 297. — Cost of importation, third element; 
 illustrated from Great Britain ; application of capital, fourth element ; 
 not proportionally productive in all cases, 298. — Great extent of 
 European improvements ; land appendages ; do not sell for cost, 299. 
 
 — Reason, difference ' between West and East, 300. — Improvements 
 become gratuitous ; citj- rents generally on level with interest, 301. 
 
 Chapter VIII. — Wages, Bent, Interest, and Profits, as relatively af- 
 fected by Currency Inflation. — ^Not affected in equal degree ; wages did 
 
CONTEKTS. XXVU 
 
 . not rise in 1864-5 as prices did, 302. — Rents advanced little, interest 
 somewhat, but not as high as profits; state of things illustrated, 303. 
 — The laborer loses ; the business man gains, but not so greatly as 
 supposed J is, however, the only party who gains at all, 304. — Ex- 
 cept speculators ; loss on all fixed incomes, 305. — Facts of the war 
 hold to a degree in all expansions. 
 
 Chaptes IX. — Principles of Taxation. — Necessity of government ; it 
 receives revenue ; by taxation, 306. — Importation in United States ; 
 must be just and equal in a free country, 307 . — Government own a 
 share in every product, has a lien on every article of value ; principles 
 of taxation propounded by Adam Smith ; first, equality of contribu- 
 tion, 308. — Explained and illustrated; second, taxation must be 
 certain and plain, 309. — Third, convenience of payment to be con- 
 sidered ; fburth, economy ; how the last principle may be violated ; 
 by great machinery of collection, 310. — By disturbing industry; by 
 encouragement to smuggling ; by interruptions and vexatious visits ; 
 a fifth principle proposed, taxation of mischievous consumption ; 
 forms of American taxation,. 311. — National ; State ; taxes divided, 
 as direct and indirect, 312. 
 
 Chapter X. — National Taxation. — 1. Customs; duties of two kinds, 
 specific and ad valorem; American policy has fluctuated, 312. — 
 Specific duties unjust ; ad valorem create fraud, and so far defeat 
 revenue, 313. — Customs as a mode of taxation ; easy and effective ; 
 a tax on consmnption without reference to ability, therefore unjust ; 
 not clear and plain to the contributor, 314. — Moreover, as they 
 raise the value of the home product, government gets only a small 
 part of what the people pay; illustrated, 315. — Example of taxa- 
 tion laid on articles not of home production j customs expensive 
 on account of the machinery, 316. — Additional estimates showing 
 expense of raising revenue by customs, 317. — Bounties preferable 
 for protection to customs, 318. — Excise as a mode of taxation; un- 
 equal, like customs ; not so expensive ; more vexatious, 319. — Taxes 
 on disadvantageous consumption ; eminently desirable ; revenue in 
 Great Britain thus obtained, 320. — Stamps, cheap, efficient, unequal ; 
 licenses desirable, 321. 
 
 Chapter XI. — National Taxation (continued). — Income tax; only 
 perfectly just principle ; established in Great Britain ; in United 
 States, 322. — Should be no exemptions as to persons or amount ; 
 difficulties alleged ; people do not know their income ; answer, should 
 know, and will learn ; some are dishonest ; answer, every year in- 
 
XXViii CONTENTS. 
 
 creases difficulty of fraud; should be put on oath, 323. - Do not like 
 to have income known ; answer, all are copartners in taxation, and 
 the contribution of each ought to be known ; income deferred must ' 
 be estimated, 324. — Taxation of exports reduces power in com- 
 merce, e.g. wheat, 325. — Eflfect shown; except where there is a 
 virtual monopoly' of product, 326.— This we have in cotton ; universal 
 demand, 827 .— Restricted culture; United States control the pro- 
 duction ; production constantly increasing ; price advancing simulta- 
 neously ; yield in United States different years, 328.— Value of crop ; 
 limited export duty would not curtail the market, 329. — Amount of 
 revenue yielded ; cotton capacity of United States, 330. 
 
 Chapter XII. — State Taxation. — Is direct ; increased by rebellion ; 
 method of; false position of poll-tax payers, in regard to appropria- 
 tions and expenditures, 332. — Income-tax would remove the diffi- 
 culty; poll-tax unreasonable in itself, but tolerated as part of a 
 system, 333. — Burden thrown on property; effect on small farmers 
 unjust and mischievous, 334. — Great disparity of taxation ; ad- 
 vantages which the poll-tax payer derives from government, 335. — 
 Return made for these ; effect of State and national system com- 
 bined ; affect each other's injustice, 336. — Apportionment of national 
 taxation among States considered ; cheaper, if the States could 
 not be relied on ; taxation of credits ; propriety has been questioned, 
 337. — Matter discussed ; this liability, being known, has entered as 
 an element into all purchases, 338. — Income-tax would avoid all 
 injustice ; as it is, credit should be taxed ; taxation of government 
 bonds ; importance of the question, 339. — Proportion of national 
 debt to estimated wealth ; large amount of income exempted ; better 
 pay higher interest, 349 . — Such exemption diminishes the operation 
 of frugality; consolidation of national debt; proposition in Congress, 
 341 . — Desirable, but no exemption from taxation should be allowed ; 
 such exemption separates the rights of voters from their responsibili- 
 ties ; creates a mischievous class, 342. — Unjust for national authority 
 to limit, in this way, the control of State and town authorities over 
 property ; creates inequality ; will create an interest against the pay- 
 ment of the debt, involving endless taxation ; particularly unjust to 
 certain sections, 343. — Absorbs too large a proportion of the wealth 
 into the debt, as our bonds will be returned in consequence from 
 Europe ; entirely unnecessary now ; never was good policy ; wisdom 
 of British financiers in Napoleonic wars, 344. — If wisely managed, 
 our debt need not burden the country excessively ; a consolidation 
 should be effected, but not in a single issue ; proposed sinking fund 
 considered, 345. 
 
CONTENTS. XXIX 
 
 Chapter XTTT. — Foreign Indebtedness. — 1st, Economy of foreign in- 
 debtedness ; of four kinds, individual, corporate ; these may be 
 enforced by law, are of great extent ; State, 346. — National ; no 
 legal remedy for these ; amount already sent abroad ; 2d, exporta- 
 tion of public stocks considered ; desirableness depends on return 
 made, 347. — Exporting stocks regarded as extending mercantile 
 indebtedness ; the return will depend much on condition of the 
 currency, 348. — Disadvantage at which stocks are now exported ; 
 tariff will not help it, 349. — The remedy should be applied to the 
 currency ; rapid depletion of the United States ; objection to foreign 
 indebtedness ; , debtor cannot choose his creditor, 350. — Makes no 
 difference who the creditor is ; we should be glad to have the use of 
 foreign capital ; errors of financial management during the rebellion ; 
 wisdom of the Confederate loan, 361.. — Our debt can be che.Tply 
 negotiated abroad, if rightly put out; can make no operations advan- 
 tageously under an expanded currency ; indefinite fear that foreign 
 indebtedness endangers a nation, 352. — The danger is to the party 
 owning, not the party owing, the debt ; no evil can arise from this 
 source ; fallacies respecting a national debt ; Mr. Jay Cooke's first 
 proposition, 363. — If " our debt is so much added to our wealth,'' 
 the war was a fiinancial blessing; nobody is richer, the govern- 
 ment is three billions poorer ; the wealth which the debt represents 
 has been spent in war, 354. — If debt is wealth, repudiation would 
 destroy wealth; not soj again, " debt is active capital;" govern- 
 ment debt, like individual, can be hypothecated to obtain capital, 356. 
 — Again, it^" gives stability to government; " government depends on 
 the satisfaction of the people ; France has'large debt, yet undergoes 
 repeated and violent changes ; but " every government creditor is in- 
 terested in the stability of the nation ; " who holds the debt ? not one 
 citizen in fifty holds enough stock to make his interest from it so large 
 as the taxation it imposes, 357. — Blustrated, 368. — The debt will be 
 a source of discord and faction ; again, " it insures protection to home 
 industry," 369. -^ England has a large debt, and has repudiated pro- 
 tection ; again, " it is a desirable basis for banking ; " debt is no basis 
 for sound banking; again, "the generation contracting is under no 
 obligation to pay ; " this simply enslaves posterity, 360.— But nations 
 must sometimes create debts;" v«ry rarely, 361. — Ours should be 
 paid within the century, 362. 
 
 Chapter XTV. — Rise and Orowth of tlte Modem Financial System. — 
 no large national debt ever paid ; William III. of England author of 
 modern system ; his war with France, 363. — Disadvantages of former 
 kings of England ; "William established a regular scheme of borrow- 
 
XXX CONTENTS, 
 
 ing ; incorporated Bank of England to manage the debt j established 
 land-tax, 364. — Also indirect taxation ; results of the new system ; 
 unlimited credit ; all check on war expenditures removed, taxation 
 transferred to the poor ; the aristocracy conciliated, 365. — Progress 
 of British national debt, 366. — Diagram of the British national debt; 
 the bank grows up with it, 367. — Advantages and mischiefs of indi- 
 rect taxation, 368. — Fruit of this policy; extension of war system; 
 increasing indebtedness all over the civilized world ; impoverishment 
 of the masses ; such a debt throws taxation on the productive classes, 
 371. — Altered condition of the United States, 371. 
 
 Chapter XV. — On the Laws of Inheritance and Bequest. — To whom 
 does the world belong, the living or the dead? 371. — It is a concern 
 of government ; Mr. McCulloch's argument ; the world belongs to 
 the living, 372. — Laws entailing property established in certain coun- 
 tries, 373. — Wealth tends to pass out of the hands of a family or 
 class, 874. — This liability of the rich is the property of the poor; 
 to contravene it by law is to rob them ; the laws of primogeniture and 
 entail ; their rightfulness ; subsistence secured to man only in his 
 powers of industrial appropriation, 375. — Analogy of nature ; defeat 
 his right to appropriate by making property inalienable, and you de- 
 prive him of subsistence, 376. — Expediency of such laws ; entailed 
 estates generally too large for economic well-being ; monopoly of 
 wealth and monopoly of wives, 377. — Diminish the industrial de- 
 sires ; draw off wealth to luxury, 378. — Come to men incompetent 
 to administer them, 379. 
 
 BOOK V. — COISrSILVIPTIOlir. 
 
 Chapter I. — Divisions of the Subject. — Destruction of wealth not a 
 subject for science; consumption the use of wealth, 380. — Illus- 
 trated, 381. — Upon consumption depends reproduction; the acts of 
 consumption often cannot be defined or even detected, 382. — Not 
 the less real ; relations of production, exchange, distribution, and 
 consumption illustrated; consumption divided as mistaken, luxuri- 
 ous, public, and reproductive. 
 
 Chapter TL.— Mistaken Consumption. — CsLiiital nji^liei for reproduc- 
 tion without result ; frequent failures of industrial enterprises, 383. 
 — Secondary uses of such failures, i.e. railroads, factories, &c., 
 
CONTENTS. XXXI 
 
 884. — Large proportion of industrial misadventures ; why ? capital 
 fallible ; extravagance in outlay ; great accidents or developments, 
 385. — Wealth unproductively applied is not capital ; is waste or 
 luxury, 386. 
 
 Chapter m. — Luxurious Consumption. — What is luxury? 386. — 
 General formula ; standard varies with classes, countries, and ages, 
 387. — Direction varies with individual taste; do luxuries directly 
 encourage industry? illustration, 388. — Encourages one class to 
 discourage another; capital thus spent pays less wages than that 
 employed reproductively, 389. — Do they indirectly encourage indus- 
 try ? the desire to spend is the origin of the desire to gain ; great 
 economic importance of this ; this influence of luxuries increased by 
 their general diffusion, 390. — Only temperate and harmonious con- 
 sumption of wealth in luxury encourages industry ; place of morality, 
 891. 
 
 Chaptkr rV. — On the Degree of Luxurious Consumption. — Luxuries 
 not confined to the rich ; an extent of necessary wages, 392. — 
 French and English workmen compared ; popularization of luxuries, 
 893. — Relative consumption in luxury by different classes in Great 
 Britain; historical examples of luxury, 394. — The causes of luxu- 
 rious consumption, a surplus, preponderance of desire to spend over 
 desire to gain ; this influenced by security and profitableness of capi- 
 tal ; extent to which luxurj^ can be carried ; Gibbon's theory, 395. — 
 Modifications of this ; no certain proportion for all nations ; idleness 
 as a luxuiy, 396. — Of learning and sirt ; have value ; their price 
 varies, 897. — Quantity of labor bestowed on them governed by sup- 
 ply and demand; effect of such consumption, 398. — Sumptuary 
 laws ; supported by urgent reasons, 399. — Found impracticable ; 
 causes, 400. — Violations not easily proved ; against human nature ; 
 laws in the interest of morality should be sustained, 401. 
 
 Chapter V. — Public Consumption. — Economical reason for govern- 
 ment, 401. — Right to participate in consumption ; share ? 402. — 
 Government should take nothing from individual enterprise ; anec- 
 dote, 403. — Government should do nothing for display; historical 
 instances of frugality ; progress in this direction ; expense of gov- 
 ernment varies with circumstances and character, 404. — Expendi- 
 tures of European nations; of United States, 405. — Does public 
 consumption encourage industry ? if unnecessary, it is only charity, 
 requiring great expense beyond the help given to the poor, 406. — 
 saves self-respect, entails burden on the future ; if necessary, public 
 
XXxii CONTENTS. 
 
 does not get full value of the outlay, 407. — Government ne.ver 
 operates successfully ; some duties must be undertaken directly by 
 government; these occasions few and definite, 408. — Disadvantages 
 of government consumption ; seldom needed by the people ; perpet- 
 uates dependence ; demoralizes industry ; induces political corruption, 
 409. — If government expends at disadvantage when necessary, it 
 should not go beyond its strict occasions ; expenditures of United 
 States in recent war not economically advantageous, 410. 
 
 Chapter VI. — GTiarity and Poor-Laws. — Field of this agency ; 
 restricted by family relation, 411. — Constituents of the class 
 needing support; statistics of pauperism, 412. — Not very impor- 
 tant in United States; what classes entitled to charity? all who 
 require it ; the vicious ? Roman cruelty ; ' Christian law, 418. — 
 Who should administer charity; may be most judiciously and 
 economically done by private hands, 414. — Mutual -relief soci- 
 eties another and advantageous mode of charity; such agencies 
 extensive in Europe and the United States, 416. — Christian 
 scheme of the Quakers or Friends, 415. — All these methods 
 insufficient, and the. State must engage in the work, 415. — By what 
 branches of the government ; to what extent ; two English methods ; 
 allotment of land and parish allowance, 416. — Failure of this sys- 
 tem; to what extent poor-laws may be effective, 417. — Able-bodied 
 workmen as paupers, 418. — Pauperism of England, 418. — In what 
 form should charity be administered i* 418, 419. — How government 
 should furnish charitable assistance, 420. — In what spirit charity 
 shoidd be dispensed, 421. 
 
 Chapter VIE. — TTie Finance of War, 422. — Fallacy that more money 
 is wanted in time of war than in peace ; evil effects of this ; govern- 
 ment becomes the greater operator in war, and changes the 
 direction of industry, but does not increase production ; war a 
 business as truly as agriculture, and needs similar resources, 
 materials, provisions, and services, 422. — "Raising money" no 
 more necessary in time of war than peace, 423. — Except for obtain- 
 ing foreign assistance. 
 
 Chapter VIII. — Economy of the War System, 425. — War the greatest 
 fact in public consumption ; not accidental ; consisting of (1) a per- 
 manent military and naval force ; (2) constant preparations ; (3) large 
 national indebtedness; British statistics in proof, 426. — Statistics 
 of European armies ; muster roll of the British army, 427. — State- 
 ment of national debt of each European power, 428. — Small pro- 
 
CONTENTS. XXXUl 
 
 portionate amount required for civil service in Great Britain, 428. — 
 Kapid increase of war expenditures ; statement of Mr. Gladstone, 429. 
 — War expenditures must be greatly increased by the revolution in 
 naval warfare inaugurated in the United States during the Rebellion ; 
 the "Merrimack" and " Monitor," 430. — Questions whether new and 
 improved ideas of international intercourse are not quite as desirable 
 as new engines of human destruction, 431. — Condition of the United 
 States, 431. — Modern war debts will never be paid until the war 
 policy of nations is changed, 432. — Is war a moral necessity? would 
 not the same common sense that establishes courts of justice for 
 individuals, establish a similar institution for the settlement of inter- 
 national disputes ? 432. — Folly of rival armaments, 433. — Changes 
 in war armament, 434. — Influences adverse to war; (a) commerce; 
 (6) increasing intercourse ; (c) education of the masses ; (d) example 
 of the neutralization of the American lakes and the Black Sea, 435. 
 — A congress of nations probable, 436. — Motion of Mr. Cobden in 
 House of Commons ; Lord Palmerston's declaration ; the French 
 emperor's proposal; declined only by Great Britain, 437. — Reply 
 of Emperor of Russia, King of Prussia, and other monarchs, 438. — 
 The public press in favor of disarmament, 438 and 439. --The 
 question rests with Great Britain, France, and the United States, 440. 
 
 Chapter IX. — Economy of Public Education. — Objection to compul- 
 sory education in England not appreciated in the United States, 
 440. — Economic results of education ; (1) prevents pauperism and 
 crime; (2) creates higher economical condition, 441. — Sc'otland and 
 the United States as illustrations, 442. — Secures more uniform dis- 
 tribution, 443. 
 
 Chapter X. — Reproductive Consumption. — Its character and origin; 
 necessity for the use of reproductive capital, 444. — Importance of 
 frugality, 445. — What amount of reproductive consumption indis- 
 pensable ; (1) capital must support labor, 446. — Capital must provide 
 for the increase of population ; must supply its own wants, 447. — 
 Must support government, 448. — What amount of reproductive con- 
 sumption is desirable? 448. — Little occasion to ask this question in 
 a normal state of society, 449 . — The degree somewhat determined by 
 geographical position and political relations, &c., 450. — Desires to 
 spend unequally developed in different communities, 451. 
 
 Chapter XI. — Population. — Reference to the theory of Malthus ; 
 his two postulates, 452. — Three fallacies; (1) as to subsistence; 
 (2) as to propagation, 453. — (3) The supposed necessary relation 
 
XXXIV CONTENTS. 
 
 of distress to thesB postulates, 456. — Reference to English pauperism, 
 457.^^ Causes that limit population,, 458-460. — Misgovemment and 
 war; self-restraint and social influences, 461. — Differences in the 
 increase of the native and foreign population ; how accounted for ; 
 (1) emigrants mostly young persons, 462. — (2) Engage in more 
 healthy employments ; (3) but, principally, are far less influenced by 
 prudential considerations ; American and foreign marriages in Massa- 
 chusetts, 463. — Comparison of deaths in same population, note, 463. 
 — Reflections upon the facts given, 464. 
 
 Chapter Xn. — Importance of a Right CormmvpUon. — The moral and 
 social interest that attaches to the wealth, attaches to its use, 465. — 
 What a right consumption would bring, 465. — Wealth has its genera- 
 tions, 466. — ^No natural obstacles to its constant increase and the 
 general amelioration of the condition of mankind, 467. — Illustration 
 of a wrong and right use of wealth, 467. — The science of wealth not 
 complete which does not embrace moral' considerations, 468. — What 
 is the economic good ? the question answered, 469, 470. 
 
THE SCIEl^CE OF WEALTH 
 
 A MANUAL OF POLITICAL ECONOMT. 
 
POLITICAL ECONOMY. 
 
 BOOK L 
 DEFINITIONS. 
 
 ERRATA. 
 
 Page 185, for Diagram No. 6 read 3. 
 „ 193, for Diagram No. 7 read 4. 
 „ 195, for Diagram No. 8 read 5. 
 „ 227, for Diagram No. 10 read 7. 
 
 Togioai jicueasicy lo > complete eitiier. A just aaS efficieii'fc' 
 government of the state is important to realize the largest 
 development of wealth, but only as a condition under which 
 the laws of wealth, already complete and harmonious, may 
 have their own proper sway. 
 
 Government cannot furnish a new power in man, or a 
 new agency in nature. It can, to a certain extent, control 
 the exfercise of existing power, and the use of existing 
 agencies ; but it can control only by limiting them. Noth- 
 ing is added through legislation. The science of wealth is 
 
 1 111 
 
POLITICAL ECONOMY. 
 
 BOOK L 
 DEFINITIONS. 
 
 CHAPTER I. 
 
 CHAEACTEE OP THE SCIENCE. 
 
 Political Economy is the Science of Wealth, and pro- 
 , fesses to teach the laws by which the production and con- 
 sumption of wealth are gOTCrned. 
 
 The term, " political economy," is not a fortunate one, 
 smce it leads the popular mind to a misapprehension of 
 what the science actually teaches, and confounds it r with 
 politics, or the science of goTernment, from which it ia 
 distinct. 
 
 The relations into which these sciences enter are volun- 
 tary, and for the supposed advantage of both, not from any 
 logical necessity to complete either. A just and efficient 
 government of the state is important to realize the largest 
 development of wealth, but only as a condition under which 
 the laws of wealth, already complete and harmonious, may 
 have their own proper sway. 
 
 Government cannot furnish a new power in man, or a 
 new agency in nature. It can, to' a certain extent, control 
 the ex6rcise of existing power, and the use of existing 
 agencies ; but it can control only by limiting them. Noth- 
 ing is added through legislation. The science of wealth is 
 
 1 [11 
 
2 DEFINITIONS. [BOOK I. 
 
 complete in its own principles, though the statesman may 
 think it policy to contravene them for a supposed good. 
 Political economy is, then, silent before the law. 
 
 The science of wealth would be no less complete and cer- 
 tain, should the action of government render the creation 
 or possession of wealth impossible. The science would vin- 
 dicate itself by saying, that, when wealth is created, it must 
 be as my laws determine. The independence of these 
 sciences does not imply that they are indifferei^it to each 
 other. The statesman must consult the economist at every 
 step, if he would use the powers of government to national 
 advantage, and legislate in accordance with the natural 
 laws of wealth, and to the advancement of the national in- 
 dustry. It is not intended here to enforce this as a duty, 
 but to show, by these remarks, the relation of the statesman 
 to the science we are to investigate. 
 
 Political economy teaches the relation of man to those 
 objects of his desire which he can obtain only by his efforts. 
 He has wants: he needs food, clothing, and shelter; he 
 ■wishes many things not vital to him. Together, these con- 
 stitute his wants, in the view of political economy. This is 
 the first fact of the science. It is the foundation of all. 
 These wants can only be satisfied by efforts. This is the 
 second fact. By it, man builds on the foundation laid in 
 his wants. The objects or satisfactions obtained by these 
 efforts are collectively called wealth, or those things which 
 contribute to the welfare of man. This is the third fact to 
 be noticed. The circle of political economy is here com- 
 pleted. It may hereafter appear that there is a perpetual 
 progress, an unceasing self-multiplication ; that each satis- 
 faction creates a new want, which in turn seeks its object 
 through an effort. 
 
 Let us make a formal statement of what we have ob- 
 tained : — 
 
 Wants, Efforts, Satisfactions; or. 
 Desires, Labor, "Wealth. 
 
CHAP. I.J CHARACTER OF THE SCIENCE. 3 
 
 The wants of man, in which are all the springs of wealth/- 
 are various, and change their place and form with times and 
 circumstances. But they arise from his nature. They are 
 a certain and constantly operating force. They commence 
 with man's existence, and terminate only with his life: 
 and, when all the desires of the individual are satisfied in 
 ! the- grave, and his labor paralyzed, the wealth he lays down 
 in death becomes the possession of other men, with full 
 strength and fresh desires ; and so the creation of wealth 
 goes on in ever-increasing circles, expanded by the central 
 force, — the wants of man. While the individual awakens 
 but slowly to the consciousness of his needs, gradually 
 exhausts his activity in supplying them, and finally resigns 
 all as he passes from life, we find that the sum of such 
 wants and energies experiences no diminution by an atom, 
 no suspension for an instant. Differing as these do in the 
 individual, they are, in the world, as well ascertained and 
 determinate as the facts on which any other science rests. 
 
 While the one element of wants or desires is secured in 
 the constitution of man's being, the other element — viz., 
 the relation of effort or labor to them — is fixed in the con- 
 stancy of nature, and the permanence we attribute to the 
 created world, — a foundation sure enough to build upon. 
 
 If, on the one hand, man's being were so constituted that 
 his wants should cease, or be intermitted without any reason 
 at the time, and without any assurance of return, or prove 
 too weak to move the activities towards their satisfaction ; 
 or, on the other, nature were so disposed that labor had no 
 guaranty of reward, resulting indifferently in good to the 
 laborer, or in nothingness, or in positive injury to him 
 who performs it, — we could have no science (f political 
 economy. 
 
 But, as man's being and nature's laws are found in expe- 
 rience, political economy is to be regarded as a positive sci- 
 ence. Nothing in its fundamental principles is hypothetical 
 or problematic. None of its methods are whimsical or acci- 
 
4 DEFINITIONS. [bOOK I. 
 
 dental. Each thing is susceptible of clear demonstration. 
 All its parts are calculable. 
 
 "Political economy plainly belongs to the same class of 
 sciences with mechanics, astronomy, optics, chemistry, elec- 
 tricity, and, in general, all those physical sciences which 
 have reached the inductive stage. Its premises are not 
 arbitrary figments of the mind, formed without reference to 
 concrete existences, like those of mathematics ; nor are its 
 conclusions mere generalized statements of observed facts, 
 like those of the purely inductive natural sciences."" * 
 
 In his efforts to supply his wants, we have said, man 
 avails himself of the powers of nature, the fertility of the 
 earth, the stimulating quality of the sun's rays, the agencies 
 of wind, water, and steam, — all the dynamical forces and 
 mechanical supports at his hand. He must, therefore, recog- 
 nize these, and know the laws by which they are governed. 
 But such inquiries do not come within the field of the polit- 
 ical economist. He takes them from the hands of the 
 physical philosopher, furnished to his own use. 
 
 Let us say, then, that human nature in its wants, the 
 physical laws which supply them, and the statistics of hu- 
 man industry in all its manifestations, are the material of 
 our science. 
 
 Political economy is a science whose laws may be dis- 
 turbed in their operation, or made perplexing to observa- 
 tion, by the legislation of the state. No enactment could 
 affect the movements of the planets, nor could the utmost 
 tyranny of his age obscure the eye of the philosopher who 
 looked on the revolution of the earth. So far as political 
 economy, as a science, is physical, depending on the forces 
 and agencies of nature, it is above legislation. So far as it 
 is moral, depending on human nature, it can be hindered or 
 deflected by laws not its own. The desires of man may be 
 influenced by enactments, not made to cease, not brought 
 into being; for they are all in his nature: they have been 
 
 » Logical Method of Political Economy, by Professor Cairnes, p. 38. 
 
CHAP. I.] CHARACTER OP THE SCIENCE. 5 
 
 created, and they are indestructible. But the force of the 
 state, while it is impotent to present man with a single new 
 motive, or to erase one from his mind, can yet modify and 
 control what already exist. Practically, this is the great dis- 
 turbing force which political economy has encountered in all 
 the past. Wealth is the constant subject of legislation often 
 in direct antagonism to its own laws. 
 
 The express purpose of much legislation has been to 
 reform human morals by an external pressure on man's de- 
 sires, or, at least, to reform human manners by denying all 
 gratification of such desires ; and tliis, not in the interest 
 of religion, or for the safety of the state, but in matters of 
 dress and equipage. Other legislation has sought to supply 
 supposed deficiencies in human intelligence, and has substi- 
 tuted blind laws for the keen sight of personal interest 
 and business experience. Institutions have been created, or 
 have grown up, whose actual effect at the present time, if 
 not their avowed design, is to counteract the operation of 
 the natural laws of wealth ; and with these institutions vast 
 interest's have become allied in such a manner as to influence, 
 the material welfare of a great portion of the people. Hence 
 the laws of political economy are not' only contravened by 
 direct legislation, but are obstructed or perverted iu many 
 WQfjs by false social and political opinions. 
 
 It wiU be easily recognized as a part of that human na- 
 ture of which we have spoken, that the promulgation of 
 principles whose legitimate operation threatens the over- 
 throw of long-established abuses, or which interfere with 
 existing customs, should excite prejudice and opposition. 
 This is one of the chief difficulties the science has had to 
 encounter from the first. Here we have the reason why it 
 has made comparatively Kttle progress, and is the only sci- 
 ence that cannot obtain a candid and impartial examination 
 from the mass of mankind. It is a long time since chem- 
 istry was considered a diabolical art, since geology and 
 archaeology were excommunicated as infidel, since the doc- 
 
6 DEFINITIONS. [BOOK I. 
 
 trine of gravitation was an offence in the nostrils of the 
 Church ; but prejudices and ignorance and partial interests 
 never opposed economical truths more vehemently than to- 
 day, 
 
 " A science that comes in contact with the interests of 
 men, which lies in the region of daily action and desire, 
 will find its theories more frequently questioned, and its 
 proofs more severely tried, than one which has to do with 
 the relations of abstract ideas, or the facts of the external 
 world. Political economy is not a science varying with 
 climate and country. There is not an English and an 
 American political economy distinct from each other, and, 
 in a measure, the reverse of each other. The forces of hu- 
 man nature, the agents of production, the arithmetic of 
 gains, are the same everywhere, and lead to the same prin- 
 ciples of economic action." — Baacom's Political Economy. 
 
 Of the advantage of a knowledge of political economy, the 
 same writer thus speaks: " The knowledge which it imparts 
 is of an important and — if we choose to majte that the test 
 — of a most practical character. Wealth underlies all civi- 
 lization, and ultimately, therefore, in a large measure, both 
 knowledge and religion. It is among the lowest, but also 
 the first, steps to social worth and national strength. We 
 are not to value wealth for that which it is in itself, buttfor 
 that to which it can be made to minister. In its reiinue 
 come, or rather may come, all intellectual, social, and reli-j 
 gious advantages." 
 
 CHAPTER n. 
 
 DEFINITION OF WEALTH. 
 
 Hating now given the three great facts on which the sci- 
 ence is founded, it becomes necessary to fix precisely the 
 terms to be used in the further development of these 
 inquiries. Political economy is unlike all other sciences in 
 
CHAP, n.] DEFINITION OP WEALTH. 7 
 
 this, tliat it lias not the option of making or choosing its 
 own terms. From the nature of the case, it is obhged to 
 adopt words in common use. It is encumbered with all the 
 notions, false or loose, which may have been attached to 
 these. It has to speak of wealth ; of value and utUity ; of 
 labor and capital ; of production, exchange, distribution, and 
 consumption. These are common phrases. Each has a 
 variety of meanings in popular language ; yet, when used in 
 the discussion of this science, it must have one meaning as 
 definite, exclusive, and precise as the terms of natural his- 
 tory. The liability to confusion from this source can only 
 be guarded against by being kept constantly in mind. 
 Until the proper definitions become instinctive, so that they 
 arise freely in their own shapes on the mention of such 
 terms, there will be a constant slipping back, as it were, to 
 their habitual meanings in common life. At the best, the 
 laborious reference of the mind to formal definitions wiU 
 tend to diminish the force of aU representations and argu- 
 ments where they appear. The greatest obstacle, however, 
 encountered by writers, is not that arising through popular 
 prepossessions in regard to words ; but it is their own mis- 
 application of language, confounding things essentially dis- 
 tinct, and clothing exact principles in expressions so vague 
 and indeterminate as to make science impossible. 
 
 "We have said that political economy treats of wealth ; 
 but what is wealth? In popular language, it is houses, 
 lands, ships, merchandise, with a general "and so forth," — 
 all that we call property. In science, the term " wealth " 
 includes all objects of value, and no other. 
 
 A" discussion of its principles will be satisfactory only so 
 far as the explicitness and exclusiveness of this term is held 
 in view. No apology is to be given for the definition, and 
 no substitute offered. The least deviation from this line 
 wiU lead to ceaseless entanglements and perplexities. 
 
 The principle is cardinal. The science turns on it. 
 
 Political economy has been called the " science of values." 
 
8 DEFINITIONS. [BOOK I. 
 
 No definition could be more strictly accurate ; but we shall 
 retain that already given, as being more popular, and as 
 nearer to the customary use of the words. It is, then, the 
 science of wealth, understanding that wealth consists of 
 objects of value only. 
 
 CHAPTER in. 
 
 DEFINITION OP VALUE. 
 
 What, then, is value ? When does an article or commodity 
 possess value ? 
 
 When it is an object of man's desire, and can be obtained 
 only by man's efforts. Any thing upon which these two con- 
 ditions unite will have value ; that is, a power in exchange. 
 Value is the exchange power which one commodity or 
 service has in relation to another. 
 
 That such a power does exist, is not a matter of dispute. 
 Its influence is felt and acknowledged in every country, 
 civilized or savage. This it is which excites to industry, 
 creates commerce, and supports government. This power 
 obeys laws as certain and immutable as those which apper- 
 tain to any of the great forces of nature. Just as man is 
 sure to feel wants, to put forth efforts, to realize satisfac- 
 tions ; so he is sure to be found exchanging an excess for a 
 novelty, a home product for that which comes from abroad, 
 the work of his mind for the work of another's body. 
 
 Again let us remark, that the term " value " alwj-ys ex- 
 presses precisely power in exchange, and no other power or 
 fact. Desirableness is not value. Utility is not value. No 
 objects are more useful and desirable than atmospheric air, 
 the light of day, the heat of the sun ; yet these have no value. 
 They will exchange for nothing, because any one may have 
 all he wishes without effort. 
 
CHAP. III.] DEFINITION OF VALUE. 9 
 
 An object, to possess value, must be desired by some one 
 who is willing to render a service or equivalent in order to 
 obtain it, for the reason that he cannot have it without. It 
 is what a man gets, what another will give, that determines 
 value. The use of this term, in its strictest sense, is of the 
 utmost importance. If confounded with any thing, or taken 
 mto any partnership, the whole science is thrown into con- 
 fusion. 
 
 It has been common for writers to speak of exchangeable 
 value, mtrinsic value, value in use, &c. ; but all these terms 
 are inappropriate. The adjectives are superfluous : they 
 have no significance whatever. To speak of exchangeable 
 value is to speak of exchangeable exchangeability. The 
 term "value," in the science of values, always implies power 
 in exchange, and nothing else. 
 
 Of all the writers on the subject, no one seems to have 
 been more full and clear in the definition and illustration 
 of value than M. Bastiat, in his " Harmonies of Political 
 Economy : " — 
 
 " Theorists have set out, in the first instance, by confounding 
 value with utility. This was their first error ; and, when they 
 perceived the consequences of it, they thought to obviate the difii- 
 culty by imagining a difference between value in use and value in 
 exchange, — an unwieldy tautology, which had the fault of attach 
 ing the same word 'value' to two opposite phenomena" (p. 161). 
 
 " The theory of value," he further says, " is to political economy 
 what numeration is to arithmetic. Value is the relation of two 
 SERVICES. The idea of value entered into the world for the first 
 time when a man said to his brother, * Do this for me, and I will 
 do this for you ; ' they had come to au agreement : then, for the 
 first time, we could say the two services exchanged, — were worth 
 each other." 
 
 The case of the blind man and the paralytic is given in 
 illustration. The blind man says, " I have limbs : you have 
 eyes. I will carry you: you shall be my guide." Each 
 receives a benefit ; their services are exchanged, — valued by 
 
10 DEFINITIONS. [BOOK I. 
 
 each other. Here we have value appearing, not in material 
 wealth, but in services ; yet the principle is just the same as 
 when the hatter says to the bootmaker, " I will give you a 
 hat for a pair of boots," and they change accordingly. They 
 really exchange their mutual services, which have been put 
 into the form of material objects. 
 Another illustration is given : — 
 
 " I wish for water to quench my thirst ; I go two miles to the 
 spring, and get it. My neighbor goes on the same errand. I say 
 to him, ' Bring me water, and I will do something in the mean time 
 for you ; I wUl teach your chUd to spell.' Here is the exchange of 
 two services : one is worth the other. Presently, I say to my 
 neighbor, ' Instead of teaching your child while you are gone for 
 the water, I will pay you twopence each time.' If the proposal is 
 accepted, we say the service is worth twopence. If others in the 
 neighborhood employ the same man to bring water, he becomes a 
 water-merchant; and the value of water is as fully recognized as 
 the value of wheat. The water, at first valueless, is now an article 
 of wealth.- It has not changed its chemical qualities, but services 
 have become materialized, or incorporated with it. If the well, in 
 the case supposed, were brought nearer to the village, the value 
 of the water would be reduced, because less labor or service would 
 be required to obtain it." 
 
 Suppose an aqueduct built by the joint labor of the com- 
 munity. The business of the human water-carrier has ceased ; but 
 not the less is the value of the water, delivered at the door, the 
 product of labor. The labor has been invested with a permanent 
 form, as pipes, walls of masonry, gates, &c. Labor has been accti- 
 mulated for the purpose, instead of using the hourly labor of tho 
 water-carrier. The industry of the bricklayer and the plumber 
 carries water years after they ceased to work on the aqueduct. 
 
 We have said that it was not the properties of the water that 
 gave value ; no more does the value reside in the mere delivery of 
 the same. The water-works of some regions furnish them water 
 on the ground, at the rate of a million and a half square feet a day 
 to each square league. Yet the water has no value there ; for the 
 agencies employed are not the labor of man, but the currents of air, 
 — Nature's pipes and conduits. 
 
CHAP, ni.] DEFINITION OP VALUE. 11 
 
 The diamond, as M. Bastiat observes, makes a great figure 
 in works on political economy. It is adduced as an illustra- 
 tion of the laws of value, or of the supposed disturbance of 
 those laws ; and, as he gives a more full and satisfactory 
 explanation of the cause of value in a diamond than any 
 other writer, we shall quote his words : — 
 
 "I take a walk along the sea-beach, and I find by chance a 
 magnificent diamond. I am thiis put in possession of great value. 
 Why ? Am I about to confer a great benefit on the human race ? 
 Have I devoted myself to a long and laborious work? Neither the 
 one or the other. But, undoubtedly, because the person to whom I 
 transfer it considers that I have rendered him a great service, — all 
 the greater that many rich men desire it, and I alone can render it. 
 The grounds of his judgment may be controverted. Be it so. It 
 may be founded in pride or vanity. Granted again. But this 
 judgment has nevertheless been formed by a man who is disposed 
 to act upon it, and that is sufficient for my argument. Far fi-om 
 the judgment being based on a reasonable appreciation of utility, 
 we may allow that the very reverse is the case. Ostentation makes 
 great sacrifices for what is utterly useless. In this case, the value, 
 fej from bearing a necessary proportion to the labor performed by 
 the person who renders the service, may be said rather to bear 
 proportion to the labor saved to the person who receives it. This 
 general law, which has not, so far as I know, been observed by 
 theoretical writers, nevertheless prevails universally in practice. 
 
 "The transaction relative to the diamond may be supposed to 
 give rise to the following dialogue: — 
 
 " ' Give me your diamond, sir.' 
 
 " ' With all my heart. Give me, in exchange, your labor for an 
 entire year.' 
 
 " ' Your acquisition has not cost you a minute's work.' 
 
 " ' Very well, sir : find an equally lucky minute.' 
 
 " ' Yes ; but, in strict equity, the exchange ought to be one of 
 equal labor.' 
 
 " ' No : in strict equity, you put your value on your service, and 
 I upon mine. I don't force you : why should you lay a constraint 
 upon me ? Give me a whole year's labor, or seek a diamond for 
 yourself' 
 
12 DEFINITIONS. [BOOK I. 
 
 " ' But that might entail on me ten years' work, and would prob- 
 ably end in nothing. It would be wiser and more profitable to 
 devote those ten years to another employment.' 
 
 " ' It is precisely on that accoimt I imagined I was rendering you 
 a service in asking you only one year's work. I thus save you nine, 
 and that is the reason why I attach great value to the service. 
 If I appear to you exacting, it is only because you regard the labor 
 which I have performed ; but consider also the labor I save you, 
 and you wUl find me reasonable in my demands.' 
 
 " ' It is not less true that you profit by nature.' 
 
 " ' And, if I were to give away what I have found, for little or 
 nothing, it is you who would profit by it. Besides, if this diamond 
 possesses great value, it is' not because Nature has been elaborat- 
 ing it since the beginning of time. She does as much for a drop 
 of dew.' 
 
 " ' Yes ; but, if diamonds were as common as dew-drops, you 
 could no longer lay down the law to me, and make your conditions.' 
 
 " ' Very true ; and, in that case, you would not address yourself 
 to me, or would you be disposed to recompense me highly for a 
 service you could perform yourself.' 
 
 The result of this dialogue, M . Bastiat regards as proving 
 that value no more resides in the diamond than in air or 
 water. 
 
 " It resides exclusively in the services which we suppose to be 
 rendered and received with reference to these things, and is deter- 
 mined by the free bargaining of the parties who make the ex- 
 change. The pretended value of commodities is only the value of 
 services, real or imaginary, received and rendered in connection 
 with them. Value does not reside in the commodities themselves, 
 and is no more to be found in a loaf of bread than in a diamond, 
 the water, or the air. No part of the remuneration goes to Nature. 
 It proceeds from the final consumer of the article, and is distributed 
 exclusively among men." 
 
 Again : — 
 
 " In order that a service should possess value in the economical 
 sense of the word, it is not at all indispensable that it should be 
 real, conscientious, and useful service. It is sufficient that it ia 
 
CHAP. III.] DEFINITION OP VALUE. 13 
 
 accepted, and paid for by another service. It depends wholly on 
 the judgment we form in each case ; and this is the reason why 
 MORALS will always be the best auxiliary of political economy. 
 Economic science would be impossible if we admitted as values 
 only values correctly and judiciously appreciated." 
 
 Yalue does not always exist in a visible form. The 
 wealth of a nation is generally supposed to consist in the 
 aggregate of its material objects having value, — in its lands, 
 buildings, ships, merchandise, treasure, canals, railroads, 
 &c. ; but its potential wealth, or power of creating wealth, 
 includes not only all these named, but the intelligence, skill, 
 industry, and productive energy of its citizens. No in- 
 ventory of a nation's effects will give an adequate idea of its 
 economic condition, unless we hold in view its capacity of 
 development, and the industrial genius of the people. 
 
 The main principle in the theory of value is expressed in 
 the common phrase, " A thing is worth what it will fetch," 
 —that is, what some one will give for it ; the value depend- 
 ing on the will of the purchaser, as determined by his 
 judgment. 
 
 Value is the appreciation of services. 
 
 The valtie of a thing is the service or labor which it wiH 
 command in exchange. 
 
 If there is no resistance to the possession of an article, it 
 can have no value. Labor alone does not always create 
 value ; but value never exists in an article, unless some one 
 is -willing to give labor, in some form or other, in exchange 
 for it. 
 
 The ancients thus described the combinations of exchange : 
 
 Do ut des, Commodity for commodity. 
 
 Do ut facias, Commodity for service. 
 Facio ut des, Service for commodity. 
 Facia ut facias, Service for service. 
 
 This statement exhausts all the modifications of the 
 principle. 
 
11 DEFINITIONS. [BOOK I. 
 
 CHAPTER IV, 
 
 DISTINCTION BETWEEN VALUE AND UTILITT. 
 
 We have now gone over all the ground belonging to the 
 theory of value: but we cannot leave it without dwelling 
 a while on one part of it; without clearly marking the 
 boundary which separates it from the domain of utility, — a 
 most troublesome and intrusive neighbor. 
 
 There is between utility and value a distinction as real as 
 between weight and color. 
 
 Suppose a farmer in Vermont has one thousand bushels 
 of wheat ; its value is two thousand dollars. Its utility is, 
 that it will make forty thousand pounds of bread. 
 
 A farmer in Illinois has one thousand bushels of wheat, 
 equally good ; but its value is only one thousand dollars. Its 
 utility is just the same. It will make as much bread, and 
 as good, as the wheat of Vermont. The value, then, does 
 not reside in the utility, but in the power in exchange. The 
 wheat of Vermont commands a -higher price than that of 
 Illinois, because of its location nearer to the market. Here 
 location means labor; that is, the labor required to overcome 
 it. This will be still more apparent, if we suppose the far- 
 mer removed a thousand miles by land from any market. 
 His wheat might then have no value ; yet its natural, inhe- 
 rent utility would be as great as ever. 
 
 Take another illustration. A pound of small nails or 
 tacks formerly had the value of twenty-five cents, equal to 
 one-fourth of a day's labor. By the introduction of mar 
 chinery, the value was reduced to ten, then to five cents, or 
 the twentieth part of a day's labor ; the utility remaining all 
 the time as at first. The value of many articles, especially 
 those called manufactures, are, in the ordinary progress of 
 human efibrt, constantly diminishing, though never ajini- 
 hilated. This is because the labor or service to be appreci- 
 
CHAP, rv.] VALUE AND UTILITT. 15 
 
 ated in such values is constantly lessening, though it can 
 never wholly disappear. In this is seen, not only the 
 certain distinction between value and utility, but one of 
 the most beneficent laws of the science, which may be stated 
 as follows : Value moves, diminished constantly by the sub- 
 stitution of the gratuitous agencies of Nature, by the inge- 
 nuity and industry of man. Utility remains fast-anchored 
 in the wants of man and the properties of matter. This 
 is the primary fact. But value moves agaih, — not to in- 
 crease, but to multiply. Values are no greater, but there 
 are more of them. The factor that multiphes is the ever- 
 growing wants of man. Now, utility begins to move, ex- 
 panding with the enlargement of man's activities, and the 
 increase of the fruits of labor. Here we have the promise 
 that the human race is destined to a constant augmentation 
 of utilities, bringing in a great amelioration of its condition. 
 Man is relieved from part of his labor only to feel new 
 wants, and so, through fresh efforts, to find greater satis- 
 factious in life. 
 
 Political economy makes no inquiry whether the increase 
 of material objects of desire is, in truth and on the whole, 
 a good. It assumes this. It leaves to others the discussion 
 whether the highest interests of society are attained by 
 repelling the kindness of Nature, and by denying the in- 
 stincts of man. This kindness, and those instincts, politi- 
 cal economy accepts, and goes forward from them. It can 
 never become stoic; It is not a science, unless wealth is a 
 good. 
 
 It is a science ; and it has no doubt that the healthful, 
 honest increase of physical necessaries, comforts, luxuries, 
 and refinements, with the opportunities which they bring for 
 mental improvement and moral culture, with the safeguards 
 they place upon social order and personal rights, and with 
 the manifold strong and subtile motives which they contri- 
 bute to the exertion of all the human faculties, and the full, 
 friendly intercourse of all communities and peoples, — it 
 
16 DEFINITIONS. [BOOK I. 
 
 has no doubt that this is desirable. But it does not labor 
 to prove it so. It does not found itself on any supposed 
 refutation of asceticism. It takes without inquiry the uni- 
 versal inclination to the accumulation of wealth, under the 
 restraints of mutual duties and common rights. 
 
 We have said that Nature adds value to nothing. Though 
 unceasingly at work for man, she receives no compensation. 
 She creates utilities beyond computation, but does all gra- 
 tuitously. Wind, water, and steam are most efficiently 
 engaged in producing commodities necessary to the welfare 
 of mankind ; and the earth is unceasingly active to bring 
 forth man's food in its many forms. Yet all is done with- 
 out adding to the wealth of the world. The forces " work 
 for nothing," and hence confer no value. The power of 
 the wind, for example, in propelling vessels, adds no value 
 to the articles transported. But, it may be objected, would 
 it not cost a great deal more to transport that merchandise, 
 if it had to be done by human hands working at the oar ? 
 Certainly ; and, from the very illustration, it appears that 
 the power of the wind has not increased the value, but 
 rather diminished it. It has taken the slaves from the 
 bench, and does the merchant's rowing for him. It is Na- 
 ture's work, not man's labor ; and hence value goes down, 
 while utility stands fast. 
 
 Transportation does, indeed, add to the value, but only 
 because man's vessels and man's labor are employed in 
 effecting it. All the natural forces that come in take off 
 from value. If a merchant were to make a charge for the 
 use of his vessel, the payment of his hands, and the ordi- 
 nary rate of profit on Ms voyage, and, besides these, for tfie 
 use of the wind, it would not be allowed. Competition 
 V would correct his philosophy ; and the eloquence of unsold 
 merchandise would be his teacher in the theory of value. 
 Take steam for an example in point. The services of this 
 great agent in England are probably equal to the muscular 
 effort of one hundred millions of men ; but the whole of it 
 
CHAP. IV.] VALUE AND UTILITY. 17 
 
 is gratuitous. All that is required to secure these services 
 is macliinery and fuel, whose whole value has been given by 
 labor. 
 
 If we look to the fertility of the land, by far the greatest 
 of all the natural forces engaged in production, we shall 
 find that it confers no value. Is it asked, " Why, then, do 
 men pay for the use of it ? Why buy it at a large price ? " 
 The answer at length to this question will be deferred till the 
 discussion of rent ; but it will be sufficient for the purpose 
 of the present argument to say, that it is because appropri- 
 ated or owned (whether rightly, or wrongly) by individuals 
 who can make a profitable use of it themselves. 
 
 There are many special products which have been pre- 
 sented, in discussion of this subject, as exceptions to the 
 principle, that value comes only with and by labor; e.g., 
 precious stones, curiosities, the precious metals, monopolies, 
 patents, &c., &c. The relations of the first two are fully 
 defined in the extract already offered from the work of M. 
 Bastiat. Of gold and silver, it is enough to say, that, what- 
 ever the theories of the past, it is now an abundantly recog- 
 nized fact, that the mining of these metals proceeds strictly 
 according to the laws of industry, with hardly its ordinary 
 accidents and chances. It is estimated, that, when brought 
 to market, these metals have cost sixty-six cents on the 
 dollar. The remaining thirty-four cents constitute the re- 
 muneration of the laborer and the capitalist ; which cannot 
 be regarded as excessive when the privations, risks, and 
 hardships of the occupation are kept in view. Monopolies 
 and patents confer no value, but simply contravene its laws. 
 This is their object. They are designed, by giving the 
 exclusive right to produce or sell a given article, to reward 
 the favored party for his skill in invention, or for a general 
 good supposed to be conferred upon the community. They 
 are compulsory contributions levied upon the public for the 
 benefit of individuals. 
 
 2 
 
18 DEFINITIONS. [BOOK I. 
 
 CHAPTER V. 
 
 DEFINITION OF LABOB. 
 
 We have defined value at great length and with various, 
 illustrations, with the result, to our minds, that it arises 
 from the union of desire and labor ; but we have not defined 
 the latter term. 
 
 What is labor ? 
 
 The voluntary efibrts of human beings to produce objects 
 of desire. 
 
 Labor is always irksome. This is law. Men do not vol- 
 untarily put forth their exertions, except for a reward. By 
 the beneficent provision of Nature, habit assists our activ- 
 ities ; great desires overcome the sense of weariness and 
 pain ; the impetus of one movement carries us on into the 
 next. Toil has its compensations. Its fruit is pleasant and 
 wholesome. But not the less is it, of itself, against the drift 
 of man's natural inclinations.* It is because men do not 
 volunta,rily put forth exertions, except for a reward, that 
 every thing which costs labor will, as a general rule, com- 
 mand a corresponding amount of service or labor. There- 
 fore it is that labor is the essential measure of value. 
 Whatever disturbing catises there may be, it will, on the 
 whole and in the long-run, be true that labor commands* its 
 equivalent in labor. 
 
 In this definition, we have spoken of voluntary efibrts 
 alone, because involuntary or uncompensated efforts are 
 not to be classed as labor. They are merely the result of 
 the use of a given amount of capital. Slaves are owned, 
 
 * " Lator is either 130(1117 or mental, or, to express the distinction more 
 comprehensively, either muscular or nervous ; and it is necessary to include 
 in the idea, not solely the exertion itself, but all feeliogs of a disagreeable 
 kind, all bodily inconvenience or mental annoyance, connected with tlie em- 
 ployment of one's thoughts or muscles, or both, in a particular occupation.' 
 — J. Stuaet Mill, Principles of Political Economy, p. 29, Am. ed., vol. i. 
 
OHAP. VI.J DEFINITION OP CAPITAL. 19 
 
 like horses or oxen ; and what value they confer is from 
 their employment as so much capital. This distinction is 
 not unimportant, because we shall see that capital is con- 
 trolled by other laws than those which govern labor. 
 
 Under a free-labor system, as will be shown, there are 
 two proprietors of value, — the laborer and the capitalist. 
 Under a slave-labor system, only the latter has any share in 
 the product. 
 
 CHAPTER YI. 
 
 DEFINITION OP CAPITAL. 
 
 Labor enters into production, or the creation of values, in 
 two ways : — 
 
 First, As the labor of the present. 
 
 Second, As the labor of the pa^t. 
 
 We call the first " labor " simply ; the second, " capital," 
 which is accumulated labor. In their nature, these are 
 identical. They have assumed different forms, have ac- 
 quired independent rights, and each obeys certain laws 
 peculiar to itself. These two forms of labor may be, and 
 often are, owned by different persons. One man has present 
 labor at his command. This must be his own. Another 
 has accumulated labor. This may be his own, or that of 
 others, of which he has come into possession. 
 
 In practice, the two forms of labor must come together 
 and help each other, if they would effect the barest subsist- 
 ence of mankind. Even the naked savage goes Hungry till 
 he gets his bow and his fishing-hook by the labor of his 
 hands. As society goes forward to plenty, comfort, luxury, 
 civilization, the union and mutuality of the two become 
 more intimate and vital. By such a connection alone is 
 wealth produced. 
 
20 DEFINITIONS. [BOOK I. 
 
 The growth of capital, and the steps by which it comes to 
 its proper position in the creation of values, may be best 
 shown by a familiar illustration. An able-bodied workman 
 presents himself to you, having the full disposal of his own 
 powers, fully representing the labor of the present, and that 
 only. We wiU, however, compromise so far with his neces- 
 sities as to allow him to be clothed ; though each article he 
 wears has come from the labor of the past, and, in this 
 supposition, is capital. He has no tools ; and, if you have 
 no work that can be done without tools, you must deny him 
 employment. His chances, then, of labor, are hardly as 
 one to a hundred without tools. In the other ninety-nine, 
 he starves for want of capital. But, by chance, you find 
 work requiring no help from accumulated labor. You set 
 him to clearing a field by throwing the stones into heaps. 
 He has secxired subsistence for the day without capital. It 
 was uncertain whether he would obtain it. It is certain the 
 employment cannot last long, since need of such assistance 
 closes, perhaps, with the first' evening ; and you send him 
 away helpless in the midst of civilization. His livelihood 
 to-morrow is still more precarious. But no : he carries 
 away his earnings for the day. He chooses to lay them out 
 in an axe, rather than on any object of comfort or pleasure. 
 He has practised a self-denial. He appears the next morn- 
 ing with his axe. He has enlarged the sphere of his activity, 
 perhaps, fifty-fold. He has now fifty chances of employ- 
 ment. He has secured work for fifty days. Before the 
 close of this period, he can, by thrift, provide for his imme- 
 diate bodily wants ; pay for his clothes, for which we gave 
 him credit more in charity than logic; and become the 
 possessor of a pick and shovel, scythe and rake. He is now 
 a full farm-laborer, able to do any part of the strictly neces- 
 sary work of agriculture with such tools as he has, and may 
 rightfully expect employment every day of the year. So it 
 is, in the grand field of the world's industry, that capital — 
 the accumulation of labor — helps the labor of the present, 
 
CHAP. VII.] BBLATION OP CAPITAL AND LABOR. 21 
 
 not only to its immediate sustenance, but to permanent 
 occupation, to increase, and to the highest economic civi- 
 lization. 
 
 CHAPTER VII. 
 
 RELATION OP CAPITAL AND LABOR. 
 
 But this iiuion creates the competing interests of labor and 
 capital, since they are generally found in different hands. 
 An interest is, in scientific meaning, a share. Each has 
 now only a share. Before, each had the whole of its own 
 product, but a most melancholy whole. They are competi- 
 tors ; for those shares are not determined absolutely in the 
 nature of the union to which they have consented. It is by 
 the earnestness and persistency of competition alone that 
 either can secure its remuneration, or maintain its existence. 
 
 But they are not antagonists. All their effort, even in 
 the severest assertion of their individual claims, goes to the 
 increase of the common property, and the advancement of 
 their mutual service. Antagonism tends to destroy. Its 
 purpose is, so far as it proceeds, to remove one or the other 
 of the parties. The competition of labor and capital never 
 ceases ; but it respects the bond of union in which only 
 each has its own full development. 
 
 Here we see the folly of the supposed antagonism. They 
 are partners, and should divide the results of industry in 
 good faith and good feeling. Fq,lse philosophy, or unprin- 
 cipled politics, may alienate their interests, and set them at 
 discord. Capitalists may encroach on labor. Laborers 
 may, in their madness, destroy capital. Such is the work 
 of ignorance and evil passions. It is the surpassing folly of 
 the members that combined to cut off supplies from the 
 stomach. 
 
 However far such a strife may be carried, it must result 
 in mutual injuries ; and health can only be restored by ob- 
 
22 DEFINITIONS. [BOOK I, 
 
 taining the recognition of tlie full rights and obligations of 
 each. The condition of well-being is peace. A false philos- 
 ophy has set the world at war for ages, proclaiming that 
 what one nation may gain another must lose. Such a phi- 
 losophy has had its trial, extending over centuries of waste 
 and terror; and is now, fortunately, dishonored through the 
 whole civilized world. 
 
 Akin to it is the belief that hatred and retaliation are the 
 normal relations of capital and labor, and that mutual dis- 
 trust and hurtfulness are inevitable in all the developments 
 of industry. Such a belief blasphemes against the harmo- 
 nies of Providence, — is sightless before the glorious order 
 of man and nature. It was the popular faj.th in such a prin- 
 ciple of hurt, not help, between the two great divisions of 
 industrial power, that effected the Revolution in Prance. 
 The cruel, shallow selfishness of capital has robbed labor by 
 means of law. Labor, impoverished, ignorant, degraded, 
 has often turned upon its tyrant, and laid in a common 
 waste church and state, letters and wealth. 
 
 CHAPTER Vm. 
 
 THE GENERAL DIVISIONS OP THE SCIENCE. 
 
 1st, It being admitted that man has wants which he can 
 satisfy from the world around him, and which he desires 
 to satisfy as fully and easily as possible, we are first led to 
 inquire in what manner this can be done most effectively, — 
 how the forces at his command may be most advantageously 
 employed ; in other words, what are the laws which govern 
 
 the PRODUCTION OP WEALTH. 
 
 2d, Since men have different capacities and tastes, — 
 since they are placed in a variety of circumstances as to 
 soil, climate, and civilization, — their products will be vari- 
 
CHAP. Till.] GENERAL DIVISIONS OP THE SCIENCE. 23 
 
 ous ; and yet, since all men desire nearly the same objects, 
 an interchange of their respective commodities will become a 
 necessity. Hence arises that department of industry called 
 ESCHANGE, the laws of -which it is the province of political 
 economy to investigate. 
 
 3d, Almost all objects which men desire are produced by 
 the joint efforts of several individuals. One contributes 
 strength ; another, skill ; another, capital : yet the product 
 must be distributed among them all, and in just propor- 
 tions. As this division, it is quite clear, should not be left 
 to the caprice of individuals, but be determined by natural 
 laws, it becomes one of the departments of inquiry upon 
 which the political economist must enter. It is here his 
 duty to ascertain what those laws are, and under what cir- 
 cumstances and conditions they will effect an equitable DIS- 
 TEiBUTiON of the WEALTH which has been produced. 
 
 4th, As all commodities created by human exertion are 
 designed for use, and as such use implies consumption 
 more or less rapid, and as upon this depends the power and 
 disposition for reproduction, the question of consumption 
 has a scientific place among the objects of our inquiry, and 
 will be found to possess a practical importance second only 
 to that of production. 
 
 These are the four great questions which suggest the gen- 
 eral divisions of our subject; viz., production, eschange, 
 distribution, and consumption of wealth. 
 
 Exchange might not improperly be regarded as belonging 
 to the first general division,, since it contributes largely in 
 the actual production of wealth : yet, as it also greatly facili- 
 tates and increases consumption, and has influence through- 
 out the whole domain of human industry, it seems desirable 
 to regard it as a separate department ; and it has often been 
 treated as such by writers on the general subject. 
 
BOOK 11. 
 P E OD U C T I N. 
 
 CHAPTER I. 
 
 POEMS OF PEODTICTION. 
 
 All values are created by modifications of existing matter. 
 Man cannot create one particle ; biat he can modify what he 
 finds, or change'its condition, in three wAjs ; viz. : — 
 
 £1/ TBANSMUTATION, by TRANSFORMATION, h/ TRANSPORTATION. 
 
 First, by transmutation. 
 
 This is eminently the work of the agriculturist, who, 
 availing himself of the chemical agencies of the earth and 
 air, transmutes seeds into vegetables, fruits, and grains; 
 and these again, by the aid of animal organizations, into 
 butter, beef, hides, &c. This is the most extensive branch 
 of industry, and employs probably four-fifths of the human 
 race from generation to generation. It is the base of the 
 great pyramid of production. It furnishes the material 
 and the support of all other forms of labor ; and not this 
 only, but it renews and restores their waste with an unceas- 
 ing supply of fresh bodily and mental power. The air of 
 trade and of the mill heats and rises, and cold currents 
 rush in from the prairie and the mountain. The foot of 
 the rustic is ever turned to the marts of commerce, and the 
 busy gatherings of men. He comes with clumsy tread and 
 homespun dress ; but he takes the first place in the market 
 and the synagogue. Basil enters Constantinople as night is 
 felling, stares about on the magnificence of the city, and 
 [24] 
 
CHAP. I.] FOEMS OF PRODUCTION. 25 
 
 falls asleep on the steps of the Church of St. Diomede. 
 He is tired of Macedon. He has business on the throne of 
 the world. He who restored tlie laws of the Eastern em- 
 pire, and reclaimed the lands deluged by the barbarian 
 floods, is the exemplar of tlie countryman, in all times, gaz- 
 ing rudely around on the luxury his homely virtues are to 
 appropriate. The millionnaire dashes by in his splendid 
 turnout : a raw, tall lad, with a bundle on a stick, looks on 
 with wonder, — the employer of that man's children. 
 
 Just as agriculture sends to the markets and the mills of 
 the world their materials, so it sends tliem their workmen. 
 Strength and even life go fast in the eager competitions of 
 manufactures and trade. Cool air, fresh blood, flows in 
 from the country, to supply the waste. The bare, bleak 
 hills, where Nature grudges every morsel of food, and stabs 
 cruelly through every chink in the wall, every rent in the 
 clothes, feed the busy cities with ipen. The streams of vig- 
 orous life run off from them to refresh the plains below. 
 
 Agriculture has no need to receive back, in any form, 
 her contributions to the other occupations. The power to 
 give without exhaustion lies in the liberal, healthful repro- 
 duction of man, when living in intimate relations with 
 Nature. H§re, after aU its hurts, humanity comes for heal- 
 ing. War aind pestilence, the fierce contest of the mart, 
 the stifling atmosphere of the miU, may waste our kind in 
 quick or lingering deaths ; but still, by the side of the 
 brooks, men will be born to hold up the frame of industry 
 and social order when their supporters faint and fail. Yet 
 agriculture does get back a certain share of what it gives. 
 Because it is not a labor of ambition, because honors are 
 not to be gathered in the fields it cultivates, because the ex- 
 citements of machinery and association are not to be found 
 in its work or play, because quick wealth is not to be real- 
 ized in its slow increase, the rustic turns himself to the 
 city ; and because it is not a labor of ambition, and for 
 each of the other reasons given, the citizen, weary with all, 
 
26 PRODUCTION. [book II. 
 
 goes back to the open fields and fresh air of the country. 
 The cabbages of Diocletian, the eggs of John Ducas Vata- 
 ces, the apples of Sir William Temple, are the return made 
 to agriculture for Basils, Astors, and Lawrences. 
 
 But the department of agriculture is not confined to the 
 popular view of it. When grain is produced, the seed must 
 be planted in prepared ground, the long interval of growth 
 to maturity must be filled with care and labor ; and, at last, 
 the work of harvesting completes the round of duties that go 
 to the production of the grain. But there are great indus- 
 tries in the department of agriculture, where harvesting 
 alone is performed by man. Nature has done all the rest. 
 Man's part is to find and to take of her bounty. Such an 
 industry is mining, — whether of iron or coal, whether of 
 diamonds underground in Golconda, or sponge under water 
 in the Archipelago. Such an industry is the fisheries, — 
 whether of whales off Greenland, of cod off Newfoundland, 
 or of pearl-oyster off Ceylon. So great, indeed, is the sci- 
 entific extension of the department of agriculture, that even 
 the smelting of the ore, and the transportation from the 
 fishing-grounds to the port from which the venture began, 
 are included in it, because these first put the products in 
 the possession of the capitalist in an available. form. ' Any 
 further change, whether to make the metal up into forms 
 for use, or carry the fish or oil or pearls to market, would 
 come under the other forms of production, to which we now 
 proceed. 
 
 Man modifies matter and exchanges its condition, — 
 
 Secondly, by transformation. 
 
 This is the business of the manufacturer and the me- 
 chanic. These create values by changing the forms of 
 matter, as cotton and wool into cloth, iron into tools and 
 implements. , This is the second great department of human 
 industry. Its ramifications extend throughout the world, 
 yet not everywhere of the same vigor and extent. Since 
 manufactures, as a whole, do not meet wants so primitive 
 
CHAP. l.J ' POEMS OP PRODUCTION. 27 
 
 and absolute as does agriculture, they are, by a law evi- 
 dent in all industry, found not to be so equally diffused. 
 Those needs which are peremptory and instant will, from 
 that reason, tend to obtain their supply from the immediate 
 neighborhood in which they arise. The nearer objects of 
 desire approach to being luxuries, the more cosmopolitan 
 they become. Other reasons, which will appear in our prog- 
 ress, will further account for the unequal growth of manu- 
 factures, which have yet more uniformity than is exhibited 
 ia statistical tables, or in general estimation, since the 
 staple articles of manufacture attract more attention than 
 those multiform smaller products which far outweigh them 
 in value. 
 
 The distribution of manufactures is governed by a variety 
 of conditions, among which may be briefly stated the fol- 
 lowing : — 
 
 1. The industrial genius of a people. Without plun- 
 ging into the deep questions of ethnical diflferences, or 
 compensations in the whole of character, it is yet evident 
 beyond discussion, that the active powers of every people 
 have something of their own which they do not fully share 
 with others. Were all the nations of the earth possessed 
 of mental, moral, and physical qualities which could be 
 positively estimated to be, in the sum of them, equal, it is 
 quite certain that they would be far from similar: their 
 energies would develop in different lines towards different 
 objects. Patience and a kind of business faith distinguish 
 some peoples, mark their features, and are impressed dis- 
 tinctly in the results of industry. Activity and daring spec- 
 ulation no less characterize others. To a class of minds 
 thoroughly representative of more than one nation, mechan- 
 ical contrivance gives the same glow of pleasure that 
 rewards the painter for his years of toil. A distrustful, 
 reserved, secretive disposition may be observed through the 
 entire industry of another country, tending to individual- 
 ize efforts and discourage combination. The catalogue of 
 
28 PRODUCTION. • [book H. 
 
 traits has been extended sufficiently to account for much 
 of the inequality which exists in the distribution of manu- 
 factures among the nations of the civilized world. 
 
 2. The territorial advantages of a people, which are 
 both positive and negative in their nature, — positive, as a 
 people is endowed with water-power, and with the col- 
 location of necessary materials, as of ore, coal, and lime for 
 making iron ; negative, as a people is not attracted to other 
 branches of production by superior facilities. It is esti- 
 mated that Holland has not agricultural capacities to supply 
 a third of its population. With some peoples, this niggard- 
 liness of soil would have been a reason for emigration or 
 starvation ; but there, uniting with the peculiar genius of 
 the inhabitants, this necessity has produced a wealthy and 
 flourishing state. It has ever been held by moral writers, 
 that such unkindness of Nature develops the industrial 
 energies of a people, where it is not so extreme as to 
 destroy even the conditions of production. But the inquiry 
 is too abstruse for our purpose. 
 
 3. Great accidents, belonging neither to the essential 
 genius of the people, or its territorial endowments. Such 
 are the transcendent discoveries in the sciences and the arts. 
 Such are wars which exhaust nations, leaving' them weak 
 for generations. Such are persecutions, like that which 
 scattered over the continent six hundred thousand Hu- 
 guenots, — the cunning artisans of Prance ; like that which 
 wrought devastation still greater in the " reconciled " prov- 
 inces of Spain.* Such was the windfall of the Indies in 
 the lap of Europe. The desirableness of such a distribution 
 of manufactures will be discussed elsewhere. Our purpose 
 here is, only to show by what means it comes about so un- 
 equally. 
 
 Passing now from this question, and looking only to the 
 aggregate of such industries, we find it to be small, if we 
 
 » " Our manufactures were the growth of the persecutions in the Low 
 CountrieB."— Edmund Bueke, in his speech to the electors of Bristol. 
 
CHAP. I.] FORMS OF PRODUCTION. 29 
 
 consider only the number of those employed. But labor 
 here acts in connection with a, greater amount of capital 
 than in agriculture, and avails itself of more and mightier 
 agencies of Nature. The factor into which labor is multi- 
 plied is vastly increased when we enter the workshop and 
 the mill. 
 
 But man modifies matter or changes its condition, — 
 
 Thirdly, by transportation. 
 
 The merchant does not primarily create value in objects, 
 but enhances that already existing by transporting such 
 objects from one locality to another. 
 
 The characteristic illustration is of the most familiar 
 kind. Cotton bought at New Orleans, in 1860, for twelve 
 cents per pound, transported to Liverpool, would have sold, 
 say, for fifteen cents. By his capital and skill, the mer- 
 chant has added twenty-five per cent to the value or ex- 
 changeability of the cotton. He has increased the wealth 
 of the world so much. He, therefore, has produced value. 
 Such transactions are useful alike to the producer and to 
 the consumer of the articles transported. 
 
 In so far as the transportation of products gives them 
 value, it belongs to the present general division of the sub- 
 ject ; but its methods and agencies are so unlike those of 
 the other forms of production, it is governed by laws so 
 peculiar and complete in themselves, it composes so large 
 and easily separate a department of inquiry, that it is, for 
 the discussion of its principles, placed as a general division 
 of the science under the title of " Exchange." To complete 
 the sphere of production, we recognize here the share it has 
 in creating values ; but the means by which this is effected, 
 and the impressive phenomena exhibited in the operation 
 of this agency throughout the entire world, are set apart 
 for special consideration. 
 
 We have thus gone through the three forms in which man 
 modifies matter to create values, — transmutation, trans- 
 formation, and transportation. The inquiry will at once 
 
30 PBODUCTION. [book II. 
 
 occur, whether these exhaust all possible efforts in pro- 
 ductiou. The answer may come out more clearly if we 
 proceed by an illustration. 
 
 The chemist, — what is his position in the world of val- 
 ues ? He has been ranked, by some scientific writers, among 
 the agricultural class, because he so aids and directs the 
 processes of Nature as to produce objects of value by chang- 
 ing tlie elementary powers of acids and alkalies into salts, 
 &c. That is, he transmutes. It seems more accurate to say, 
 that he belongs among producers just so far as he assists in 
 any one of the three forms defined. He works by the side 
 of the agriculturist, helping how best to direct the labor of 
 the farm. Here the chemist produces value. He works by 
 the side of the manufacturer, with lubricants and solvents, 
 removing obstacles which no muscular strength could shake ; 
 and here, again, he produces values. He may, also, labor 
 by the side of the merchant, making much cunning use of 
 Nature ; and here, again, he produces values, in the form 
 of transportation. Prom each he receives remuneration in 
 proportion as he renders service. 
 
 The division we have made of production into three 
 modes seems to afford the best view attainable of the sub- 
 ject. It will be observed, that these are not distinct forms 
 in which labor appears, as in so many moulds ; but that they 
 result from an arbitrary classification of individual efforts, 
 according to the best reason of the case. The whole 
 authority of such a classification consists in this, — that it 
 is more complete and definite than any other which is 
 offered. 
 
 All these forms of productive effort may be united in a 
 single commodity ; and, indeed, there are but few products 
 which do not contain them all. To the agriculturist has 
 been attributed the work of transmutation. Yet, practi- 
 cally, he performs every function of human labor; and, 
 directly or indirectly, uses nearly every known agency of 
 Art or Nature. The manufacturer has the work of trans- 
 
CHAP. II.] CONDITIONS OF THE HIGHEST PRODUCTION. 31 
 
 formation ; but he can only create values by mingling his 
 labor "with that of the agriculturist and the merchant, and 
 thus the final product is the property of all. By what 
 principle, and through -what force, the remuneration of 
 each is determined, will appear under the title of " Distribu- 
 tion." Such, then, are the general forms in which man 
 puts forth his efforts for the satisfaction of his desires. 
 
 CHAPTER II. 
 
 CONDITIONS OF THE HIGHEST PRODUCTION. 
 
 If labor, through some form, produces all wealth, we are 
 led to inquire into the circumstances and conditions that 
 increase or diminish the efficiency of this great force. 
 That there are mighty variations as it appears in different 
 coimtries, and even in adjacent communities, is so manifest 
 as hardly to require mention or illustration. 
 
 If the wealth of any nation cannot be determined merely 
 by the proportion of its population to that of the world, or 
 of its territory to the general mass of the globe, — as it 
 clearly cannot, — the question. Why ? introduces us to the 
 disctission of all those influences which directly or indi- 
 rectly, immediately or remotely, make one to differ from 
 another. These may be classed as follows : — 
 
 Division op Labor. 
 
 CO-OPERATION of CAPITAL. 
 
 Economic Culture. 
 
32 PEODUCTION. [book II. 
 
 CHAPTER III. 
 
 DITISION OF LABOK. 
 
 In some countries, a man wishing for a chair goes into the 
 "forest, fells a tree, carries the timber to his workshop, forms 
 the parts, and puts them together into a chair. It is a 
 rude and imperfect article, but it has cost him the labor of 
 two days. 
 
 In other communities, we find a chair, equally service- 
 able and far more elegant, produced by the labor of half a 
 day. Here one man cuts the timber, another transports 
 to the mill, another saws it into suitable dimensions, an- 
 other forms the legs, another the seat, another the back, 
 another puts the parts together, while still another paints 
 it. A great many chairs are produced by the combined 
 labor of many individuals ; and the result is, that one chair 
 has the value of only half a day's labor. Three-fourths of 
 the labor employed in the making of chairs is, then, liber- 
 ated, to rest in idleness, or to apply itself to further pro- 
 duction with still increasing results, as the desires which 
 control efforts shall determine. We cannot be ignorant, 
 that, in some communities, labor, when set free, does waste 
 itself in idleness and frolic. But this is true chiefly of 
 those in which leisure is bestowed, not by man's con- 
 trivance, but by the generosity of Nature. Here the powder 
 of labor is too often corrupted by the very luxuriance of 
 growth, which gives it great opportunities, and opens a 
 world to its easy conquest. 
 
 But it may safely be assumed, that such an industrial 
 genius in a people, as seeks to lessen present labor by the 
 distribution of its several offices, wiU find fresh objects of 
 desire. The very thoughtfulness and care, the social con- 
 fidence, and mutuality of service, which are required to 
 effect a division of labor, insure such a susceptibility to new 
 
CHAP. III.] DIVISIOrf OF LABOR. 33 
 
 industrial wants as shall necessitate the employment of all 
 the labor so relieved. 
 
 The savage who can provide himself with clothing, shel- 
 ter, and food in twenty days of the year, may be willing to 
 spend the rest of the time in doing nothing. But it was 
 never heard that men came together to do any thing, and 
 remain content to do nothing more. The full discussion 
 and illustration of this principle, which governs the use 
 of labor saved, belongs to the third inquiry; viz., that of 
 " Economic Culture." "We have here, strictly, to show only 
 how labor is saved by the division of employments. This 
 forms the great fact of modern industrial civilization. "We 
 shall find it the most important condition of production, 
 multiplying all its powers faster than the soil multiplies the 
 seed. Here is more of the explanation of wealth than can 
 be found in all other inquiries. This force is being rapidly 
 introduced into every department of industry, and will 
 finally become as general as the nature of the different 
 employments will admit. "We do not find that it has yet 
 reached its ultimate limit in any sphere of human activity. 
 We shall give its phenomena and its principles special at- 
 tention ; for the greatest interests of society, moral as well 
 as economical, connect themselves with it. 
 
 "What is the significance of division of labor, as expressed 
 in the fewest words ? It is, that each workman confine him- 
 self to a single operation. 
 
 In this way, all great and successful manufactures are 
 carried on. 
 
 Take, for illustration, that of boots. One person cuts the 
 fronts ; one crimps ; one cuts in ; one cuts out tlie backs, 
 one the linings ; one pastes together ; one strips out the 
 sole leather ; one cuts the soles ; one makes the heels ; one 
 stiches the backs ; one sides up ; one binds ; one bottoms ; 
 one buffs ; one trees ; one packs, marks, &c. Here are six- 
 teen persons employed in the production of a single boot. 
 In many cases, a still further division of the parts is made 
 
 8 
 
34 PBODtlCTION. [book II. 
 
 with success. In passing, it may be remarked, that, of those 
 operations, seven are performed by the aid of machines, as 
 distinguished in popular acceptation from tools, which latter 
 are controlled by the hand, and have all their motive power 
 in the muscular force of man. 
 
 As long ago as Adam Smith wrote, it took sixteen per- 
 sons to make a pin. 
 
 Such, in description, is division of labor. Let us con- 
 sider its advantages, limitations, and disadvantages. 
 
 CHAPTER lY. 
 
 The advantages op division op labor. 
 
 1st, It gives increased dexterity. All common observar 
 tion testifies how rapid and accurate our motions become, 
 when confined to a single operation. The juggler is not 
 more remarkable for the nice use of his muscles, than is an 
 accomplished mechanic at his bench. The powers of his 
 body are in perfect discipline. They have learned their 
 parts, and obey instantaneously and harmoniously. The 
 more simple the movement assigned, the greater will be the 
 efficiency of performance. 
 
 2d, It allows the workman a better knowledge of his 
 business. This is to the mental powers what the first is to 
 the bodily. It gives intellectual dexterity. The man has a 
 mastery of his special operation. He knows more about it 
 than if he had two things to think of and care for. He 
 becomes shrewd in every motion. He adapts his labor to 
 the material; he discriminates between the qualities of 
 that material. He meets the little difficulties of his work 
 with more skill and less waste. These two advantages of 
 the division of labor are shown in the different wages which 
 skilled mechanics obtain as compared with unskilled, able 
 seamen with landsmen. 
 
CHAP. IT.] ADVANTAGES OP DIVISION OF LABOR. 35 
 
 3d, It saves time, in passing from one work to another. 
 In the making of a chair after the primitive fashion we 
 have supposed, a great deal of time will be spent in passing 
 from one part of it to another, from the place of one opera- 
 tion to that of another. And, even where we suppose a 
 laborer to be engaged in two operations only, there is still 
 a loss inflicted, just as often as he has occasion to leave one 
 for another. It is not a loss alone of the time physically- 
 necessary in eflfecting the transition, but each operation will 
 leave something to harass the mind in the other. During 
 the first part, the attention will be distracted by what has 
 just been left. During the last part, the attention will run 
 on, anticipating what is to come. The shadow is cast both 
 ways upon the mind. 
 
 4th, It facilitates the invention of tools and machines. If 
 a treasure of gold or iron or oil is hid under the ground, the 
 discoverer is more apt, other things being equal, to be the 
 maii who owns the land, and resides and works on it, than 
 a casual visitor. So, if there is a possibility of adapting 
 foreign forces to the production of values, the inventor will, 
 on the same condition, more probably be the workman than 
 any one else ; he is constantly engaged upon the operation ; 
 he desires, of course, to simplify it, since it is a law of mind 
 to do as little work as possible for a certain result ; he 
 knows the wants of the subject ; he knows all the capabili- 
 ties of his material ; he thinks about it all the time, and can 
 try an experiment without changing his place. Therefore, 
 by the logic of Nature, he invents. And, in fact, few of the 
 great aids to industry have been discovered by disinter- 
 ested science. They came from the laboring brain of the 
 mechanic. Where the work was almost too delicate for 
 human eyes, a thousand iron fingers go around to do it, 
 never losing their nimbleness, nor ever getting weary ; 
 where the work was too great for human strength, monster 
 arms swing the hammer, or toss the load in air. 
 
 The history of American manufactures expounds tho 
 
36 PRODUCTION. [book II. 
 
 phrase, " Necessity is the mother of invention." Even the 
 slaves of the South have been directed to important mechan- 
 ical discoveries, in the way we have described. One simple 
 operation, constantly employing the attention, must, in time, 
 lose all its secrets. 
 
 5th, It secures the better adaptation of physical and men- 
 tal abilities. No consideration is more vital than tliis. The 
 work which man finds to do, the efforts he has to make 
 for satisfactions, however high his wants may rise, will be 
 of the most various character, and require the most diverse 
 powers. There are operations which demand great strength ; 
 others, rapid motion ; otliers, good judgment ; others, a 
 mechanical eye ; others, fidelity and trust ; others, high 
 intelligence and education. Such qu.alities, even those 
 purely physical, are not found equally in all ; nay, by the 
 compensations of Nature, they are generally, though not 
 necessarily, found apart. Therefore, unless work were 
 divided according to the several qualities required, a defi- 
 ciency in one would neutralize all the others, and exclude 
 the workman from employment, or compel him to work at 
 great disadvantage. 
 
 The extensive applications of this principle will occur to 
 every mind. Each map finds the sphere of his highest use- 
 fulness as he is endowed by Nature. Those who are gifted 
 with education and ingenuity devote all their time and 
 energy to duties appropriate to such powers. They thus 
 confer on others the advantage of their own gifts, and are 
 themselves spared from drudgery and uncongenial labor. 
 The poorest in qualifications, also, find a place in which 
 they can produce within the great partnership of society. 
 Women are enabled to undertake business of the most deli- 
 cate and important character, to which their strength is 
 sufficient ; while children of all ages take parts that would 
 otherwise occupy men. The power saved or gained, by 
 such an adaptation of talents to special branches of indus- 
 try, is incalculable. Without it, a great part of the human. 
 
CHAP. IV.J ADVANTAGES OP DIVISION OF LABOR. 3T 
 
 race would be helpless paupers, and the remainder -would 
 earn a scanty and miserable livelihood. Man working by 
 himself is a poacher on the domain of Nature ; men, in 
 industrial society, found empires, build cities, and establish 
 commerce. 
 
 And not merely do all find in a proper division of labor 
 their full occiipation and fair reward, but the work of each 
 is just as truly productive as that of any other. The boy 
 who watches crows does as much at that business as the 
 bravest and greatest of earth. He takes the place of some 
 one who goes away to do a larger work. In anthropology, 
 this is only a boy ; iu political economy, he is a man. He 
 ajid the other make together two men. 
 
 6th, It increases the power of capital in production, tends 
 to concentrate manufactures in large establishments, and 
 reduce profits. 
 
 Supposing all men equally capable of carrying on inde- 
 pendent business, which is not the case, — if we compare 
 seven men each with a capital of $1,000 and one man with 
 a capital of |7,000, we shall find the economical advantage 
 greatly in favor of the latter. The former must do busi- 
 ness on a small scale, and purchase materials in small 
 quantities. The latter can buy at wholesale prices, can 
 afford to go often to market, and to keep himself well in- 
 formed, and will sell as well as buy to great advantage. 
 
 In addition to this, the large manufacturer can afford to 
 work for a smaller rate of profit. 
 
 A single hatter, for example, who makes only $2,000 
 worth of hats, must secure 25 per cent, iu order to have a 
 net income of $500 ; while the man who can make $20,000 
 worth of hats will, if he realize 6nly 12|- per cent, have an 
 income of $2,500. A cotton manufacturer, who makes 3,000 
 yards per day, or 900,000 per annum, if he gets but half 
 a cent per yard profit, has an income of $4,500 ; the man 
 who makes but 300 yards per day, at one cent per yard, 
 VT double the profit, gets but $900. 
 
88 PRODUCTION. [book II. 
 
 "We see from these illustrations why the great estabUsh- 
 moiits drive smaller ones out of the market. A tendency 
 to a reduction of profits is a natural consequence of this. 
 Therefore, other things being equal, it is desirable that 
 manufacturing establishments should be sufficiently large 
 to secure all the advantages of concentrated capital, and 
 effect the complete division of labor. 
 
 7th, It shortens apprenticeship. 
 
 Every art, trade, or profession must be preceded by an 
 apprenticeship, more or less extended, according to what is 
 necessary to be learned. A trade, which, in order to be 
 perfectly understood in all its parts, requires an apprentice- 
 ship of seven years, — if it be subdivided into seven different 
 operations, may, it is evident, be obtained with as great a 
 degree of perfection by an average, in each branch, of one 
 year's service. Some of the parts may require more than 
 one year, others less. 
 
 Now, we find this to be practically true ; and the result is 
 a great saving of time, and time is money. 
 
 For example : — 
 
 Seven men serve seven years each to learn to make hats, 
 
 — in all, a service of .49 years 
 
 Seven men serve one year each to learn to make a 
 
 seventh of a hat, equal to 7 „ 
 
 Saving of 42 years 
 
 in the mechanical education of every seven men employed in this 
 manner. 
 
 Apply this principle to the manufacturers of Massachusetts, which 
 has at least 75,000 skilled workmen, and suppose the apprentice- 
 ship to be seven years, we have — 
 
 75,000 at 7 years each 525,000 years 
 
 75,000 at 1 year each 75,000 „ 
 
 Saving of 450,000 years 
 
 in one generation of skilled workmen. 
 
 It will be observed that these are years of apprenticeship; 
 
CHAP. IV.] ADVANTAGES OP DIVISION OP LABOR. 39 
 
 not of labor. Li considering what is the saving to the 
 wealth of the country, we must estimate the amount of 
 values created by these workmen during the apprenticeship 
 under the first system supposed. Per contra, we must take 
 into account the greater amount of material destroyed in 
 teaching each man to do all the parts, and the greater inter- 
 ruption of the employer or journeyman. 
 
 If we suppose these years, saved from apprenticeship, 
 to have an average value of $200, we have a saving of 
 $90,000,000 /(>?• each generation of skilled workmen in Mas- 
 . sachusetts. 
 
 The principle, under which t^his saving of time is made, 
 cannot be disputed. 
 
 8th, It gives opportunity for greater social development, 
 and increases the social power of labor. 
 
 This is immediately of moral interest ; but it has impor- 
 tant economic bearings. The principle itself is indispu- 
 table. Not only is the workman brought near his fellows, 
 and, by such contact, stimulated to industry, to acquisition, 
 to taste ; not only does such association of purposes and 
 means afford more of the instruments of intellectual ad- 
 vancement, — schools, lectures, churches, journals ; not only 
 does the close neighborhood of mind quicken and brighten 
 all the faculties, teaching by example, and firing by con- 
 troversy ; but, by such association, workmen are brought 
 nearer their employers, have a greater sympathy and co- 
 operation, act intelligently and harmoniously as to their 
 rights, and form a public opinion among themselves which 
 has often been found a great power, economically and civilly. 
 Such an association, moreover, brings the workman nearer 
 the government and the public force ; sometimes for evil, 
 but often for good. A population thus concentrated is 
 capable of prodigious impulses. All the artisans of the 
 empire are not equal to the mob of the capital. Govern- 
 ment knows and respects the power of this class, no matter 
 .how fully disfranchised it may be in the law. 
 
40 PRODUCTION. [book H. 
 
 CHAPTER V. 
 
 THE LIMITATIONS TO THE DIVISION OP LABOR. 
 
 But the great principle of division of labor, so very bene^ 
 ficial in its operations, is yet limited by certain conditions, 
 which it cannot disregard. 
 
 1st, When the priaciple has been so far applied that each 
 operEktion has been made as simple and fully a unit as 
 hi man ingenuity can devise. Beyond this, there is no 
 didsion, but only repetition. Any attempt to refine the 
 process so far as to give the workman less than one natu- 
 rally complete motion orf the body, will only embarrass and 
 delay industry. 
 
 2d, When the concentration of capital has become so 
 great that interested personal supervision cannot be brought 
 to bear upon each department, and upon the whole enter- 
 prise, with sufficient intensity to iu&ure efficiency and fidelity 
 on the part of those employed, and harmony in the general 
 conduct of the business. Beyond this point, the advantages 
 derived from the power of concentration are neutralized. It 
 may even become mischievous. It is well that there should 
 be limitations, because they prevent such aggregations of 
 capital as would swallow up the whole industry of a state. 
 Experience shows that the greatest establishments are not 
 always or generally the most profitable. Those wliich are 
 large enough to secure all the real advantages of concen- 
 trated capital and combined effort, yet are small enough to 
 be -brought under direct, personal, interested supervision, 
 are the most beneficial to their owners and the public. 
 
 3d, Where the industry consists of an indefinite number 
 of parts, yet the special circumstances will not allow each 
 workman profitable employment in a single operation, — for 
 example, agriculture in most of its branches: first, from 
 the fact that its operations cannot be sufficiently localized ; 
 
CHAP, v.] LIMITATIONS TO DIVISION OP LABOE. 41 
 
 and, second, from the necessities of the seasons. No depart- 
 ment is capable of so much subdivision as this ; yet, in 
 practice, none experiences so little. In mining, the fish- 
 eries, and many incidental matters, it is effected to a 
 considerable extent ; but, in most of the parts of pure 
 agriculture, it has very limited range. Boys and women 
 are indeed made viseful in it, but they have not the same 
 continuous and profitable employment as in manufactures. 
 Nor does their work correspond precisely with what is 
 required in our definition of the division of labor. They 
 are occupied, generally, not in one operation so much as in 
 a miscellaneous class of light duties, too variable to realize 
 the dexterity and thoroughness obtained elsewhere. 
 
 There are other instances which seem to approach near 
 to the conditions of the highest efficiency. Some persons 
 are employed for an entu-e community to plant, to graft, or 
 to team; but not only does the extent of territory limit 
 their application to a single pursuit, but the change of the 
 seasons drives them from one to another almost every 
 month. Stock-raising, and gardenmg for large markets, 
 afford the best American example in agriculture ; yet each 
 of these is not only a considerable department in itself, 
 but whoever engages in either of them must do much 
 not directly connected with it. 
 
 The culture of the grape realizes, perhaps, as fully the 
 mechanical advantage of division of labor as any in agri- 
 culture. 
 
 But, generally speaking, the farmer is a laborer of a 
 thousand duties. 
 
 This fact alone does not account for the different pro- 
 ductiveness of the manufacturing and the agricultural inter- 
 ests. 'In the nature of their objects, it is found that 
 machinery must be applied to them in far different propor- 
 tions. The mechanic arts, which can IBe localized to the 
 highest degree of concentration, and made general to all 
 seasons of the year, admit also of prodigious multiplication 
 
42 PRODUCTION. [book II. 
 
 by artificial agents. Prom these considerations, we deduce 
 the principle, that the value of agricultural products, as a 
 class, — that is, their power in exchange for products other 
 than agricultural, — will be constantly increasing. A bushel 
 of corn, in 1820, would purchase only four yards of cotton 
 cloth. In 1860, it would purchase ten yards of the same 
 or better quality. This difference will continue to grow 
 wider and wider as the mechanic arts advance ; but not 
 indefinitely, inasmuch as the materials of manufactures^ are 
 always themselves of agricultural origin, and hence the 
 depreciation of the price is limited. 
 
 We have thus far spoken of the division of labor as 
 applied only to direct, material production, affecting the 
 laboring classes, and those immediately superintending 
 them ; but the principle has been extended to mental labor, 
 as well as that which is simply muscular. 
 
 The professions known as the learned, and others which 
 have an important though indirect agency in production 
 (for, unless they have some agency in production, we have 
 nothing to do with them here), naturally divide themselves 
 into branches more or less numerous and special, as occa- 
 sion offers. The recognition of professions and industrial 
 classes is itself a tribute to the great principle of the divis- 
 ion of labor ; but it proceeds still further, to assign special 
 functions, within those professions and classes, to individual 
 members. 
 
 Thus the law, when a sufficient concentration of legal 
 labor is secured, branches into the departments of titles 
 and conveyances, of insurance, of marine losses, forfeiture 
 and salvage, of patents, of criminal jurisprudence, &c. In 
 medicine, the eye, the ear, the skin, consumption, fevers, 
 cancers, have each their own practitioners. 
 
 That science and skill are promoted by such subdi- 
 vision, and that the immediate efficiency of professional 
 labor is greatly increased thereby, cannot be intelligently 
 questioned. 
 
CHAP. TI.J DISADVANTAGES OP DIVISION OP LABOE. 43 
 
 As any community advances to a higher civiHzation, 
 specialties are more and more resorted to. Individuals, 
 finding themselves peculiarly adapted by their talents and 
 tastes to a particular calling, or having unusual advantages 
 for the pursixit of it, give themselves up to that object. 
 They concentrate upon it their thoughts, their time, and 
 their resources. They excel. They know more, and can 
 do better, m their chosen line than those about them. This 
 gives them position and power. They are sought for, are 
 looked to, because they have something that is wanted. No 
 matter how humble his station, or how minute his field of 
 investigation, if a man understands soxuething perfectly, his 
 world — whether a hamlet or an empire or the race — will 
 resort to him. He becomes a benefactor of society. He 
 receives its honors and rewards. There is no person in 
 any position in life, however exalted or lowly, who may not 
 advantageously cultivate a specialty. 
 
 CHAPTER VI. 
 
 THE DISADVANTAGES OP THE DIVISION OP LABOR. 
 
 1st, It tends to enervate the laborer, because it does not, 
 as a general fact, give full activity and development to all 
 the functions of the body. 
 
 We shall proceed to show that this is true of those classes 
 who perform what we have designated as material labor, 
 while the very distinction of mental labor implies such a 
 separation between the natural functions as seems not to 
 consist with the best physical condition of those engaged, 
 Common observation will affirm that this is strikingly true. 
 It is not necessary, but the tendency exists. 
 
 In the material occupations, it is found that confinement 
 to a single opferation is often highly injurious. There are 
 
44 PBODUCTION. [book II. 
 
 forms of labor wliich sufficiently exercise the several parts 
 of the body. The mere fact of uniformity of motion brings 
 no objection to such as these. But there are those which 
 ifequire the constant fatiguing use of some member, to the 
 injury of the rest of the body ; others require a cramj^ing 
 posture that oppresses and disorders the vital organs ; 
 others stiU require the workman to poison his blood with 
 unwholesome gases. In the great centres of capital and 
 labor, — whether we regard the mill, or that larger mill, 
 the city itself, — it is notorious that distortion, paralysis, 
 and organic feebleness, are more common than where labor 
 is diffused, and the laborer changes his work and his place 
 frequently. 
 
 That this will occur in the course of all manufacturing 
 industry is probable. That it is inevitable does not so 
 clearly appear. The sanitary arts keep even pace with the 
 advance of machinery. The civil war in America developed 
 astonishingly the resources, which are at the command of 
 government, to suppress malaria, and reform the habitar 
 tions of disease. The growth of manly sports, and the 
 cultivation of gymnastics for health's sake, are likely to 
 work a great change for the better in the sanitary conditions 
 of our people. The intelligent precaution of operatives in 
 every country, where their remuneration is any thing less 
 than robbery, can guard against all excessive derangement 
 of the bodily functions. 
 
 It is perhaps significant to the question whether the 
 application of the bodily powers to a single continuous 
 action is really in practice injurious, that we find in the 
 statistics of Massachusetts, ranging over sixteen years, 
 the average life of " laborers having no special trades " to 
 be less by two years than that of " active mechanics in 
 shops." 
 
 Mechanical operations were formerly considered as dis- 
 qualifying for military service ; and even our modern phi- 
 losophy has found in them a reason for the employment of 
 
CHAP. VI.] DISADVANTAGES OP DIVISION OP LABOR. 45 
 
 mercenaries, and the maintenance of standing armies. But 
 the great civil war just referred to exliibited tlie novel fact, 
 tliat, beyond all dispute, the troops raised in agricultural 
 districts are not so hardy in the privatioiLS and exposures of 
 camp and field as those coming from the towns. Tliis does 
 not, however, imply a better state of health at home. It 
 may be, that the latter class find, in the constant exercise 
 and the out-door employment, just that change of habit and 
 condition which they needed. All that is diiferent from 
 their usual course of life is in the direction of more air and 
 light and motion; while the agricultural laborers find no 
 change except for the worse. They have been accustomed 
 to active employment ; but the harsh necessities of the ser- 
 vice come to them fresh and strong. It is perhaps the 
 direction of influences more than the degree of them which 
 determines these matters of health; or it may be, that 
 mechanical occupations, contrary to general opinion and 
 in spite of some plain drawbacks, do tend to compact the 
 frame and the sinew, and lend force and vitality to the or- 
 gans. Whatever the explanation, we will rest with the fact, 
 that, in the severe trial of strength and endurance made by 
 the war, the mechanical occupations have not been dis- 
 credited. 
 
 2d, This system, in some of its applications and in certain 
 degrees of extension, does not give that full employment 
 and expansion to all the powers of the mind which its nor- 
 mal development requires. This is obvious. The mind, if 
 intensely devoted for a whole life to a single effort, and that 
 perhaps of the most simple kind, cannot but be unfavorably 
 affected. Unless counteracting influences are resorted to, 
 it wiU undoubtedly be contracted and enervated. 
 
 To this liability are opposed three compensations : — 
 
 a. The great communicativeness observable in such cir- 
 cumstances, the eager discussions, the free inquiry, the 
 school, and the lyceum. 
 
 I. The saving principle that the employment of one mem- 
 
46 PRODUCTION. [book II. 
 
 ber is, to a certain extent, the employment of all. The 
 human faculties, ■ mental and physical, are a knot. They 
 interpenetrate so completely that it is impossible to move 
 one without affecting the rest. If we compare the mind to 
 a reservoir, we may say that the individual powers and dis- 
 positions flow out of it as so many streams ; but there is 
 nothing to prevent them from flowing back, if the level is 
 sufficiently disturbed. The special use of one may develop 
 it greatly ; make it more strong and active than the others. 
 But such a predominance is not distortion. Pew minds are 
 capable of even and temperate growth. In this principle 
 resides the variety of human character. It may be ques- 
 tioned whether any but the most gifted can be educated in 
 any other way so thoroughly and efficiently as by interested 
 application to some single matter. Generalization and broad 
 philosophy rouse the full powers of but few intellects. In 
 the majority of cases, it will remain true that intense, spir- 
 ited, persistent laboj directed to one point is better than the 
 languid, nerveless, unspurred, rambling play of all the fac- 
 ulties. Mind, to be energetic, must not be republican. The 
 powers must be centralized. Some must be despotic. 
 
 Indeed, the argument against division of labor on this 
 score would be better expressed by saying, that the constant 
 repetition of single acts so far dispenses with thought, and 
 even with consciousness, in the operation, that it makes man, 
 in some sense, a machine. This is, to a considerable extent, 
 true ; the compensation being that it affords a greater op- 
 portunity for discussion and reflection, if the workman 
 chooses to avail himself of the kind of mental leisure which 
 is afforded by the monotony of his occupation. It is, there- 
 fore, not the excessive use, but the disuse, of the intellect- 
 ual faculties, that is to be feared in those arts to which labor 
 has been carried to its fullest division. 
 
 e. The laborer is not all workman. While his special 
 occupation provides for his subsistence, and endows him 
 with energy, industry, and «oncentrativeness of mind and 
 
CHAP. VI. J DISADVANTAGES OP DIVISION OP LABOR. 47 
 
 character, he has other hours and other duties, ample, if 
 reasonably used, to compensate for all the evil mental 
 effects of his continuous toil. 
 
 It will be observed, that it is only to the division of labor 
 leyond a certain point, that the objections we have discussed 
 have any application. A more ill-developed society, with 
 more ill-developed members, could not be conceived than 
 where this principle was not applied at all. In fact, there 
 could be neither members nor society ; but here and there a 
 savage would bask in the summer sun, or hide himself in 
 the storms of winter, in hopeless, helpless barbarism. 
 
 However we may speculate, a priori, on the consequences 
 of dividing minutely the parts of labor, we may perhaps 
 get a stronger light and a better view by observing the 
 mightiest experiment of industry ever known in the world, 
 ■ — that of England to-day. Nowhere are the natural advan- 
 tages of agriculture more apparant ; nowhere has manu- 
 facturing been more elaborated. Yet no person can be 
 cognizant of the condition of the English population, with- 
 out being assured that the manufacturing, laboring class is 
 almost immeasurably above the agricultural in intelligence, 
 in independence of character, and obedience to law. Prob- 
 ably the most conservative nobleman of the realm would 
 admit that the former class is far better qualified for the 
 franchise than the latter. 
 
 3d, It will follow, from what has been already urged, that 
 division of labor, in its greatest extension, has a tendency, 
 or at least there is found in it a liability, to lower the 
 average of health, to shorten life, and prevent the natural 
 increase of population. 
 
 All these results are found, on examination, more or less, 
 but still above the general facts of the country, in all the 
 great centres of manufacturing industry, where tlie full pos- 
 sibilities of the mechanic arts are realized by the intense 
 subdivision of labor. This result can only be partially and 
 confusedly shown by statistics : still enough can be ex- 
 
48 PEODUCTION. [book II. 
 
 tracted to assure us that there is a great loss of vital 
 energy, whether or not it is necessary to such a state of 
 industry. 
 
 The American average of life may be expressed nearly as 
 follows : * — 
 
 Cultivators of the earth 64 years. 
 
 Active mechanics out of shops .... 50 „ 
 
 Active mechanics in shops 47^ „ 
 
 Inactive mechanics in shops 41f „ 
 
 Laborers, no special trades 45 J „ 
 
 These statistics, accurately gathered and showing the 
 results of many years, require " correction" in several par- 
 ticulars, if the real lesson of them is to be obtained. In 
 the first place, two-thirds of the class of mechanics as pre- 
 sented here are engaged in such occupations as do not 
 allow any very extended siibdivision of the parts, so that 
 the average of the great manufacturing establishments and 
 their dependent cities would be found still more striking. 
 In the second place, the agricultural occupations are con- 
 tinually making contribution to manufacturers of their best 
 blood and bone, renewing the natural waste of the mill and 
 shop, and so interfering with the statistics of the subject. 
 This element can neither be eliminated nor determined. 
 We shall rest satisfied with knowing it is there. So impor- 
 tant is it at times, that Lowell appears on the tables as one 
 of the healthiest cities of America. It is unquestionably 
 true that much of the historical feebleness and mortality of 
 such places has been avoided by more humane and intelli- 
 gent precautions, by gymnastic sports and out-door games, 
 and by a better adaptation of all the conditions of produc- 
 tion to the necessities of life and well-being. Bxit the great 
 fact which accounts for this seeming healthfulness of a 
 manufacturing city is the constant infusion of the fresh, 
 vigorous, young blood of the country. 
 
 * Massachusetts Eegistration of Births, Deaths, and Marriages. 
 
CHAP. VI.] DISADVANTAGES OP DIVISION OP LABOR. 49 
 
 It is not necessarily a disadvantage in tins respect, that 
 manufactures, in their greatest centralization, prevent the 
 full natural increase of population. Indeed, it is a bene- 
 ficent provision of Nature which checks propagation in 
 precisely those circumstances where the offspring is less 
 likely to receive that nourishment and care and exercise 
 which shall secure its best development. Far from being a 
 misfortune, it is well that those who are to live in the cities 
 should be born in the counti-y, and get size and strength on 
 the hills and in the open air. This tendency does not go 
 so far as to deprive the dwellers in the cities, and the work- 
 ers in brass and wool, of the cares and the pleasures and 
 the culture of paternity. Yet the law that men shall be 
 born upon the land is as clear in history, and in our com- 
 mon observation, as any fiat of Nature. 
 
 4th, The division of labor lessens the number of those 
 who do business on their own account. This is a natural 
 consequence of what has been shown. We have said that 
 capital has a tendency toward concentration ; and, if it be 
 aggregated, labor must also be. The result of this, in agri- 
 culture, is to absorb the yeomanry into the class of those 
 who labor by the day or month, with no interest in the 
 land. The result in manufacturing is to subordinate hun- 
 dreds of operatives to the control of a single will. This 
 has a threefold relation : a. To the formation of character. 
 Something of independence and self-respect is unquestion- 
 ably lost, so far as these depend on external conditions. 
 Position and responsibility do foster and strengthen man- 
 liness and self-mastery. By the division of labor, the 
 independence of each is sacrificed to the good of all. It 
 will not be doubted, that, on the whole, it is desirable that 
 it should be so ; nor can it be denied that there are partial 
 drawbacks, even in this plain tendency of civilization. It 
 is the sacrifice man has to make in society, in industry, in 
 government, h. To the fairness of remuneration. A very 
 few now participate in the profits. The great bulk of 
 
60 PRODUCTION. ■[book U. 
 
 ■workmen receive only wages, and that on temporary engage- 
 ments. This disproportion may be excessive, and is likely 
 to be where laws or institutions check enterprise, and 
 discourage individual effort. In such cases, laborers are 
 practically a herd of cattle, driven about from place to place, 
 receiving bare subsistence, and unable to mend their con- 
 dition. This is a lamentable state of things ; an abuse of a 
 good principle. No one can deny, however, that the worst- 
 treated operatives of the civilized world receive infinitely 
 more than if the efforts of men were all individual and 
 independent, and each was left to satisfy his wants from 
 the primitive resources of Nature. But, even if we come 
 forward from the barbarous state to that in which the work 
 of man has divided itself into numerous trades, each of 
 these, however, yet remaining distinct, and compare tliis 
 with the present state, in winch trades have been repeatedly 
 subdivided, — capital aggregate and labor subordinate, — 
 we shall yet find that the share of the poorest laborer in the 
 mighty product of our industry of to-day is greater than 
 ever before. Augustus, says Arbutlmot, had neither glass 
 to his windows nor a shirt to his back. 
 
 Thus much could be urged of the wretchedest operatives 
 on the earth ; but, when we regard the condition of labor 
 as it exists in nearly all the countries of the world, we shall 
 quickly confess, that, though the laborer has given up his 
 share of profits, he receives back, as wages, far more objects 
 of desire than he (Jould have obtained in the old way. c. To 
 the 'steadiness of employment. By the attraction of labor 
 , to great centres, the fate of many laborers is made depend- 
 ent on that of a few capitalists. This is a great fact, 
 scientifically and historically. It must continue. It has 
 issued, in the past, in the form of great industrial distresses, 
 of a general suspension of mechanical labor from causes 
 affecting only the mercantile credit of the employers, of 
 frantic appeals for support, of laws in which government 
 assumes the duty of providing work for its whole popula- 
 
CHAP. VI.] DISADVANTAGES OP DIVISION OP LABOR. 51 
 
 tion, of riots and revolution. So far as this will occur irt 
 spite of prudence and careful management, it is the con- 
 dition on which' we have the advantages of division of 
 labor. Men cannot cross the great ocean alone. They 
 must go together, have help of each other, and embark 
 their fortunes on a common bottom. More of them woiild 
 perhaps be safe if each was on a ship of his own ; but that 
 cannot well be. 
 
 Even in regard to steadiness of employment, the aggre- 
 gation of capital and consequent division of labor assist 
 the workman wp to a certain point. That point is the great 
 catastrophe which no structure can withstand. Then, the 
 greater the structure, the more completely it crushes the 
 laborer. 
 
 Where capital is concentrated, it is. stronger, protects 
 itself better ; and, of course, the workman shares in this 
 power and immunity. "Where the industry of thousands is 
 controlled by the mind of one, it will be more intelligently 
 and harmoniously administered, and with a larger view of 
 the business. By such superiority of union in production 
 (for that is synonymous with division of labor), the industry 
 of a country is lifted clean over obstacles which individual 
 enterprise could not pass, — is preserved amid storms that 
 would shatter the feeble fabric of single hands. Industry 
 in masses, when it receives a shock, can hold on to the accu- 
 mulations of the past and to the credit of the future, and so 
 stands firm. 
 
 But when the blow becomes so heavy as to shatter even 
 the great workshops of modern industry, and they come 
 down, then truly the fall is great. The ruin is more com- 
 plete than if the storm had . prostrated a village of huts. 
 The reservoir of gathered power has burst ; the springs 
 have long since been broken down ; the wells been filled 
 up ; and there is no supply for immediate wants. Such a 
 loss is repaired slowly. The trampled grass raises itself, 
 and looks up again ; but the oak lies as it falls. Independ- 
 
62 PBODUCTION. [book II. 
 
 ent has been discouraged by collective industry ; the shop has 
 been abandoned for the mill; each workman has learned 
 only the fraction of a trade ; no one can buy, make, and 
 sell ; no one dares to undertake any business, foreseeing 
 that the corporation must rise again. For a while, all is 
 distress. It is only when the stately fabric of associ- 
 ated industry is reared again, that plenty is known in the 
 land. 
 
 "We have discussed, somewhat at length, the relations 
 which division of labor holds to the condition of the laborer, 
 by depriving him of the opportunity to do business on his 
 own account. Until recently, it has been supposed that 
 the advantages of the principle could not practically be 
 obtained without this defect ; that capital could not be con- 
 centrated, and the trades perfected, without diminishing the 
 independence and self-reliance of labor. But recent devel- 
 opments seem to be anticipating the objection. It is now 
 a matter of common practice to admit the laborer to an 
 interest in business, — a share in profits. This is done by 
 merchants to their salesmen, by master mechanics to their 
 workmen, by ship-owners to their hands. All stock-com- 
 panies, of whatever character, admit of this principle. 
 Mutual industrial associations for trade, mining, and insu- 
 rance, furnish its most significant and hopeful applications. 
 There is no reason why these should not be extended much 
 further by a gradual growth, as they are found convenient 
 and profitable. Just so far as a sufficient spring of self- 
 interest can be maintained in the effort, both of the employer, 
 or manager, and of the operative, so far may mutuality of 
 profits be applied to all departments with the most bene- 
 ficial results. 
 
CHAP. VII.] THE DIVISION OF LABOR. 53 
 
 CHAPTER VII. 
 
 THE DIVISION OP LABOR (concludecT) . 
 
 We have passed through the discussion of the advantages, 
 the limitations, and the disadvantages of the division of 
 labor. 
 
 If, now, we inquire on which side the balance lies, there 
 will be no question that it is in favor of the application and 
 extension of the law. It appears as the great multiplying 
 power of modern industry ; it has made the difference 
 between barbarism and civilization ; it resides in man's 
 being as the principle of help ; it is the only name that 
 savage nature fears. 
 
 K we could personify the forces of matter and the treas- 
 ures of the earth, holding council how they might escape 
 being enslaved or plundered by rapacious man, we should 
 hear them say : " Let us spread disunion among our foes- ; 
 let us convince them that their interests are separate, and 
 lie apart ; let us excite among them suspicion and hatred. 
 Then the summer sun shall make them languid, and winter 
 shall bring torpor on them. The waves shall overwhelm 
 them, struggling singly with the ocean ; the drought shall 
 starve, the snow shall freeze them. So will we conquer, and 
 be safe." 
 
 And indeed, as if they had so talked, like the councillors 
 of a state invaded by a powerful foe, and had so planned, 
 we find them for ages deceiving the hearts of men, sowing 
 dissension, and enkindling strife by treacherous bounties of 
 gold and precious stones, like bribes sent into an enemy's 
 camp. Nations fell to qiiarrelling about the accidental and 
 trivial treasures scattered, in fraud of their full rights, upon 
 their paths. Great wars were waged to secure paltry bal- 
 ances in coin : wealth of continents was disregarded. Men 
 stood over against each other, hunted for gold in the dust, 
 
54 PRODUCTION. [book H. 
 
 neglecting the mighty riches that lay deep in the soil. 
 They had no heart to say, Let us help each other, and see 
 what we can do. Whole peoples acted, and look now in 
 history just as we imagine miners to do when they suspect 
 the presence of some great treasure among them ; each 
 hunting silent by himself, casting angry glances from under 
 steadfast lids ; each heart beating fast with fear and wrath 
 that some other may find it first; hateful all, and hating 
 one another. 
 
 That this sketch is not exaggerated, let it be said, to the 
 shame of mankind, that the Mercantile theory was un- 
 doubted till the middle of the last century ; proclaiming as 
 truth, and pursuing as policy, the world over, the double lie 
 that the only wealth is gold and silver, and that what one 
 people gains in trade another must lose. So man had need 
 of his fellow only to rob him ; so man had need of Nature 
 only to get her gold. 
 
 Palaces and warehouses floating safely on the waves ; 
 bi-eakwaters along the sea ; coast-lines of docks and wharves ; 
 arterial railroads to the length of the continents ; canals 
 connecting oceans ; bridges leaping rivers ; the genii of 
 the woods groaning in the windmills ; brook-nymphs grind- 
 ing corn in the valleys ; the spirit of the air hard at work 
 pegging shoes ; mountains of iron split open ; precious 
 crystals, forming for ten million years, strewn about the 
 land, — these are the first fruits of man's confidence in his 
 fellow. 
 
 CHAPTER YIU. 
 
 THE CO-OPEEATION OF CAPITAL. 
 
 This is the second grand condition, through which the 
 producti-veness of labor is increased. 
 
 We have before spoken of capital : we now proceed to 
 define it strictly. 
 
CHAP. VIII.] THE CO-OPERATION OP CAPITAL. 65 
 
 It is that portion of wealth employed in reproduction. 
 
 The distinction involved is an important one. All capi- 
 tal is wealth, but all wealth is not capital. The very use 
 of the term " reproduction " testifies to the feeling of man 
 that the object of any thing is not fulfilled in its own creation 
 or perfection, but that there is an endless series of propa- 
 gations, with a constant view, and with increasing force, to 
 some ulterior end. And we find that production does go 
 forward, not by the increase alone of the laboring class, not 
 by mere annual savings and gross accumulation, but by the 
 employment of that which before was an object of desire in 
 itself, as now a means to the gratification of new desires. 
 Since it is recognized that human wants create others of 
 their kind, and hence go on increasing in number and ur- 
 gency, it is necessary that human efforts should find some 
 force having a corresponding rate of increase, by which to 
 assist themselves in supplying the growing demand. Such 
 an agent is found in capital, which is taken out of wealth. 
 
 A man may have much wealth, and use little capital. 
 Wealth is as it is had; capital, as it is used. For example, a 
 man may live in a house worth thirty thousand dollars, and 
 have ten thousand dollars invested in a ship, from which he 
 derives all his support, and which forms his capital. It 
 may be asked. Is not the house itself capital ? It is so far 
 as necessary to production, in sheltering the producer and 
 his family, even with the style and comfort usual to such a 
 degree of society. Beyond this, it ceases to be capital. It 
 is devoted, not to the creation of values, but to personal 
 enjoyment and culture ; noble and worthy ends for wealth, 
 but not for capital. 
 
 We may change the supposition. The man may have a 
 house worth ten thousand dollars, and ships to the value of 
 thirty thousand dollars. The difference to production will 
 be apparent, inasmuch as his active capital now consists of 
 three-fourths of his wealth, while before it was only one- 
 fourth. 
 
56 PRODUCTION. [book n. 
 
 It will follow from this lUustratioii, that there is much of 
 the wealth of the world wliich it is difficult to classify 
 whether as capital or not, much in which the two ends 
 tmite, much in which the share devoted to reproduction is 
 doubtful. Still, this casts no discredit on the distinction 
 itself, which stands manifest to all. There are many such 
 principles in political economy, the general direction and 
 character of which cannot be intelligently doubted, yet in 
 whose particular applications we find difficulties and appar- 
 ent contradictions ; just as the mountain-ranges stretch 
 across the continent, unmistakable in their great course, 
 shedding the waters of one slope to the east and of the other 
 to the west, making clear separation between the Flora and 
 Fauna of the adjacent countries, and forming impassable 
 boimdaries of empire, yet are occasionally interrupted by 
 one cause or twisted away by another, so tliat we find peaks 
 here and there, which a little ciitic can take his stand upon, 
 and deny the geography of the hemisphere. 
 
 How does capital arise ? 
 
 From the net savings of labor. A person who earns five 
 hundred dollars a year, and places one hundred dollars of 
 it in a savings-bank, or invests it in land or machinery or 
 railroad stock, or anywhere at work, has increased his own 
 capital and the capital of the country by so much. It is 
 not what he lays aside for use in his own occupation merely, 
 but for use anywhere. 
 
 All capital comes in this way. A country increases in 
 capital just in proportion to the increase of capital accumu- 
 lated by its members. If the individuals of a nation apply 
 none of their net income to reproduction, there is no 
 increase of the national capital. If they withdraw any of 
 their capital to meet personal consumption, the country 
 becomes poorer. 
 
 Many of the considerations which pertain to the accumu- 
 lation of capital, and the ultimate use of it, belong to the 
 discussions of economic culture, or go further on, to the gene- 
 
CHAP. VIII.] THE CO-OPERATION OP CAPITAL. 57 
 
 ral division of " Consumption." We have simply to do with 
 those principles which apply existing capital to the wants of 
 present labor. 
 
 Capital is known as " fixed " or " circulating." 
 
 Fixed capital consists of every description of property 
 employed in production, which, from its nature, cannot be 
 advantageously changed to any other use than that for 
 which it was originally designed. The land, buildings, and 
 tools of the farmer, the ships and warehouses of the 
 merchant, the machines and implements of the manufac- 
 turer, belong to this class. They must be used for the 
 purposes to which they are particularly adapted, or they 
 have little value. They are fixed. The ship cannot be 
 used as a wagon, or the spinning-jenny as a locomotive. 
 
 Circulating capital, on the other hand, consists of those 
 articles or commodities which can be readily changed from 
 one purpose of production to another. Of this class are the 
 stock and produce of the farmer, the money and wares of 
 the merchant, the raw materials of the mechanic. These 
 are easily transferred from one business to another, and 
 indeed from one place to another, and may be used in a 
 great variety of forms. Of all these, money is the most 
 mobile, as it can be changed without delay or loss to any 
 occupation or locahty. 
 
 Fixed is, in its nature, more permanent than circulating 
 capital, not merely in its adaptations, for its name implies 
 that, but in its existence. The greater part of circulating 
 capital — stock and materials, for example — is held only in 
 the' immediate view of transmuting or transferring or trans- 
 porting it, so that it shall pass into fixed capital. There, 
 on the contrary, it has taken its ultimate form. If it loses 
 this, it is only by destruction. It does not intend to assume 
 any higher condition. 
 
 It is in this way that fixed capital receives the mighty 
 annual additions which astonish us on the page of the 
 statistician. The products of last year form a part of 
 
58 PRODUCTION. [book H. 
 
 the houses, ships, railroads, and machinery of the present. 
 The farmer adds something to his stock, or his land, or his 
 buildings. The mechanic widens his shop, and multiplies 
 his tools. The merchant enlarges his business, and extends 
 his connections. The laborer saves something out of his 
 ■wages, beyond the demands of immediate subsistence. It 
 is in this way that fixed capital is increased by the contri- 
 butions of circulating capital. The products of labor are 
 generally in this form ; and it is enabled to pay its tribute 
 without being itself impoverished. 
 
 In popular language, all wealth is divided into real estate 
 and personal property. This distinction, if not scientific, 
 is convenient for occasional use. We must bear in mind, 
 however, that, while all real estate is fixed, all personal 
 property is not circulating capital. Ships, machinery, and 
 many other things not attached to the soil, are personal 
 property, though standing in the category of fixed capi- 
 tal. 
 
 CHAPTER IX. 
 
 THE CO-OPERATION OP CAPITAL (continued). 
 
 Is the distinction between productive and unproductive 
 capital real ? It has been urged by many writeirs at con- 
 siderable length. It is susceptible of much illustration. It 
 involves many important considerations. 
 
 There is, however, no such thing as unproductive capital. 
 There may be misapplied wealth, misused wealth, wasted 
 wealth; but capital reproduces. If any discrimination is 
 necessary between that portion of wealth which is applied 
 successfully to reproduction, and that which is intended for 
 such an end, but fails in attaining it, we may say that capi- 
 tal is that portion of wealth applied to reproduction, which 
 
CHAP. IX.] THE CO-OPEEATION OP CAPITAL. 59 
 
 secures a compensation to its owner. Whatever his inten- 
 tion, if lie uses any part of his wealth without multiplying it, 
 it remains wealth; he has not made it capital; it may, 
 by unproductive use, cease even to be wealth. Wealth 
 put into an enterprise which results in nothing is no more 
 capital than wealth put into a house which burns down, and 
 probably is wealth as little. 
 
 Nay, more : so far as wealth thus applied, while making 
 some return, fails of securing the fair, average remunera- 
 tion of capital, it so far ceases to be capital. It may be 
 wealth merged for a time ; it may be wealth lost for ever : 
 it is not capital. 
 
 A complete illustration of this principle is found in com- 
 mon business. Suppose a man to be possessed of fifty shares 
 of certain stock, par value one hundred dollars. The en- 
 terprise does not succeed ; the stock does not pay adequate 
 dividends ; the value of the shares has sunk to fifty dollars. 
 Would any one say that his capital, so far, was five thou- 
 sand dollars ? Clearly, it is but two thousand five hundred 
 dollars. Half of his investment has been sunk ; half is 
 capital. 
 
 But it has been urged, that much capital is reproductive 
 that does not afibrd a remuneration to its owner. For 
 example : a railroad is projected and built, does not pay ; 
 its stock sinks to nothing ; yet, though it does not pay divi- 
 dends, it improves the industry of the country through 
 wliich it passes. 
 
 We have nothing to do, in the discussion of production, 
 with any such incidental advantages, even if they exist. It 
 may be, that, in the consumption of wealth, we shall find 
 principles explaining the efiects of such an investment. 
 
 In the light of production, however, we can only say, that, 
 in so far as the railroad does not remunerate its owner, it 
 ceases to be capital. So far as it is supposed to promote 
 agriculture or manufactures, and indirectly help the indus- 
 try of the community, it is simply on the level of the 
 
60 PRODUCTION. [book H. 
 
 gratuitous gifts of Nature, — the powers of the wind, rain, 
 and sun, or the courses of streams and valleys ; assisting 
 man unquestionably, but having no value, being neither 
 capital nor wealth. 
 
 A canal that does not pay for its building is no more cap- 
 ital than a river. Both may transport commodities with a 
 great saving of labor, and with great encouragement to pro- 
 duction. The world abounds in natural bridges, causeways, 
 roads, mountain cuts, dikes, &c. If a man, with ill advice, 
 constructs artificial works of this character, which prove 
 failures, he adds just so much to what is gratuitous in the 
 world. Economically speaking, it has ceased to be prop- 
 erty : it has become common. 
 
 CHAPTER X. 
 
 THE co-OPEEATiON OP CAPITAL ^Continued). 
 
 Having considered the two great agents by which all wealth 
 is created, viz. capital and labor, we come to speak of their 
 union, and to inquire under what circumstances it will be 
 most effective. 
 
 1st, When a due proportion of each is found. Labor 
 halts without capital ; capital wastes without labor. Which 
 shall govern the other ? Which shall be the fixed quantity 
 to which the other must conform? Labor, certainly, be- 
 cause it is less variable in amount. It can be diminished or 
 increased but slowly, depending as it does on the propagar 
 tion of the human race ; an element that is determined 
 positively, in the old countries, to a very gradual growth, 
 and, in new countries, has never more than doubled itself 
 in thirty or forty years. Capital, on the contrary, is liable 
 to very rapid fluctuations ; can be accumulated, under favor- 
 able circumstances, with great ease ; and can be wasted or 
 scattered just as fast under different conditions. 
 
CHAP. X.] THE CO-OPERATION OP CAPITAL. 61 
 
 Labor, then, being that which is most restricted in quan- 
 tity, capital must, in order to the highest production, 
 conform to it. There must be as much capital as labor 
 requires, not as much labor as capital needs. We do not 
 put this on the ground of any superior rights of labor. Cap- 
 ital is the labor of the past, and has rights as perfect as that 
 of the present. 
 
 What this proportion should be in any community, it 
 would be impossible to declare beforehand, as it is even 
 impossible to decide precisely what it is in fact. Still less 
 could a proportion be determined which capital should bear 
 to labor in all communities. It is plain that this will vary 
 according to the occupation ; as, for instance, we have seen 
 that in agriculture there cannot be so general application 
 of machinery as in manufactures ; while, on the other hand, 
 because its operations cannot be localized or made inde- 
 pendent of the seasons, the number of tools is thereby 
 greatly increased ; each farmer requiring certain tools, yet 
 not using them to their full capacity at any season, and let- 
 ting them lie idle for months. 
 
 The mechanic, on the other hand, while he uses a greater 
 share of tool-power, has it yet so arranged that the tools lie 
 idle little of the time. 
 
 It is plain that the proportion will vary, also, according 
 to the natural advantages a person or commiinity enjoys. 
 Expensive clothing and shelter are essential to the support 
 of the laborer in some climates ; in others, a piece of cotton 
 cloth and a bamboo hut serve for protection the year round. 
 In some countries, there is required an immense system of 
 pipes and conduits to water the soil, barely to preserve ani- 
 mal life; in others, an equable moisture is preserved the 
 whole twelve months without any application of capital. In 
 some, strongly constructed and carefully connected dikes 
 and levees, f^xtending hundreds of miles, are essential to the 
 use of the land ; others were placed high and dry at first. 
 In some, the soil is so generous with fruit, that, " if you 
 
62 PRODUCTION. [book ii. 
 
 tickle Nature with a hoe, she laughs with a harvest ; " in 
 others, the earth has to be carried in baskets up the sides 
 of the mountains. That which, in one country, would be 
 capital, acquired by labor and haying value, is, in another, 
 a free gift. 
 
 For these and other manifest reasons, the proportion that 
 should exist between labor and capital cannot be deter- 
 mined with any considerable degree of assurance. It is 
 plain that there should be as many tools as workmen need- 
 ing to use them, else some will stand idle. It is equally 
 plain that an excess of tools will not help at all in produc- 
 tion. Capital is the instrument of labor ; and the instru- 
 ment should, of course, be adapted to the power of the 
 laborer and the work to be done. 
 
 By the census of 1860, " the real and personal property 
 of the Union was valued (slaves excluded) at 114,183,000,- 
 000." * A calculation made at the Treasury Department es- 
 timates the products of 1860 at 26.8 per cent of the wealth 
 of the country at that time. Without intending to vouch 
 at all for the correctness of this estimate, it is doubtless 
 approximately true ; and, if so, we shall be surprised, if we 
 look at the large proportion of annual product to the accu- 
 mulated wealth of the nation. If, for the sake of conveni- 
 ence, we call the annual product 25, instead of 26.8 per 
 cent, we find that it amounts to $3,545,750,000 per annum. 
 It certainly appears almost incredible that the total amount 
 of wealth accumulated in the country since its first settle- 
 ment should be only equal to four times the product in 
 1860 ; but such we understand to be the statement. If so, 
 it shows what an immense proportion of all the wealth 
 annually produced is annually consumed. From these fig- 
 ures, too, we may make an estimate of the proportion of the 
 product which belongs to labor and capital. Allowing for 
 the use of the latter ten per cent, in the shape of interest 
 and rent, or use, the amount will then stand thus : — 
 * Eeport of the Secretary of the Treasury, 1865. 
 
CHAP. X.] THE CO-OPERATION OP CAPITAL. 63 
 
 Aggregate national wealth, $14,183,000,000, at 10 per cent, is 
 $1,418,300,000, which deducted from the whole product, as before, 
 of $3,545,750,000, will leave us the share of labor, $2,127,450,000, 
 or aboHt two-thirds of the whole. 
 
 From these statistics, we find that the whole national 
 wealth is only equal to about seven times the gross earnings 
 of labor for a single year. 
 
 We have also an opportunity of comparing the wealth 
 and production of the United States with Great Britain. 
 The estimated wealth of the latter, according to Leone Levi 
 (see his work on Taxation, page 6), is $30,000,000,000, or 
 11000 per capita ; the estimated yearly production, |3,000,- 
 000,000, or $100 per capita. The wealth of the United 
 States, according to the foregoing figuring, and taking the 
 whole population, as in 1860, at 31,443,321, is $451 each ; 
 while the amount of product per capita is $112 each : so 
 that, while Great Britain has more than double the capital, 
 she has less annual product per capita. This is a confirma- 
 tion of the well-known fact, that capital and labor, interest 
 and wages, are at least double in this country what they are 
 in Great Britain. We must not confound the annual pro- 
 duct with the annual accumulation ; the latter being but a 
 small fraction of the former. 
 
 Capital should, at least, increase in a degree correspond- 
 ing to the increase of population. If it does not, labor is 
 crippled, wages fall, and starvation eventually ensues. L-e- 
 land may be quoted as an illustration. Her soil, wrested 
 from the people by conquest at different periods, from the 
 reign of Henry H. to the Battle of the Boyne, has passed into 
 the hands of foreigners, who draw away annually all her 
 surplus products. Population increases from year to year ; 
 but capital does not increase correspondingly. Nay, even 
 the waste of the soil and of implements is not fully and 
 honestly supplied. 
 
 What is the necessary consequence ? Increasing poverty, 
 and ultimate starvation or emiaration. We have said .that 
 
64 PRODUCTION. [book H. 
 
 capital is formed from the annual savings of labor. Pour 
 million pounds a year go from Ireland to absentee land- 
 lords, and eight million pounds are taken away every year 
 in taxes. The Irish people can make no savings. iThere 
 can be no increase of their capital. Starvation or emigra- 
 tion is their inevitable fate. 
 
 Is it possible that there should be a surplus of capital ? 
 
 It is evident that there may become such a surplus, if we 
 assume that production itself does not expand in the mean- 
 time. Given a certain industry, -within defined limits, it 
 may become full and overflowing with its accumulations. 
 By economy and thrift, these multiply fast, and crowd their 
 barriers. Common observation shows this to be often true, 
 with the enterprises of individuals. The excess is trans- 
 ferred to other branches, or withdrawn for personal gratifi- 
 cations. A seamstress, who, by saving, obtains a sewing 
 machine, has a wonderful help in her industry ; but a sec- 
 ond sewing machine would not assist her a single stitch. 
 
 The same is true of special occupations. The limit of 
 profitable production being reached, the amount of capital 
 employed cannot well be increased. The product, being 
 generally in the form of circulating capital, now flows oif 
 to other business, or is turned to purposes of adornment 
 and culture. 
 
 The same is also found triie, though more rarely, of entire 
 communities. States and cities sometimes reach the limits 
 within which they desire to use capital in their traditional 
 industries. They become bankers for the world, or direct 
 their profits to sumptuous houses and works of art. Such 
 were Genoa and Venice under the merchant princes, who, 
 having reached the boundaries of known trade, and brought 
 all its machinery to the perfection of existing art, began, 
 wisely enough at first, that wonderful career of architecture, 
 whose ultimate extravagance exhausted the industry that 
 gave it rise, and passed the commerce of the world to 
 traders who had not become gentlemen. 
 
CHAP. X.] THE CO-OPERATION OF CAPITAL. 65 
 
 It is evident, then, that, within the bounds of present 
 occupations, capital might easily attain a surplus, increasing 
 as it can more rapidly than population. It is productive 
 only as applied by labor ; and therefore its production is 
 limited by the capaciiies of labor. 
 
 But in fact, and on the whole of things, the limits of 
 industry do not remain the same. Wants expand, as we 
 have seen. Capital is relieved from its former employ- 
 ments, and goes on to new efforts. It can hardly multiply 
 fast enough to meet the growing demand. Enterprises 
 spring up over night. Capital hardly breathes, for the 
 work it has to do. 
 
 We believe that the time when capital shall become excess- 
 ive in the world is far beyond the occasions of reasonable 
 calculation. It is so distant at the nearest, so doubtful 
 every way, as not to be a question in a practical science, like 
 political economy. We are not called on to provide for the 
 day when all the continents shall be crowded with wealth 
 that can find no room to work. When wealth ceases to be 
 wanted for capital, it is pretty certain to be consumed in 
 luxury. Yet we are not to anticipate the same rapid pro- 
 gress at all times and everywhere which we see in a new 
 country like our own, full of wants, and stimulated to 
 efforts. Capital has its checks, just as population has. 
 Theoretically, steady increase is certain in both : practi- 
 cally, each meets obstacles ; is lost here, and checked there. 
 The forces which operate to stay it may be briefly summed 
 up as follows : a certain disinclination of capital to emi- 
 grate ; the lessening power of personal supervision from a 
 distance ; and a distrust in the administration of foreign 
 laws. 
 
 Another constant force operating against the increase of 
 capital is found in those wants of man which do not look 
 to reproduction. The desire to spend is just as truly in 
 human nature as the desire to earn, and can be as accu- 
 rately calculated. Hence it follows, that, as the desire to 
 
 6 
 
66 PRODUCTION". [book n. 
 
 earn loses power by capital becoming plenty and cheap, the 
 desire to spend gains force. A man is not nearly as likely 
 to use his money for personal gratification when he can get 
 eight per cent for it, as when he can get only four. 
 
 Yet, for all these obstacles, capital^when it has supplied 
 the demands of labor in its own vicinity, has gone abroad to 
 colonize. It has carried on great wars in which it had no 
 interest, has developed the resources of infant states, and 
 saved old nations tottering to their fall. Capital has gone 
 round the world in the same boat with the inspired dis- 
 coverer. It watched with Columbus the weeds drifting 
 from an unknown land ; it " stared at the Pacific " by the 
 side of stout Cortes ; it debarked with the gallant Cook, nor 
 was it frightened at the savage violence which took his life. 
 Like Csesar, it would not wait for the boat to come to land. 
 It freighted vessels for countries not named ; it sent fleets 
 to ports never visited by civilized man. 
 
 CHAPTEE XI. 
 
 THE CO-OPERATION OP CAPITAL (concludecT) . 
 
 2d, The union of capital and labor will be most effect- 
 ive, when each is sure of its just reward. If the rights of 
 man as a holder of property are sacred, and his rights as 
 laborer equally so, the greatest motive to production can 
 be secured. If otherwise, the creation of wealth will be 
 restricted. Men will not work or save, unless sure of their 
 reward. 
 
 There cannot come, out of the earth or heaven, a blow that 
 levels all industry in the dust so quickly and hopelessly as 
 wrong done between labor and capital.* Pestilence, drouth, 
 
 * It will be recollected that production carried on by slaves is done wholly 
 by capital: the producer being a chattel, the whole product is that of capital. 
 
CHAP. XI.] THE CO-OPERATION OF CAPITAL. 67 
 
 or floods do not so thoroughly and permanently prostrate 
 the strength and hopes of a country as a breath of suspicion 
 on the union of the two great agents of production. Then 
 comes an antagonism, indeed, fatal to both. There is 
 hardly any climate "or soil so unpropitious that man will 
 not struggle on, earning his livelihood with much endu- 
 rance, and laying something by for the future. There is 
 hardly aliy government so rigorous as wholly to suppress 
 the energy of its people. There is hardly any taxation so 
 exhaustive that something still cannot be got out of Nature 
 for man. In all these difficulties, the motive to exertion 
 is not destroyed. But if foul play oi- legal fraud comes 
 between labor or capital and their reward, the very life of 
 industry ceases at the thought. The spring of work is 
 broken. Its admirable parts and its cunning mechanism 
 are useless, motionless. The exactions and oppressions of 
 the old regime had not so broken the spirit of France, but 
 that her population and her wealth went on increasing, 
 slowly, painfully, but constantly, certainly. The Revolu- 
 tion came ; the Convention questioned the rights of prop- 
 erty, confiscated the estates of nobles, and sequestered the 
 entire endowment of the Church. Half this would have 
 been enough for ruin. The industry of France dropped 
 where it stood. In a few months, the Convention was devis- 
 ing schemes by which work should be provided by the State 
 for all its citizens. Capital had fled to the dark places of 
 the kingdom. Labor was helpless, crippled, starving. What 
 had wrought all this ? The violation of rights. Property 
 was discredited ; capital outlawed ; labor prostrate. 
 
 Labor is the first to suffer. Its wants are instant, imme- 
 diate, vital. Capital, in such economical convulsions, has 
 the privilege of leviathan. It can dive down to the depths, 
 and give up breathing for a while. If labor goes under, it 
 dies. 
 
 It is familiar to every reader of history how the brutal 
 rapacity of the Spanish conquerors terrified the nations of 
 
68 PEODUCTiON. [book n. 
 
 Peru aud the Antilles, and shut up the treasures of the New 
 World in a secrecy that even torture could not break. The 
 msdom of the man that owned the hen that laid the golden 
 egg has been embodied a thousand times in the acts of gov- 
 ernment. The result is never the enriching of one ; it is 
 ever the ruin of all. Wealth itself becomes valueless, since 
 it has no security in possession, and only excites the cupid- 
 ity of the common tyrant. • 
 
 If such is admitted to be the effect of occasional invasions 
 of property rights, either in 'labor or capital, we shall be 
 prepared to explain the barrenness of many countries the 
 oldest and best endowed of the world. 
 
 The dreariness of Asia rises in eloquent vindication of 
 the harmonies of natural law. A perfidious and cruel des- 
 potism has there made property undesirable. Man finds 
 safety only in poverty and degradation. The Jewish is per- 
 haps the only people that has pursued wealth steadily and 
 unremittingly, in spite of injustice and robbery. 
 
 3d, The union of labor and capital is most effective when 
 the latter is appropriately distributed. Capital creates no 
 values by its own powers. It must be joined with labor. 
 Somebody must use it, bring his personal energies to bear 
 upon it, set it in motion, watch its operations, work with it. 
 The farmer, the merchant, the manufacturer, must each 
 bestow constant attention on the capital he employs, or 
 no good will come of it. The more intense and vigilant 
 the application, the more certain the return, the larger the 
 profits. Tliis is a well-known practical principle ; and from 
 it follows that the point will be reached where an individual 
 has so much capital under his control that his entire efforts, 
 by himself and those working under his direction, are not 
 sufiicient to secure its greatest effectiveness. Of course, in 
 such a case, it is economically right that the excess of capi- 
 tal should be transferred to some other position, where its 
 full productiveness can be obtained. 
 
 Such limitations are highly beneficial to society ; for, were 
 
CHAP. XI.] THE CO-OPEEATION OF CAPITAL. 69 
 
 there do restrictions of this kind, were capital in vast aggre- 
 gations equally efficient as in smaller bodies, the business 
 of the world might be controlled, and the profits appropri- 
 ated, by a very few persons. 
 
 The point is of great importance. Such a concentration 
 of capital as effects the highest division of labor, and the 
 fittest application of machinery, is desirable for the interest 
 of all ; and for those purposes, and up to such a degree, cap- 
 ital so concentrated has a wonderful power in production. 
 But its aggregation, merely, is a hinderance rather than a 
 help. After the two advantages spoken of above are once 
 secured, capital becomes potent and beneficial just in pro- 
 portion as it is distributed. By such distribution, it comes 
 closer to labor and natural advantages. It makes use of 
 various powers ; it defends itself better in emergencies ; it 
 adapts itself more shrewdly to peculiarities of circumstance ; 
 it has a keener intelligence of the public wants ; it com- 
 mands a greater amount of executive talent ; it superin- 
 tends its employSs with more accuracy ; it saves the pieces, 
 keeps machinery oiled, looks after tools. 
 
 The man who is to gain by the work is brought nearer to 
 it. He is well served, because he serves himself. 
 
 For a long time, it was a favorite belief with the Ameri- 
 can people, that corporations were the most efficient agents 
 of production, even where the work was not so great as to 
 be beyond individual enterprise. The older wisdom of the 
 country turns more and more to the smaller establishments, 
 which secure full, interested personal supervision of labor. 
 The English economy has always preferred these, except 
 where the operations were beyond the reach of ordinary 
 capital. 
 
 4th, The imion of capital and labor is most effective 
 where there is the greatest freedom of industry. 
 
 Wlienever a population is sufficiently intelligent to under- 
 stand its own interests, it should be left to direct its own 
 labors. Its industry should never be interfered with by 
 
70 PRODUCTION. [book II. 
 
 goveinment. In all countries ■which may be considered 
 as enlightened or civilized, like the European and Anglo- 
 American, the people have no occasion to look to govern- 
 ment for direction as to the business they shall engage in, 
 or the manner in -which they shall conduct it. Every 
 branch of industry, in a normal state of society, grows spon- 
 taneously out of the wants and capacities of the people. 
 Tillage, manufacturers, commerce, fisheries, spring up in 
 the places to which they are best adapted. They can never 
 be advantageously forced into being, or maintained by gov- 
 ernmental authority and patronage. Every plant will thrive 
 best in its own soil. Soils and climates vary : productions 
 will differ in consequence. 
 
 But our immediate topic relates, not to acts of govern- 
 ment, based on a distinct purpose to change the general 
 course of national industry, — which will be more appro- 
 priately discussed elsewhere, — but rather to those which 
 impose minor restrictions ; directing the modes of labor, 
 moulding the forms of capital, and prescribing the condi- 
 tions of their union. AU limitations of the rights and 
 powers of capital or labor, not required by the public mo- 
 rality or security, are useless and mischievous. 
 
 No lawmaker can gather and express the desires of his 
 people so accurately and seasonably as they are shown in the 
 market demand ; or set in train and carry on their efforts, 
 with myriad instrumentalities, to that end, so savingly and 
 earnesytly as is done by interested, educated capitalists ; or 
 present satisfactions so fully and happily as is done by the 
 merchant whose fortune is to answer for his appreciation of 
 the public wants. 
 
 The work of the politician in this behalf is gratuitous 
 and impertinent. It is an indignity to industry which will 
 be revenged upon the people. Capital and labor should be 
 mobilized as far as possible ; free to collect or divide, to 
 turn to the right or to the left ; free in gift, pvlrchase, and 
 heritage. On the contrary, the effort of legislation has gen- 
 
CHAP. XII.] ECONOMIC ClfLTUEE. 71 
 
 erally been to impose checks and limitations and hinder- 
 ances everywhere. 
 
 We have thus discussed at length the union of capital 
 and labor ; passing close by the great practical questions of 
 protection and entail, but reserving them, the one to the 
 division of " Exchange," the other to that of " Distribu- 
 tion." 
 
 CHAPTER XII. 
 
 ECONOMIC OULTUEB. 
 
 We shall best define the field of this agency by discussing 
 one of the most severely contested questions of political 
 economy, viz. : — 
 
 What is the distinction between productive and unpro- 
 ductive labor ? 
 
 The form of this question is unfortunate, and has caused 
 the greater part of the confusion prevailing on the subject. 
 In itself, it is of slight importance ; but, in the course of the 
 discussion, a very grave matter has become involved with it, 
 helping the understanding of neither. 
 
 Dr. Adam Smith insisted strongly on the distinction 
 between productive and unproductive laborers. In the 
 former class he embraced all those who produce material 
 objects, which are generally admitted to be of use and bene- 
 fit to mankind. Such, clearly, are farmers, mechanics, and 
 merchants, in the general application of their industry. Of 
 unproductive laborers, he says, "In this class, must be 
 ranked some of the greatest and most important, and some 
 of the most frivolous professions, — churchmen, lawyers, phy- 
 sicians, men of letters of all kinds, players, buffoons, musi- 
 cians, operarsingers, operardancers, &c." This somewhat 
 extended list by Dr. Smith has suffered curtailment by 
 almost all writers since. The distiaction between physical 
 
72 PEODacTioN. [book n. 
 
 and mental labor, between direct and indirect agency in 
 production, could not long be permitted to remain as found- 
 ing a distinction between productive and unproductive labor. 
 It is clear that the physician who preserves the life and 
 strength of the workman on the farm or in the shop is 
 equally productive with him ; and that the lawyer by whom 
 transfers of property are effected, and personal safety 
 secured, is equally productive with the owner or the over- 
 seer. 
 
 One occupation after another, " important or frivolous," 
 was withdrawn from the unproductive class, as prejudices 
 disappeared in the light of a better philosophy, and as the 
 part of each in the great economy became manifest; so 
 that now little is left of that sweeping condemnation of un- 
 productiveness passed by the father of the science upon the 
 learned and artistic professions. Yet there is a residuum, 
 which it is our business to clear away. 
 
 All labor, in the economic sense, is productive. The only 
 office of labor is production. We do not, in either popular 
 or scientific language, call by that name the efforts a man 
 makes to do mischief, to dig away a dam or girdle trees, 
 though he may devote his utmost energies to such destruc- 
 tion. Nor do we call that labor which does not seek a 
 reward, whether it be play, though of the hardest kind, or 
 gratuitous service, however useful to the recipient. No 
 more should we call by the name of labor that misdirected 
 or mistaken effort which fails of its reward. 
 
 Labor is defined as the efforts of man directed to the sat- 
 isfaction of his desires. Every effort that is not so directed 
 is a shot thrown away. It is wasted power, not labor. If I 
 spend a twelvemonth in the invention of a machine, which, 
 when completed, is of no sort of use to any one, and for 
 which I can get nothing, my exertions have been unproduc- 
 tive. I have worked enough for a reward ; but, as it proved, 
 my work was not directed to the satisfaction of human 
 desires. So of expenditures to improve land, which in no 
 
CHAP. XII.] ECONOMIC CULTURE. 73 
 
 ■way enhance its fertility. There is a great deal of this kind 
 of effort : perhaps much is inevitable. It is waste, not labor. 
 
 But it may be urged, Suppose a man works for months 
 preparing ground, planting, and cultivating till , his crop is 
 nearly ready ; but a jBlood comes, and carries all off from 
 before his eyes, and leaves him nothing "to show for what he 
 has done. Was there not labor bestowed ? Certainly ; and 
 the labor was productive, and it had its reward, not the less 
 that each individual effort did not carry off its result in a 
 complete form at the time, but waited for the harvest. 
 Value was produced at every stroke of the shovel — palp- 
 able, appreciable, marketable value — just as truly as if it had 
 been taken home at the close of each day. Labor had been 
 there, and received its recompense ; but the flood made a 
 robbery of it all. Not the less was there labor, not the less 
 was there production, not the less was there value. 
 
 In this view, we see that all labor is productive. 
 
 But it may be asked, Does it make no difference to the 
 community what objects of labor are selected, and by what 
 means these objects are attained ? Certainly ; and, in this 
 inquiry, we reach the field of economic culture, which is 
 that education of the desires, that instruction of efforts, 
 and that use of satisfactions, which will unite to bring out 
 desires, efforts, and satisfactions in ever-increasing circles 
 of industry. Here arise, properly, all the important ques- 
 tions which were formerly discussed under the head of pro- 
 ductive or unproductive labor. 
 
 Now it can be asked with effect, whether the operardancer, 
 the physician, and the churchman are useful ; whether they 
 expand the desires, instruct the efforts, and dispose the sat- 
 isfactions of men to a constantly enlarging industry. 
 
 Let us inquire closely. It wiU be readily granted, that 
 these and other similar classes may have influence upon, 
 or power in, production in two forms, either primary or 
 secondary. 
 
74 PRODUCTION. [book II. 
 
 Primary, where a direct part is taken, an active agency 
 maintained, in the creation of values. 
 
 Secondary, when an effect is produced, which, by modify- 
 ing human capacities or desires, however indirectly and in 
 whatever degree, brings about ultimately a greater creation 
 of values. 
 
 For example : that great class which, in various offices, 
 maintains civil justice and order, has indisputably a primary 
 influence or power by rendering possible the present crea- 
 tion of values, and by watcliing over their keeping and 
 transfer. Government and the law are great agencies of 
 production. Without them, however desirous people might 
 be of wealth, and however capable of effort, little or noth- 
 ing could be produced. Robbery and violence would scatter 
 and destroy what already exists, and a universal waste 
 would speedily follow. But they have, also, a secondary 
 power or influence ; for it is found tliat the maintenance of 
 peace and property rights awakens new and increasing 
 desires, widens the horizon of ambition, and stimulates 
 everywhere to honest industry. Civil security is an educa- 
 tion fbr wealth, an economic culture. 
 
 Then that great class which teaches has both a primary 
 and a secondary power and influence, — primary, in that it 
 gives instruction to present labor, as it is struggling to-day 
 with the difficulties of production ; explains chemical and 
 mechanical laws ; and establishes the alphabet, the written 
 letter, electric communication, the rules of book-keeping, 
 and the art of navigation : secondary, in that the progress 
 of mind brings it infallibly to higher stations of aspiration 
 and activity. 
 
 The work of the physician is almost entirely of the pri- 
 mary character. He saves the lives of producers, and 
 preserves their strength to labor. This secondary power or 
 influence of his profession, if such exists, is distant and 
 trivial. 
 
 On the other hand, we shall add nothing to the dignity of 
 
CHAP. XII.] ECONOMIC CULTURE. 75 
 
 the churchman or priest or minister, by attributing to him 
 any direct power in production. Yet his part may be no 
 less important because secondary. The influence of religion 
 is hardly less marked than that of race, in the creation of 
 values. K its influence tend to improve the morals, and 
 thus aid in the preservation of public order ; to elevate the 
 mind, and thus give it nobler and higher aspirations, and a 
 better appreciation of the right uses of wealth, — it must be 
 a great auxiliary to its production. 
 
 That class of agencies which we have designated as pri- 
 mary comes within the view of production. The class of 
 secondary agencies belongs to the department of consump- 
 tion, which treats of the use of wealth, so that it may bring 
 forth more wealth. 
 
 Here, in economic culture, is the point at which pro- 
 duction, passing by exchange and distribution, comes into 
 relation with consumption. In pure theory, production 
 and consumption complete the economic good, which is 
 reproduction. The harvest which is gained in production 
 is sown or wasted, as the case may be, in consumption, to 
 re-appear in a more abounding harvest, or in barrenness, 
 in reproduction. Practically, however, we have to intro- 
 duce the laws of exchange and distribution, as the agencies 
 by wliich production is finished, and^ consumption made 
 possible. 
 
 We have used metaphors drawn from the chemistry of 
 agriculture to express the significance of economic culture. * 
 To illustrate from mechanics, we should say that it treats 
 of the re-action of labor. No force can re-act except from 
 something external. Labor is a force directed to an object. 
 The energy with which it is to move in a new direction 
 will depend on the temper and shape of the body on which 
 it impinges. Reproduction, then, is the rebpund of pro- 
 duction from consumption. 
 
 K labor expends itself on objects that do not stimulate to 
 further efibrts or serve as instruments to further produc- 
 
76 PRODUCTION. [book n. 
 
 tion, but rather debauch the energies and corrupt the 
 faculties, it is evident that reproduction will be lessened 
 and debased, and the whole course of industry be down- 
 ward. 
 
 If, on the contrary, labor expends itself on objects that 
 present fresh and urgent desires, and excite to renewed 
 activities, it is evident that the course of production is up- 
 ward ; and the people will rise economically, with a rapidity 
 and force, such as signalized the career, in the fourteenth 
 century, of Florence ; in the seventeenth, of Holland ; in 
 the eighteenth, of England ; in the nineteenth, of the United 
 States. 
 
BOOK III. 
 EXCHANGE. 
 
 PART FIRST.— TRADE. 
 CHAPTER I. 
 
 THE PRINCIPLES OP TRADE. 
 
 Exchange has its origin from the division of labor; aad 
 the further that division is carried, the greater extension is 
 given to exchange. If each man supphed his own wants 
 by his own work, trade could not exist. But, so far from 
 this being the rule of industrial society, the article to which 
 a man devotes all his Ikbor may be such as he never used, 
 perhaps never saw used. 
 
 Exchange is that agency which brings a man what he 
 wants for what he does not want, which furnishes gratifica- 
 tion for his desires out of objects which are adapted to 
 gratify few or none of his desires. 
 
 As the division of labor begins in the most savage state, 
 so exchange is known there. One goes into the woods for 
 venison; another, to the river for fish. At night, they 
 divide. Half the fish is given for half the meat. Perhaps 
 other parties are introduced. Instead of exchanging the 
 whole of their fish or venison, each of the two gives a por- 
 tion for a trinket, and another portion to the medicine man 
 for herbs which he alone knows how to collect. "We have 
 here brought in exchange, not only in regard to the plain 
 necessaries of life, but to the services of science and to lux- 
 uries. Yet all this occurs in the daily life of the savage 
 
 [771 
 
78 EXCHANGE. [BOOK III. 
 
 Only one went for venison : four have venison now. Only 
 one went fishing : four have fish to eat. The hunter and the 
 fisherman have trinkets and medicine they know not how to 
 get. The doctor and the cripple who made the trinket have 
 fish and venison they could not procure for themselves. 
 
 This is the idea of exchange. It extends first to the 
 industry of a hamlet ; it enlarges to take in the entire com- 
 munity ; it remains through all the successive modifications 
 and refinements of labor and accumulations of capital. It 
 goes abroad ; it crosses rivers, then narrow seas, then the 
 broad ocean ; hunting out everywhere what the seller wants, 
 carrying everywhere what the buyer wants. The word 
 " exchange" expresses the economical principle of all this: 
 its office is the creation and apportionment of wealth. 
 
 " Trade " is a technical term for the sum of all actual 
 exchanges. It is exchange realized. 
 
 There are several kinds of trade : — 
 
 1st, Domestic or home trade, which includes what is 
 commonly known as the coasting trade. 
 
 2d, Carrying trade, in which the carriers have no inter- 
 est in the commodities beyond their transportation. 
 
 3d, Foreign or international trade, to which the word 
 " commerce " is generally applied. 
 
 These kinds of trade are subdivided into the wholesale, 
 retail, and jobbing trades ; and specialized indefinitely as 
 the iron, cotton, shoe trades, &c. 
 
 Whence does trade arise ? 
 
 From the desire which individuals and communities have 
 for each other's products. It is evident that this is essen- 
 tial to trade ; since, if men or peoples produced by them- 
 selves all they wished for, there could, as we have said, be 
 no occasion for an exchange. It is evident, also, that this 
 is sufficient for trade, since it supplies all the motive that 
 can exist for an exchange. 
 
 To what extent can trade be carried ? 
 
 To the extent of the surplus production of each individ- 
 
CHAP. I ] THE PRINCIPLES OP TRADE. 79 
 
 iial or nation. Given tlie aggregate surplus products of all 
 the people of a country, severally, and we have the amount 
 of its entire trade. Given the aggregate surplus products of' 
 the people collectively, and we have the amount of its, foreign 
 trade. 
 
 Elustration : Suppose a community of one hundred indi- 
 viduals, each producing three hundred dollars' worth a year, 
 aggregate revenue, thirty thousand dollars. If each per- 
 son desires to consume only one hundred dollars' worth of 
 his own articles, he will have left for trade two hundred 
 dollars' worth, — aggregate in the community, twenty thou- 
 sand dollars. But if, after exchanging around with his 
 neighbors, it is found that each member of the community 
 has one hundred dollars which he does not wish to part with 
 for any thing he can get at home, we have the aggregate 
 surplus available for foreign trade, ten thousand dollars. 
 
 Ordinarily, individuals or peoples do not wish to part 
 with all their products. Ohio, for example, does not wish 
 to dispose of all her wheat. A share must be kept for 
 home consumption. The surplus will be exchanged for other 
 commodities abroad. 
 
 Exactly the amount to be so retained will depend, within 
 certain limits, on the degree of disposability. The more the 
 wheat is in demand, — that is, the more of desirable things 
 are offered for it, — the less will the producers be inclined to 
 retain it ; the greater effort will they make to dispense with 
 its use themselves, or substitute other things for it at home. 
 But this result will be limited by the necessities of the peo- 
 ple. It cannot be calculated on to increase very largely the 
 amount available for trade. 
 
 It will, of course, be remarked, that the amount of sur- 
 plus, in particular countries, will vary with the character of 
 their products. We can suppose an entire people engaged 
 in industry, of which they make no use themselves. In 
 such a case, their trade would be to the amount of their 
 whole production and their whole consumption. In fact, 
 
80 EXCHANGE. [BOOK III, 
 
 this condition of things is never realized. The nearer it is 
 approached, the more general the trade. The more vital 
 and primitive the articles produced, the greater will be the 
 share consumed at home. Ohio has no such trade, propor- 
 tionately, as Ehode Island; not necessarily because the 
 latter produces more, but that she produces more of what 
 she does not want. The people of Birmingham consume 
 but an infinitesimal part of the articles they produce. 
 
 We have here the principle that the wealth of a people is 
 not determined by the extent of its trade. 
 
 We have said that the trade of a community, whose whole 
 production was exchanged, would be equal to its production 
 and consumption. It would be so, but that would be deter- 
 mined by its production only. It would be this alone which 
 it would carry in its hands into the markets of the world, 
 and on this would depend what it should get there. 
 
 What persons or communities will trade most largely 
 with each other ? 
 
 Other things equal, those whose productions differ most. 
 
 Two tailors will not traffic much together. Both will 
 trade with the shoemaker and hatter. Indiana will not trade 
 extensively with Illinois ; but both will trade largely with 
 Louisiana and Massachusetts. Russia and Sweden will 
 make very few exchanges, because their productions are as 
 much alike. Both wiU deal largely with the West Indies. 
 
 What determines the character and kind of products each 
 country will afford ? 
 
 1st, Soil and physical conformation. One will be a wheat- 
 raising, another a wool-growing country. Each will spon- 
 taneously turn its industry in that direction where it will 
 produce the greatest values with the least outlay of labor 
 and capital. This must be where the natural adaptations 
 of the land are followed. This operates, in respect to na- 
 tions, precisely as we see it in smaller communities, where 
 one farm is especially fitted for grazing, another for tillage, 
 another for timber. 
 
CHAP. I.] THE PEINCIPLES OP TRADE. 81 
 
 2d, Climate. From the Arctic regions to the tropics, 
 from Siberia to Hindostan, is infinite Tariety, both of heat 
 and moisture. Some, countries are deluged with twenty-five 
 feet of water in a season ; * others parch the year round 
 with ten inches. Some are locked with frost eight months 
 in twelve ; others are open the year round. It is evident 
 that the conditions which are admitted to have given rise to 
 the differing species of fruits and grains and vegetables will 
 control their increase. 
 
 3d, Social condition. "Take, for examples, England and 
 Brazil, — one distinguished for the high moral and mental 
 endowments of its citizens ; the other having a heteroge- 
 neous population, in a poor and semi-barbarous condition. 
 The latter would, plainly, seek to enrich themselves from 
 the spontaneous yield of the soil, from the wild wealth of the 
 pampas and the forests, from the precious ores and stones 
 along their streams and in natural caves, rather than till 
 the ground to the fertility of a garden, sink shafts into the 
 solid rock, cast up highways upon the rivers, and work iron 
 into the needle and lancet. 
 
 4th, Difference of race. 
 
 This is additional to differences of social condition, and 
 looks to those peculiarities of industrial character in the 
 races of man, which are no less distinguishable than their 
 peculiarities of stature, complexion, and feature. These do 
 not affect the degi'ee of production only, as greater or less, 
 but multiply the fashions, and complete the varieties of 
 wealth. 
 
 All the causes here enumerated conspire to give a great 
 extent and activity to trade. It is m the commerce of the 
 world that we have illustrated — 
 
 THE TEBRITOEIAL DIVISION OP LABOR. 
 
 The Chinese raise tea and silk. This is their specialty, 
 
 * The mountains south of Bombay receive three hundred and twenty 
 inches of water a year, mostly in three months. 
 
 6 
 
82. EXCHANGE, [BOOK HI. 
 
 the form of industry to them most profitable. The Cubans 
 produce sugar; and the Sicilians, oranges, for the same rea- 
 son. England excels all nations in useful manufactures; 
 France, in those of taste and beauty; while the United 
 States has its great industrial power in cotton and wheat. 
 
 Under the operation of natural laws, each country employs 
 and disposes of its labor, without any arbitrary enactments, in 
 just the way most congenial and profitable ; in other words, 
 in that way which develops its greatest industrial power, 
 and secures the largest possible production. 
 
 Suppose, on the contrary, that we of the United States 
 should determine to raise our own oranges. We could do 
 so, and create a supply equal to the demand. The cost of 
 one orange would probably be equal to the cost of raising a 
 bushel of wheat, which would procure for us abroad one 
 hundred oranges. The loss would be equal to ninety-nine 
 out of every hundred oranges. We should force a cer- 
 tain part of the labor engaged in other pursuits into the 
 business of raising oranges. The supply would be fully 
 equal to the demand ; for, at the rate of a bushel of wheat 
 for each orange, few oranges would be wanted. The people 
 would lose the enjoyment of ninety-nine out of every hun- 
 dred oranges they would otherwise consume, and could just 
 as well have, if allowed to pay for them in wheat. 
 
 If we turn to the advantages alleged * of the division of 
 labor individually, we shall find that each one of them holds 
 good in the application of the principle territorially. Indeed, 
 it may be assumed that it is here more active and efficient, 
 since the differences of communities range higher than 
 those of individuals. On the other hand, the limitations 
 prescribed are indefinitely removed when we come to the 
 field of national industry ; and the disadvantages disappear 
 altogether. That would be a bold philosophy that should 
 declare a people one-sided which does not produce every 
 thing it consumes. So far from being considered a defect, 
 * See Production, ch. It. et seq. 
 
CHAP. I.] THE PEINCIPLES OP TRADE. 83 
 
 that races or nationalities should deyelop very strongly in 
 special directions, it is highly desirable. "While it takes 
 nothing from the individual excellence, each contributes 
 "with a greater generosity to the completeness of the whole. 
 
 From these general considerations of trade, we deduce 
 the following principles : — 
 
 1st, That individuals must produce a surplus of their own 
 commodities to Tiave an opportunity to trade, and must 
 trade to make it an object to produce a surplus. Wants 
 create wealth, and wealth creates wants. 
 
 2d, That every nation is interested in the production of 
 every other nation. Any thing which impedes the produc- 
 tion of any individual or community injures the trade of 
 the world. Such causes, for example, are pestilence, as the 
 cholera, yellow-fever, and plague ; the convulsions of na- 
 ture, as earthquakes and inundations ; war, as in the case 
 of the late war in India, which sensibly affected the trade of 
 the world, and, still more striking and recent, in the case 
 of the great Rebellion in the United States, which was felt, 
 it may almost be said, by every human being on the globe. 
 Not a consumer of cotton, high or low, civilized or savage, 
 but suffered in consequence. 
 
 3d, That this mutual interest exists between any two 
 nations, whether they have direct commercial intercourse 
 or not. For example : there may be a German principality 
 that purchases nothing of the United States, yet it may pur- 
 chase largely of the cotton yarn of England. That causes 
 a demand for American cotton ; that benefits the Southern 
 States ; that, in turn, helps the trade of the North ; and 
 that, again, the producers of the West, on whom the North 
 depends for agricultural supplies. 
 
 By such ramifications, exchange extends itself through 
 the world. 
 
 4th, Since, by the laws of trade, those countries which lie' 
 most remote from each other, and are most unlike in soil, 
 climate, civilization, and ethnical characteristics, are mos- 
 
84 EXCHANGE. [BOOK m. 
 
 neaily united by commerce, it is shown, that, by this terri- 
 torial diyision ' of labor, the most extended production and 
 the most beneficent distribution of all the commodities 
 of the earth are secured ; and that, if any nation creates an 
 article of peculiar desirableness, it is placed within the 
 reach of all. Every invention or improvement becomes, in 
 this way, the common property of mankind. 
 
 5th, That commerce harmonizes all differences in the 
 industry of the world. 
 
 " AH Nature's difference makes all Nature's peace.'' 
 
 Any natural impediment or artificial obstruction to the 
 intercourse of nations, in fact, so far injures the production 
 and trade of all. 
 
 " A commercial nation," says Sir James Mackintosh, 
 " has the same interest in the wealth of her neighbors that 
 a tradesman has in the wealth of his customers. . . . Not an 
 acre of land has been brought into cultivation in the wilds 
 of Siberia, or on the shores of the Mississippi, which has 
 not widened the market for English industry." 
 
 6th, That commerce diminishes the number of wars, and 
 shortens their duration. 
 
 There may have been a time when the galleons of Spain 
 and the Indiaman of England bringing home the stored 
 treasures of barbarism influenced the cupidity of govern- 
 ments to the point of war. But as commerce abandoned 
 the spoils of conquest for the honest industry of the world, 
 as its field became widened, its connections more intimate, 
 its benefits more popular, the temptation to plunder and 
 violence died away. The advantages of a peaceful partici- 
 'pation in trade are greater to every people, even those least 
 maritime, than all that could be hoped from the ravages of 
 a Drake or a Doria. The whole interest of commerce is 
 now ftie inalienable ally of peace. It has not been found 
 Bufi&cient, thus far, to prevent all wars. But it enters into 
 negotiations, tempers grievances, and delays violence. And 
 
CHAP, n.] OBSTRUCTIONS TO TRADE. 85 
 
 when, in spite of its admonitions, war is declared and waged, 
 it remains still an argument for peaci3 more impressive and 
 influential by reason of the distresses and inconveniences 
 attending the loss of accustomed traffic. 
 
 CHAPTER II. 
 
 OBSTRUCTIONS TO TRADE. 
 
 These are of three kinds : — 
 
 First, physical, which are natural ; second, social, which 
 are incidental ; third, legal, which are conventional. 
 
 Looking at these in the light of what has gone before, we 
 shall he inclined to regard them as so much imposed as 
 a burden on industry, shackling the movements of capital 
 and labor. 
 
 But they have been presented in another aspect, as if 
 there were compensations for this hinderance of spontane- 
 ous trade ; and to this, also, we will attend. 
 
 Inasmuch, therefore, as these obstructions to trade have 
 been regarded as the protection of local industry, and on that 
 account have been received with favor by scientific men and 
 rulers, we shall speak of them as different forms of protec- 
 tion. The propriety of the term " protection " we shall 
 discuss at another point. 
 
 1st, Physical protection. ' 
 
 This results from obstacles which Nature interposes. 
 They may all be expressed by the single term " location." 
 The wheat of Vermont has a protection in its own markets, 
 as against the wheat of Illinois, to the extent of all the cost 
 of transportation from the latter to the former State. If 
 the cost of transportation and attendant charges are fifty 
 cents per biishel, then the farmers of Vermont can, as far 
 as competition from Illinois is concerned, continue to sell 
 
86 EXCHANGE. [BOOK HI. 
 
 their wheat until they reach a price fifty cents per bushel 
 greater than they coul(J obtain but for this. All this may 
 not much enrich the farmer ; for the greater price may be 
 rendered necessary by the additional labor required. But, 
 at any rate, it assists him in selling just so much. On the 
 other hand, the mechanic of Vermont must pay more, up 
 to fifty cents, for a bushel of wheat. The protection of the 
 farmer, though a natural one, is at the expense of the con- 
 sumer. The mechanic, in so far as his bread is concerned, is 
 placed at a disadvantage in production, in competition with 
 those who can purchase their wheat at the prices of Illinois. 
 It costs him more to live : he must, therefore, charge more 
 for his wares, and, of course, sell less. 
 
 If, now, the introduction of railroads reduces the cost of 
 transportation to twenty-five cents, the Vermont farmers 
 have lost half their prptection. The consequence of this 
 will naturally be, that some of that class in Vermont wUl 
 become mechanics, because the latter class has gained what 
 the former has lost, by the reduction in the cost of transpor- 
 tation. Any thing which reduces the price of agricultural 
 products has a tendency to increase aU other branches of 
 production. 
 
 This protection amounts generally to an entire prohibition 
 of the foreign article in the case of certain manufactures, 
 such as houses, barns, stores, &c., which might often be 
 erected more conveniently and cheaply than in the country 
 where they are to be occupied ; but the cost of transporta- 
 tion puts it out of the question, except in cases where the 
 local facilities are very crude and insufficient. There have 
 been great numbers of houses sent out by ship to California 
 and Australia ; and there are, even now, remaining in the 
 eastern portion of the United States, houses which were 
 framed in the old world, or which are made of brick import- 
 ed from England. 
 
 Yet, looking to the whole of things, we find that this class 
 of protection builds up, in every country, an amount of 
 
CHAP. II.] OBSTKUCTIONS TO TRADE. 87 
 
 manufacturing and mining industry, often amounting to 
 one-half of its consumption in that line. 
 
 Such a protection to industry being in the nature of 
 things, and, in fact, being the very condition of material 
 existence, we have no more call to inquire whether it is 
 desirable than we have to ask the same concerning weight. 
 It exists, and must continue. The effect of it may be less- 
 ened by man's contrivances, but can never be annihilated. 
 Those very contrivances will be among the effects of it. 
 
 In a certain sense, and to a degree, such obstructions, 
 even when apparently removed, still continue to exert a pro- 
 tection on local industry. Suppose, for example, a swamp, 
 near a certain town, requires a detour of many miles for 
 all passengers and freight. It is a natural protection on 
 the industry of the place. If, now, a causeway is con- 
 structed or the swamp drained, so that the difficulty of 
 travel is avoided, the protection is removed, unless, indeed, 
 it exists in the form of the debt incurred for drainage. In 
 either case, the people are relieved of a certain amount of 
 labor once indispensable ; and, though their " protection " 
 has been removed, their industry has been greatly bene- 
 fited. 
 
 In the prodigious enterprises undertaken by science and 
 labor for removing, in every direction, obstacles to uninter- 
 rupted communication, do we not find the best practical 
 commentary on all artificial and conventional arrangements 
 for putting countries further apart by imposing restrictions 
 on conmierce ? If the approach of foreign industry is unde- 
 sirable, it is an economic curse, that the steamship and the 
 Indiaman have replaced the galleys of Columbus or the 
 triremes of Themistocles. Let the ocean be turned to 
 quicksand, and the earth to mire ; that so the mutual hurt- 
 fulness of nations may cease in an entire impossibility of 
 reaching each other. 
 
 The second of the modes of protection is what we have 
 termed social. We have also called it incidental, there 
 
88 EXCHANGE. [BOOK m, 
 
 being no original intention to affect the direction of labor. 
 It arises from social obstructions or political disturbances. 
 These increase the protection afforded the interests of par- 
 ticular localities. A most impressive illustration is found 
 in the results of the war of the Rebellion in the United 
 States. The production and sale of cotton was greatly hin- 
 dered, and, for a time, almost annihilated. This operated as 
 an immense protection to the cotton of India and Egypt, 
 where, before, the culture was comparatively unprofitable. 
 Yet, under the encouragement of the American war, it be- 
 came more advantageous than any other branch of industry. 
 Indeed, so largely was it raised in India, that the country 
 increased in wealth at a rate quite astonishing, and a great 
 industrial revolution, for the time at least, was effected. 
 But it was at a heavy expense to all other peoples and 
 countries. What India gained, Europe and America lost ; 
 the former as producer, the latter as consumer. The wealth 
 of the world was not increased, but greatly diminished, and 
 its natural and healthy commerce widely deranged. 
 
 Even India itself has not been permanently benefited by 
 the extraordinary demand for her cotton. The return of 
 peace in the United States, bringing down the price of her 
 great staple, has caused extensive bankruptcy and great 
 commercial distress. The season of artificial prosperity 
 led to the wildest extravagance and speculation, to the 
 neglect of the culture of rice and other needful crops, so 
 that the event, which, for a while, brought unwonted pros- 
 perity, must, in the end, produce equal depression and 
 suffering. 
 
 In some countries, the despotic rapacity of the govern- 
 ment, and the violence and fraud that pervade society, serve 
 as a great protection to the industry of others, by diminish 
 ing personal safety and business security in trade. Such 
 an element affords the same encouragement to others as 
 the introduction of a bear into one store would give 
 to the sales of others. It plainly reduces the quantity 
 
CHAP. II.J OBSTRUCTIONS TO TRADE. 89 
 
 or quality of iuducements that can be held out to buyers 
 in the community where the disturbance or disorder ex- 
 ists. 
 
 Suppose the Gulf of Mexico to be infested with pirates, so 
 that the danger to life and risk of property should double 
 the price of sugar brought from New Orleans to New York. 
 This increase of price, caused by the cost of insurance 
 a,gainst robbery and murder, so long as it lasted, would be 
 a protection to that extent to the cultivation of maple sugar 
 in the North. 
 
 War, iinder all circumstances, whatever the occasion or 
 result, whether between different nations or parts of the 
 same, always has the effect of disturbing trade, arresting 
 all the healthful agencies of production, and disturbing the 
 harmony of the economic world. 
 
 3d, The last of the modes of protection is what we have 
 called legal. It is purely conventional, and arises witli the 
 direct purpose of affecting production, or, at least, with 
 the expectation that such will be the result. This is effected, 
 firstly, by the prohibition of imports from one or all nations ; 
 secondly, by a direct premium on the products of home 
 industry ; or, thirdly, by the imposition of duties on the for- 
 eign article. 
 
 The former method is so violent and extreme as to be 
 entirely out of the sympathies of modern economy and 
 statesmanship. In so far as it exists, it intends to destroy 
 trade. It may arise during a state of war, or in greatly 
 embittered controversies for purposes of injury or revenge ; 
 in which case its effects are to be regarded rather as be- 
 longing to a state of war, and as incidental to it, though 
 brought in by specific enactment. 
 
 The second, though used at different times and in differ- 
 ent countries, has never been a favorite with governments, 
 although it is by far the most economical mode of giving 
 encouragement to a particular branch of industry. An 
 illustration of the great advantage of this mode of proteo- 
 
90 EXCHANGE. [BOOK HI. 
 
 tion over that of laying duty on exports ■will be given in our 
 chapter on national taxation. 
 
 We shall have to do, then, only with that kind of legal 
 protection which is secured by the imposition of duties on 
 imports. This has been the practice of nations generally, 
 in a greater or less degree, and so with more or iess effect. 
 England formerly laid taxes on four hundred articles brought 
 into her ports from France. The United States has always 
 maintained a system of import duties of a varying character, 
 sometimes directed to one object and sometimes to another, 
 as the popular feeling went. 
 
 CHAPTER ni. 
 
 PROTECTION. 
 
 Legal protection, may be imposed from one or more of 
 four general reasons : — 
 
 1st, To raise a revenue. 
 
 2d, To encourage the production of certain commodities 
 at home. 
 
 3d, To support existing forms of production. 
 
 4th, To secure commercial independence. 
 
 All these will be examined in detail. 
 
 1st, To raige a revenue. So far as this is the only con- 
 venient way in which the state can raise a certain sum of 
 money which it must have, it is but a mode of taxation, vnth 
 which we have no present concern. So far as it also affects 
 industry, it becomes a species of protection. We have not 
 called it incidental, because its bearing on industry is known 
 and considered in its imposition. So far as the element of 
 protection remains, it should be subject to the judgment 
 which shall be pronounced on what follows. If the " pro- 
 tection " of certain domestic products be found a good, then 
 the revenue duties should be so disposed as to afford them 
 
CHAP. III.] PROTECTION. 91 
 
 all possible assistance at the same time that it serves the 
 public purse. If, on the other hand, it is decided to be mis- 
 chievous to substitute man's law for Nature's, such revenue 
 duties should, as far as may consist with the public safety, 
 be imposed on articles where it will not mislead industry. 
 
 2d, To encourage the growth or manufacture of certain 
 commodities at home. This is the field in which protection 
 joins battle of choice with freedom of industry. In all the 
 other particular reasons, its argument is, as we shall see, 
 linked with some real or fancied necessity ; but here protec- 
 tion takes ground freely and fairly, virtually making two 
 propositions which it assumes to defend: — 
 
 First, that the desires of man, as an industrial being, are 
 so blind, so passionate, or so weak, as to require correction 
 by the public will, enlightening, chastening, or stimulating. 
 
 Second, that the efforts of man, as an industrial being, 
 are not sufficient, of themselves, to achieve the satisfaction 
 of desires, without the aid of law, coercing him to that 
 which he would not voluntarily undertake. 
 
 What is industrially wanting, then, in man's nature, either 
 individually or in voluntary association, is to be supplied by 
 such enactments as are called protective. 
 
 "We will inquire about the second of these propositions, 
 with the view of reducing both to one. 
 
 Man's industrial efforts caii never be assisted in produc- 
 tion by any legal enactment. Deriving all value from labor, 
 we have here an adamantine basis, which no sophistry can 
 move. Laws may be supposed to stimulate desires, or to re- 
 press them ; but they cannot lay hand on man's labor, except 
 to hinder it. It is a power given by the Creator, to work 
 upon the constant properties of matter. It has no fellow 
 in its work ; its only tools are capital, its own creature, and 
 nature, whose forces are fixed by God. Labor has its 
 commission and its reward in itself. Just as surely as 
 man cannot add one cubit to his stature, so is law impotent 
 to help man's labor, except through man's desires. 
 
92 EXCHANGE. [BOOK in. 
 
 There is another reason, more abstract, for reducing these 
 two propositions to one. It is, that the efforts men will 
 make are included in their desires. Those efforts are those 
 desires going out after their objects. Man's work is man's 
 want active. 
 
 "We have thus to consider only the first proposition in the 
 theory of protection ; namely, that the desires of man, in 
 the economic sense, need government by law. Men, as con- 
 sumers, are to be shut off from certain objects to which they 
 naturally incline ; and, as capitalists or laborers, are to be 
 shut up to certain efforts, which, so far as the legislation 
 has any influence, are not the direct, simple, and proper 
 means to the satisfaction of existing wants. And all this 
 not at all in the interests of morality or good government, 
 but wholly with a view to the greater wealth and industrial 
 prosperity of the community. This proposition has its only 
 basis in a want of confidence in the intelligence of the peo- 
 ple to direct their own desires, and of the competency of 
 labor to gratify such desires. The proposition here reaches 
 a point where there is no argument. Consciousness and 
 experience must affirm or deny sharply and decisively. Such 
 wisdom or power, we believe, has not been vouchsafed to 
 legislators, whether absolute or representing the will of a 
 people. 
 
 Economically, it will ever remain true, that the govern 
 ment is best which governs least. The wants of a people 
 are the sole proper, the sole possible, motives for production. 
 Nothing can be substituted for them. Any thing that seems 
 to take their place is merely a debasement of them. The 
 interests of producers, whether laborers or capitalists, secure, 
 better than any other possible means, the gratification of 
 such wants. Their intelligence is always superior on such 
 points to that of any foreign body. These we believe to be 
 absolute affirmations of universal experience, not dependent 
 on reasoning, not condescending to argument. 
 
 General proposition : There is no sense so subtile as that 
 
CHAP, m.] PEOTECTION. 93 
 
 with which a man detects his own wants. There is no spur 
 BO sharp as that which urges him to satisfy them. 
 
 This is all the defence it seems necessary to make against 
 the direct attack of the protection theory. It will be more 
 troublesome when we meet it in alliance with other in- 
 terests, on ground not its own, and displaying uncertain 
 colors. 
 
 If, then, protection is foimded on false economical prm- 
 ciples, we should expect to find it working mischief in its 
 application to national industry, perverting the desires, crip- 
 pling the efforts, and plundering the satisfactions of society. 
 
 Since the subject is of great practical importance and of 
 great popular interest, we will take an illustration at length 
 from the history of American industry, exhibiting the prin- 
 ciples thus far attained. 
 
 We choose the manufacture of iyon, for six reasons : — 
 
 1st, Because it may be produced in great amount in our 
 own country, and is found in almost all others. There is, 
 therefore, nothing of the nature of a monopoly about it. 
 
 2d, Because it enjoys the largest natural protection arising 
 from its weight and bulk. 
 
 3d, Because it is one of the most simple of all manu- 
 factures. 
 
 4th, Because it has been tried on a large scale, affording 
 material for great inductions, and freeing the resiilts from 
 any imputation of accident. 
 
 5th, Because the public attention has been turned to it for 
 a long time, and it is better understood than any other we 
 could name. 
 
 6th, Because a stronger argument can be made in favor 
 of its receiving governmental protection than any other. 
 
 What is the fact in regard to the manufacture so de- 
 scribed ? At present, iron cannot be so cheaply and exten- 
 sively produced in the United States as to exclude the 
 foreign article. Why is this ? We answer negatively : — 
 
 1st, Not that we do not know how to make it. Being, as 
 
M EXCHANGE. [BOOK m. 
 
 has been said, the most simple of all manufactures, we have 
 had, from the earliest settlement of the colonies, the neces- 
 sary knowledge, and have produced it from our colonial 
 days. 
 
 2d, Not that we have not sufficient capital. No branch of 
 business is more accessible than iron-making, or requires 
 less capital proportionally. As a matter of fact, the busi- 
 ness was commenced with little difficulty, and we succeeded 
 up to a certain point. Had it been as profitable as other 
 branches of industry, it would, like the manufacture of 
 boots and shoes, have been extended to the full demands 
 of the country. Yet the latter industry has been carried 
 nearly to the full demand. The former has stopped far 
 short of it. 
 
 It is to be observed, in this connection, that a successful 
 business, once started, creates its own capital. Labor no 
 more seeks assistance from capital, than capital employment 
 by labor. Every year of profitable enterprise affords a sur- 
 plus, which can be applied to the increase of business more 
 efficiently than twice the amount of raw capital, coming in 
 the lump. The daily or monthly increments are applied 
 with an aptness and a promptness that make them far more 
 useful than wholesale, occasional accessions of capital from 
 abroad. 
 
 3d, Not that we have not the best natural facilities for the 
 manufacture. 
 
 Five great conditions of success are found most remarkably 
 in the United States, — (a) Our ore is not only of excellent 
 quality and most abundant, but (6) is found very generally 
 on the surface and (e) in proximity to the best river naviga- 
 tion, and almost always in close juxtaposition to (d) coal 
 for smelting, and (e) limestone for flux. Perhaps in no 
 other country of the world are these requisites so fully se- 
 cured. The absence of a single one of them might be suffi- 
 cient to destroy the prospect of production. 
 
 The importance of this element will be seen in the follow- 
 
CHAP. III.] PROTECTION. 95 
 
 ing remarks from Dr. Allen's excellent work on " India, 
 Ancient and Modern : " — 
 
 " India has valuable iron mines (the writer once heard a distin- 
 guished geologist, who had been inspecting them, say they contained 
 iron enough to supply the world) ; and yet nearly all the iron used 
 in the country is procured from Europe, because t he iron min es 
 are in onejroiince, and the coal is in another." 
 
 4tla, Not that the manufacture here lacks a good natviral 
 protection. America has been put at a great dis<;ance from 
 Europe. The effects of such a protection we have already 
 seen. The foreign product is, in this case, charged with 
 freight and insurance for a voyage of three thousand miles. 
 This, with articles having little bulk or weight for the value, 
 might not serve as a great encouragement to the home pro- 
 duct ; but, with iron, it is a very considerable item. 
 
 Why, then, with all these facilities, do we not produce aU 
 our iron without governmental protection ? There is but 
 one reason. 
 
 We can do better. We can obtain our iron with less 
 labor than by making it. 
 
 How can this be ? Because, tliough we have facilities for 
 making iron, greater perhaps than any other people, we have 
 still greater facilities for raising agricultural products. 
 
 We can raise forty bushels of wheat with, say, twenty days' 
 labor that will purchase a ton of iron, to produce which 
 would cost twenty-five days' labor : net saving, five days, or 
 twenty per cent on all our iron. 
 
 What is the explanation of this state of things ? 
 
 Land is an instrument, and the greatest of all, in pro- 
 ducing agricultural values. Good arable land, on which 
 wheat is raised in England, is worth, say, two hundred dol- 
 lars an acre. 
 
 In this country, the same is worth, say, twenty dollars.* 
 
 • Often not a fourth part of that sum. The government holds the best 
 wheat land at one dollar and twehty-flye cents, and gives it away to actual 
 settlers. 
 
96 EXCHANGE. [BOOK HI. 
 
 Then, with our price of land, we haye the advantage, so far, 
 over the European, in the production of crops, of nine-tenths, 
 or ninety per cent. Our capital in land is ten times as pro- 
 ductive as that of England. On the other hand, we have 
 not an equal advantage over the European in making iron ; 
 for, although it costs him more labor (and labor is, as we 
 have said, the chief item in making iron), that labor costs 
 him much less per day than it costs us ; say, at least, fifty 
 per cent less. So that, if it is estimated to cost him twice 
 as much labor to make iron, still labor costs him no more in 
 money than ours costs us. In respect of labor, then, we are 
 on a level. 
 
 So far as money, as capital is concerned, the European 
 again has the advantage of us by fifty per cent, since 
 money is as well worth eight per cent here as four per 
 cent there. 
 
 Now, these facilities which the European has, from the 
 cheapness of labor and capital, counterbalance to a great 
 extent, if not fully, the advantages which we have from the 
 ease with which we can get the materials of which iron is 
 made. 
 
 If so, in getting our iron by raising wheat, we have the net 
 advantage over the European of ninety per cent in the land, 
 which is the great item of expense in such products; so 
 much so, indeed, that the pure rent of farms in England 
 is estimated to equal the entire wages of the agricultural 
 laborers. 
 
 Thus it is that our unequalled natural advantages, aris- 
 ing from cheap virgin lands, render it improfitable for us 
 to make iron, or engage in many other kinds of manufac- 
 tures. 
 
 Such is the situation. We will now apply protection. 
 Government, in 1816, laid a duty of thirty dollars per ton 
 on bar iron ; equal to about fifty per cent on the cost of 
 the foreign article. Let us inquire into the effect of this 
 policy. 
 
CHAP. m.J PROTECTION. 9T 
 
 1st, Iron was produced. Labor and capital were at once 
 withdrawn from other occupations, and invested in furnaces 
 and iron-making. We undertook to make iron ourselves, 
 under the belief, that, with a protection of thirty dollars per 
 ton, the manufacture would be found very profitable. So 
 far, the object of the duty was accomplished. 
 
 2d, A great loss was caused to the general production of 
 the country. Labor and capital were withdrawn from pur- 
 suits of ordinary profitableness, and invested in business 
 that required fifty per cent protection to make it profitable 
 at all. If the duty was necessary to establish the manufac- 
 ture in 1816, as it was, — for a still higher protection was 
 called for, — does it not follow, that, on the whole amount 
 made under the forced system of production, there was a loss 
 to the country of thirty-three and one-third per cent ; thirty- 
 three and one-third per cent of ninety, the enhanced price, 
 being fifty per cent on sixty, the original price ? * 
 
 Is it possible that there can be any doubt of this ? The 
 production of wealth was decreased so much. The enhanced 
 price, thirty dollars per ton, took the following form : — 
 
 * It should be understood that there can be no greater discount than one 
 hundred per cent, which takes the whole of any thing ; yet there are men who 
 profess to be learned and even well versed in financial matters, who speak 
 very flippantly of two hundred or five hundred per cent discount. Professor 
 Fawcett, in his " Manual of Political Economy," page 365, says, " Mr. Glad- 
 stone has been confident in his belief that a reduction of one hundred per cent, 
 in the price of inferior French wines, will cause those wines to be purchased 
 by classes of society in this country who have never before purchased them ; 
 and, therefore, the consumption will increase more than one hundred per 
 cent." Certainly, Mr. Gladstone is right in supposing the consumption would 
 be increased more than one hundred per cent, if the price were redticed one 
 bundled per cent ; but it seems almost incredible that the Chancellor of the 
 Exchequer could have used the expression attributed to him. The fact that 
 Professor Fawcett himself could write in this manner shows the importance 
 of having the exact meaning of the term " discount " defined and determined. 
 A writer in one of the most respectable magazines in New York lately stated 
 that a certain commodity " had fallen six himdred per cent." Occurrences 
 of this kind are frequent. The difficulty in the case seems to be, that discount 
 and premium (or advance) are confounded. The first is limited to one hunr 
 dred, the latter is iUimitable. 
 
 7 
 
98 EXCHANGE. [BOOK IH. 
 
 Suppose the consumption of the United States at that 
 time, 1816, to have been eighty thousand tons per 
 annum, and that, under the system of protection, we 
 made twenty thousand tons, importing the balance ; 
 there was, then, paid duty on sixty thousand tons, 
 at thirty dollars $1,800,000 
 
 Twenty thousand tons made, at a price enhanced by 
 
 thirty dollars 600,000 
 
 Total enhanced cost to the people* .... $2,400,000 
 
 Now, as the iron-masters did not get more than the average 
 rate of profits, the entire six hundred thousand dollars was 
 lost to the country, both to people and government. The 
 sum of one million and eight hundred thousand dollars went 
 to the national revenue. The protection of iron cost two 
 million and four hundred thousand dollars, the people pay- 
 ing a tax not the less on the domestic than on the foreign 
 product. 
 
 But the real loss to the country was much greater, be- 
 cause, — 
 
 3d, Many wasteful and disastrous experiments were made. 
 When any branch of industry grows up naturally, it com- 
 mences upon a small scale, and is cautiously extended, as 
 found profitable. Under a forced system, it is quite other- 
 wise. A duty of thirty dollars a ton is laid upon iron. 
 
 Pennsylvania is full of iron ore and coal. What prevents 
 her from making a vast sum by it ? Has she not a protec- 
 tion of fifty per cent ? So everybody reasons ; so everybody 
 acts. Great establishments are started at once. There is 
 no occasion longer to consult adaptations of character, expe- 
 rience in business, or local economy. Success and fortune 
 are secured to all by omnipotent protection. Men plunge 
 headlong into the work, if, indeed, they suppose it to be any 
 thing so serious as work. Merchants, professional men, 
 farmers, mechanics, all are seized with the mania of iron- 
 making. Large iron works are hastily and ignorantly got up. 
 • Besides all the profits charged on the duties and enhanced cost of the iron. 
 
CHAP. III.] PROTECTION. 99 
 
 Incompetent heads manage them. 
 
 Inexperienced hands work in them. 
 
 Imperfect iron comes out of tliem. 
 
 Lievitable loss attends them. 
 
 Insolvency is tlie end of them. 
 
 And the iron interest clamors loudly and successfully for 
 more protection. Fifty per cent is not enough for the people 
 to pay extra on iron. These are not accidental or peculiar 
 results, but natural and certain, where the great laws of 
 trade and the even course of production are disturbed. 
 
 "We have seen these marked effects of protection in the 
 protected country. How of the excluded country? 
 
 Just so far as the " protection " is adequate, England 
 cannot send us iron. What then ? So much of her iron 
 trade is cut off; and her capital and industry must be directed 
 to raising wheat, or to some other less profitable, productive, 
 and natural employment. A part of it is forced into wheat- 
 growing, and this reduces the quantity she would naturally 
 require of American wheat. Her industry is made less ad- 
 vantageous ; our market is correspondingly diminished. So 
 far as her labor cannot find employment, it must emigrate, 
 as it has done by crowded packet lines, to Australia, Canada, 
 and the United States. 
 
 Which country will be most injured by this commercial 
 warfare ? 
 
 We answer, decidedly, the protected, because England 
 would not have made, on the iron sent us, more, say, than 
 ten per cent ; while we make a clean loss, as we have seen, 
 of some thirty or forty per cent ; that is, all left of the fifty 
 per cent enhancement of price, after the profits of the Ameri- 
 can manufacturer are deducted. 
 
 But it may be urged, tliat, if a part of the labor of the 
 country had not been taken from agriculture, its products 
 would have declined in value, and this would have counter- 
 balanced what was lost by the manufacture of iron. This is 
 a favorite view with a certain class of minds. There are 
 
100 EXCHANGE. [BOOK III. 
 
 many theorists who are continually foretelling the decline 
 of prices, and general starvation ; many business men, who 
 are expecting daily to exhaust the market, and reach the 
 limit of their industry ; many householders, who dread 
 the disappearance of fuel and light from the earth, with un- 
 told horrors beside. Such persons are much afraid of using 
 nature up. 
 
 The markets of the world being open to us, all our sur- 
 plus products would remain in demand. Provisions, espe- 
 cially, are a sort of " legal tender " the world over ; and there 
 seems to be no immediate occasion to anticipate their disuse. 
 There is no market that keeps open so long and surely as 
 this. The English ports were wrested from the monopolists 
 of grain, by a power that government and society could not 
 resist, — the power of indignant want. The misfortune of 
 overdone agricultural products is one that statesmen may 
 well leave to their successors. 
 
 But, if there were no other markets open but those at 
 home, there would be a certain tendency, not at all frightful 
 in its vehemence, to a decline of prices, in a country like 
 ours ; because an agricultural pebple, under favorable cir- 
 cumstances, always produces more than it consumes, and 
 would, sooner or later, create such a surplus as to lower the 
 price. Admitting, theii, all that is claimed for such a pos- 
 sible glut, let us inquire into the results. 
 
 As soon as wheat, to take it as the exponent of all agricul- 
 tural products, had fallen so low that it required as many 
 days' work to get a ton of iron by raising wheat as by work- 
 ing the ore, the manufacture would be successfully intro- 
 duced. That is precisely the point at which this branch of 
 industry would legitimately begin. It would not spring up 
 suddenly, at some arbitrary point, but grow up in those 
 places where the natural protection was most felt, and facili- 
 ties for production were greatest ; for instance, in a region 
 far from any considerable market, where iron could only be 
 obtained by long and expensive transportation, where the 
 
CHAP. ly.] FALLACIES OP PROTECTIVE THEORY. 101 
 
 land -was not adapted to wheat, but where ore, coal, and lime 
 were plentiful. It would extend to all parts of the country 
 where it was as advantageous as whea1>-growing. The busi- 
 ness would be introduced without any disturbance of existing 
 interests ; without wild, extravagant, and wasteful experi- 
 ments. It would be a natural development and growth, not 
 an arbitrary creation. It would feel its way with a sense as 
 subtile and secure as that with which the plant raises itself 
 into a world of big trees and wild tornadoes, and fierce, rush- 
 ing life. 
 
 CHAPTER lY. 
 
 THE FALLACIES OP THE PEOTECTIYB THEORY. 
 
 We leave now the illustrations of the principles of protection, 
 as exhibited in the manufacture of iron. We believe we 
 have shown the unsoundness of all that political philosophy 
 which proposes to substitute artificial for natural laws, in 
 production. But there still remains some popular argu- 
 ments, which we will notice. 
 
 1st, It is claimed as good policy to protect " an infant 
 manufacture" until it is well established, because it will 
 then take care of itself, and ultimately confer great wealth 
 on the country. Of this it may be said : — 
 
 (a) There is no assurance, under a system which removes 
 the sole test of usefulness and self-support from the produc- 
 tion of a people, that enterprises will not spring up which 
 never will come to maturity, which have no vital force of 
 themselves, which exist solely by reason of the protection, 
 and will never become remunerative. If good enterprises, 
 why not bad, since the test of bad or good has been witli- 
 drawn ? In such a rankness of unnatural growth, it is far 
 more likely that weeds will be produced than useful plants. 
 Thus the whole industry of a country may become perverted 
 
102 EXCHANGE. [BOOK III. 
 
 and falsified by removing the principle of competition. There 
 will be no reason for healthful industries to spring up, which 
 will not also give life to such as are weak, tardy, ephemeral ; 
 to such as are parasitic and exhausting. 
 
 (5) Other things aside, the desirableness of raising the 
 " infant " will depend very much on the length of time and 
 total cost required to bring it to full age and size. There 
 have been nations that exposed sickly and unpromising chil- 
 dren, holding it to be for the advantage of the state to rear 
 none but such as promised to become vigorous and useful 
 members of society. Religion and humanity have changed 
 this, out of respect for the image of God found in every hu- 
 man creature ; and now the cripple and the idiot are reared 
 tenderly and patiently. But the protective policy extends 
 the same kindness and forbearance to industry. No matter 
 how plainly palsy, scrofula, or fatuity may appear in the 
 form or features, the infant is sure of an affectionate solici- 
 tude, that only changes to become more anxious as the infant 
 gets punier and weaker. 
 
 France protected one of these industrial infants ; i.e., the 
 beet-sugar culture. Dr. Wayland said of it, in 1837, " The 
 present protection costs one million and four hundred thou- 
 sand pounds per anmim. Suppose this to continue for 
 twenty years, it will amount to no less than twenty-eight 
 million pounds sterling ; the interest of which, at five per 
 cent, will bring, at two and a half pence per pound, one 
 hundred and twenty-six million pounds of sugar, or nearly 
 the whole annual amount of sugar now consumed in Prance." 
 In 1865, we can say that this child, born in the early part 
 of the great Napoleon's career, has not yet become strong 
 enough to walk alone, or hardy enough to take the air. 
 Supposing an equable annual consumption of any article, it 
 requires but common school arithmetic to show that a pro- 
 tection to the extent of fifty per cent, continuing for eighteen 
 years, would amount to a sum, which, at six per ceut inter- 
 est, would furnish the nation in that article to the end of 
 
CHAP. IV.J FALLACIES OP PEOTECTIVB THEORY. 103 
 
 time, without ever paying any thing more for it. A child 
 that is so costly to bring up ought to make a very useful 
 man ; whereas it is generally true that such children have 
 to be brought up three or four times over, and then live on 
 the poor-rates. If such a protection, however, were to be 
 continued only eighteen years, and the necessity for it then 
 cease, the industry having become self-supporting, it would 
 yet be true that every pound would have two prices, added 
 to each other : one, the present cost of making ; the other, 
 interest on old protection equal to the present cost. 
 
 In fact, iron and sugar have been protected in this country 
 since 1816, and the duties still continue. And all for what ? 
 Where is the advantage of making a great annual sacrifice, 
 for a long time, to establish an industry that will grow up 
 of itself as soon as it will pay, as was growing up slowly, 
 but successfully, before there was any protection ? 
 
 (c) Finally, no sound and healthful manufacture needs 
 protection at all. The phrase "infancy" is entirely soph- 
 istical, as applied to any branch of legitimate industry. 
 Each one comes full-grown and full-armed into life. We 
 do not mean that it has no growth, as far as extension is 
 concerned. It certainly does go on from town to town, from 
 State to State, out of small beginnings. But there is no 
 infancy, so far as completeness or robustness of life is con- 
 cerned. Suppose, for example, that there was but one man- 
 ufacturer of iron in the country, and he produced only to the 
 amount of five thousand dollars a year. Yet, if he could 
 bring to the market as good and cheap an article as the ' 
 foreigner, he would be none the worse for being a solitary 
 producer on some mountain in Pennsylvania. The secu- 
 rity of any manufacture does not reside in the number of 
 those engaged, but in its power to meet the public wants. 
 However few may be employed, however humble their be- 
 ginnings, they stand simply in their ability to sell a good 
 article at a' reasonable price, and are as strong in this as 
 ever was the proudest guild of London. 
 
104 EXCHANGE. [BOOK m. 
 
 Of course, there is a period in every enterprise when all 
 is experiment and outlay. But capital is always ready and 
 able to meet the necessity. It belongs to capital to do this ; 
 for it gets the remuneration of it when the yield begins. 
 
 There is a remarkable confirmation of the truth of these 
 remarks in the history of the boot and shoe manufactures of 
 the United States. They never asked for protection ; never 
 received any notice in all the conflicts for increased tariffs. 
 The trade grew up naturally, steadily, and profitably, from 
 the first ; increasing gradually, with the growth of the coun- 
 try, until, at the present time, it is not only the largest, but 
 one of the most profitable branches of manufacturing indus- 
 try. In Massachusetts alone, this manufacture extends to 
 over fifty millions of dollars annually, and is by far the most 
 advantageous branch of industry in the State. 
 
 There is another popular argument for protection. 
 
 2d, It is claimed that we ought to protect our labor against 
 the pauper labor of Europe. 
 
 Does a restrictive tariff do this? Does it prevent the 
 laborers of Europe from entering into competition with ours ? 
 Does it not, in fact, bring them to our very doors ? 
 
 For fifty years prior to the date of the first important tar- 
 iff, viz. 1816, there was no immigration of any consequence. 
 Soon after this, we began to attract skilled workmen. Some 
 were expressly hired to come over to teach us how to spin, 
 weave, &c. As we raised the tariff and increased manu- 
 factures, the current increased, until it has inundated the 
 country. All Europe pours in its starved labor upon us. 
 
 "What kind of labor naturally emigrates ? The poorest, 
 because the better by character and capacity can protect 
 itself longer at home. An employer does not turn his good 
 men off first. 
 
 "Why so large a proportion of Irish ? Because theirs is 
 the cheapest labor ; the first thrown out in any reduction. 
 The tide, once turned upon us, kept swelling, till our nation- 
 ality is almost in dispute. This immense immigration never 
 
CHAP. IV.] FALLACIES OP PROTECTIVE THEORY. 105 
 
 came here in obedience to natural laws, but to the legisla- 
 tion of Congress. Instead of protecting American labor 
 against the pauper labor of Europe, we have brought that 
 labor here to meet the American citizen face to face, on a 
 perfect level, with equal civil rights, and have given to him 
 the advantage of our immense landed capital. Whether this 
 is good state policy ; whether a forced immigration, in such 
 vast numbers as to prevent an easy and natural assimilation 
 with the native population, is desirable or not, — it is -not our 
 province to discuss. That is a political question. It only 
 belongs to us to show that no protection has been given to 
 American labor. 
 
 3d, It has been gravely said, that the general average of 
 all profits is raised by a protective policy. 
 
 If true, this is a valuable discovery. It affords the easiest 
 known method of making everybody rich at once, and with- 
 out effort. Government has only to place sufficient restric- 
 tions on trade to carry up profits to one hundred per cent ; 
 and, when aU trade has ceased, everybody's profits will be 
 immense ! 
 
 The folly of such assertions is too apparent to justify any 
 considerable notice. 
 
 Wlaere are the enhanced profits to come from ? Out of 
 the diminished production ? Is the whole lessened, and 
 every part increased? So far as protection creates a mo- 
 nopoly at the expense of the public, it may, for a while, add 
 to the profits of an individual or a class, but only by taxing 
 other industries for the purpose. 
 
 4th, But it is urged, leaving mere argument, do we not 
 Tmow that protection especially develops manufactures ? and 
 are not manufacturing countries found to be, in fact, richer 
 than those which are more exclusively agricultural ? Both 
 propositions are true in an isolated form. 
 
 Other things equal, in a normal state of things, manufac- 
 turing communities are older than agricultural, and, of 
 course, have much greater accumulated wealth. England 
 
106 EXCHANGE. [BOOK HI. 
 
 is older and richer than the United States ; Massachusetts 
 than Ohio. Manufactures arise because a people have a dense 
 population, abundant capital, and great industrial activity. 
 Under such circumstances, great wealth will be created, be- 
 cause these are the fit conditions of creating wealth. Such 
 creations are natural. 
 
 It is, without question, true, that in an equal manufac- 
 turing population will be found a greater accumulation of 
 wealth. One important reason of this is, that a larger 
 share of the population are engaged in production, and a 
 larger amount of capital is employed. Women and chil- 
 dren, who could earn but little in agricultural labors, can 
 earn much in manufacturing. This is one of the most 
 striking results of a division of labor, as we have already 
 shown. As we carry on agriculture, women and children 
 do little, though in Continental Europe they do much. 
 Agriculture, too, can be performed only in certain portions 
 of the year. Manufacturing need never stop, summer or 
 winter, cold or hot, fair or foul. This makes a wonderful 
 difference. 
 
 All these, however, are economical advantages, which 
 manufacturing communities have, when properly constituted 
 and employed. These are reasons which may induce such 
 industry ; never reasons why it should be compelled. K, 
 with so great a superiority, manufactures do not arise 
 freely and support themselves fully, it becomes a double 
 argument for not forcing them. If such advantage will not 
 secure free manufacturing, it is certain that compulsory 
 manufacturing will not secure these advantages, without 
 the sacrifice of other interests. 
 
 But all this argument in favor of manufactures, and 
 these anticipations of agricultural glut, come out of a false 
 idea of what are the natural relations of these two great 
 branches of labor. Granted, that manufactures are a 
 desirable form of national industry, give a good market for 
 the produce of the farm and the miue, and help build up 
 
CHAP. IV.] PAILACIES OF PBOTECTIVE THEORY. 107 
 
 the common wealth ; yet it is not necessary to bring them 
 on by a forcing process, for they come of themselves as 
 soon as profitable. We have already shown (page 86) 
 that certain large classes of manufactured products receive 
 such a natural or local protection as insures their home 
 growth. But there are other classes which have an encour- 
 agement even more liberal. There is a principle always 
 operating to bring manufactures out, on every part of the 
 earth's surface. It is the impossibility of carrying on cer- 
 tain branches anywhere but at the place where the article 
 is wanted. The survey, grading, and construction of rail- 
 roads and canals, forming as they do an immense portion of 
 the public industry, cannot be brought within the purview 
 of the custom-house. They are necessarily confined to the 
 field in which these means of transport are to be used. 
 These may stand as examples of a vast class of industry, 
 which arises indifferently to protection. So all tinkeriag, 
 patching, and repairing, great or small, must be done on 
 the spot. A glance at any village, no matter how intimate 
 its connection with some centre of trade, will show how 
 large a share of its labor, other than agricultural, is em- 
 ployed in its local work ; so that, one way and another, 
 these classes of manufacturing interests, which inevitably 
 come to the community without help of law, form a very 
 considerable part of the whole. 
 
 The value of manufactured articles imported, for the four 
 years preceding the war of the EebcUion, ranged from one 
 hundred and fifty to two hundred millions a year ; while 
 the authorities of the treasury and of the census esti- 
 mate the value of home manufactures at not less than one 
 thousand millions a year, for the same period. Such 
 comparisons are necessarily crude; but it would be far 
 within bounds to say that four-ffths of all the present 
 consumption of manvfacture» would be supplied by our nor 
 tional industry, irrespective of protection. All the matter,, 
 then, comes to this : Shall we impose heavy duties to force 
 
108 EXCHANGE. [BOOK HI. 
 
 labor and capital into such channels as shall provide, at 
 great expense, the remaining fifth of the manufactures we 
 consume ? 
 
 5th, Perhaps the most popular plea of all for protection 
 looks to " the development of our natural resources." This 
 does not propose to increase the gross or net product of 
 national industry, does not assume or assert that the labor 
 and capital of the country are not well employed at present ; 
 but it remembers the great mineral and metallic wealth we 
 have yet hidden in the Middle States and the West, and it 
 sighs for the thought of their uselessness. It regards as 
 of no consequence the fact that digging or working the 
 ores will not pay. It can only exclaim, " "What a pity that 
 such great advantage should be unimproved ! " These 
 reasoners would call labor off from the rich fields of agri- 
 culture, from no other motive than a desire to see our 
 wonderful mineral treasures developed. 
 
 The answer to this species of patriotism may be very 
 short. Since Nature has taken thousands of years to form 
 these ores and store these mines, man can at least take 
 time enough to wait till it will pay to dig them. It may 
 seem to some a pity they should remain underground ; but 
 the true cause of the misfortune resides in the fact that we 
 have not population enough to settle densely one-tenth of 
 our territory. It is a misfortune that will cure itself as our 
 numbers increase. We can certainly afford to leave for 
 future generations what we cannot afford to take for our- 
 selves. 
 
 CHAPTER V. 
 
 PEOTECTION (concluded). 
 
 We have said that legal protection may be imposed from 
 one or more of four general reasons. 
 We have discussed the first two ; viz., — 
 
CHAP. T.J PROTECTION. 109 
 
 To raise a revenue. 
 
 To encourage the growth of certain commodities at home. 
 
 We now come to the remaining reasons, which will de- 
 mand but little attention, as their principles have already 
 been developed. 
 
 To support existing manufactures. 
 
 Here we leave the expediency of founding special indus- 
 tries by a system of protection, and confine ourselves to the 
 question, whether, such industries having been begun and 
 developed under high tariffs, capital having become so 
 engaged, labor having become so employed, it is not neces- 
 sary to continue the protection. 
 
 So far as. this acknowledges a moral obligation on the 
 government to save from loss those who have followed 
 the guidance of its laws, it is a question for the statesman. 
 But the economist can urge, that, if the burden of such 
 bad investments must be borne by the public, it would be 
 preferable to have it assumed in the shape of direct relief 
 to the manufacturers, rather than by a system which is 
 sure to multiply such unfortunate enterprises, and perpet- 
 uate their weakness. That great caution and forbearance 
 are necessary, in removing even a false institution, is not a 
 maxim which economy has to teach politics. 
 
 And here we come face to face with the great practical 
 difficulty of protection in our country ; that which, if all 
 its principles were triumphantly proved in general reason- 
 ing, should still throw it out of our legislation. If it were 
 proved harmless, if it were proved beneficial, there is a 
 strong reason against ever attempting to realize it here. 
 That difficulty resides in the varying politics of our coun- 
 try. Injurious as protection is to the best interests of the 
 country, any system of it, however severe, would be prefer- 
 able to the " open-and-shut " policy, absolutely unavoidable 
 in a government like ours. It is not within the bounds of 
 reason to suppose that the alternate successes of parties 
 will not continue to convulse our national legislation' ; and 
 
110 EXCHANGE. [BOOK IH. 
 
 therefore it is with emphasis true, that a consistent system 
 of protection is only possible in a government with great 
 conservative force and great central powers. A represent- 
 ative body, embracing the most opposite interests, swayed 
 by such influences and intrigues as notoriously possess 
 such an organization, and changed in all its parts every 
 few years, is not the place in which to adjust accurately 
 and dispassionately the economical parts of a nation, and 
 distribute the agencies of production. 
 
 It is our felicity, that our well-being does not depend on 
 such counsels, but that great Nature has fixed the forces 
 of industry in perfect harmony, and to the most benefi- 
 cent ends. 
 
 To secure commercial independence. True commercial 
 independence is attained by any nation, when its natural 
 resources are so developed and cultivated that it becomes 
 a power in the world, can command the products of the 
 industry of every clime, because it can furnish that which 
 all others want. This is independence in commerce. In- 
 dependence of commerce is the independence of the savage, 
 or of undiscovered countries. To assume that such inde- 
 pendence of all mutual helpfulness is desirable, outrages the 
 earliest sense of humanity. 
 
 But it is claimed that such a separation from all ofiices 
 of kindness is necessary to protect nations in war. 
 
 So far as the state urges the claims of its own safety, 
 the principles of economic science must be silent. But 
 this interference with the laws of value, for 4;he preservar 
 tion of the national life, must be strictly limited to the 
 absolute necessities of war. 
 
 There are many reasons to suppose, that this interference 
 is rarely, if ever, necessary. There are very few states 
 which could not, on occasion, supply from their own soil 
 the means of warfare. It would be much better that nations 
 should, by anticipation, secure from abroad a suflicient 
 amount of material, than by indirect efforts distort their 
 
CHAP, v.] PROTECTION. Ill 
 
 industry to an extent many times greater than would be 
 involved in obtaining beforehand, by commerce, whatever 
 might be necessary. 
 
 But finally and decisively, if it is alleged, under any cir- 
 cumstances, to be essential that a nation should possess 
 vrithin itself the means of war, we answer that it should 
 undertake the manufacture by a special government agency, 
 not by changing the entire industry of a people to produce 
 this as an incidental result. Such is, in fact, the procedure 
 of most, if not all, civilized nations, and leaves no force 
 in the plea for national independence. But the argument 
 for protection from the necessities of war has almost dis- 
 appeared in the intenser light of our growing civilization. 
 The independence of each nation in commerce, existing 
 harmoniously with its dependence on commerce, forms 
 the best hope of peace and tranquillity for the future. It 
 may be safely assumed, that the probabilities of war be- 
 tween any two peoples are inversely as their commercial 
 relations. The great reason against war, in the present 
 age, is not the expense of maintaining armies, nor the de- 
 struction of life, but the interruption of trade. This not 
 only puts peacemakers in the councils at home, but makes 
 all nations mediators between the parties at variance. 
 
 The intercourse between the United States and Austria 
 is but trifling. A little fire would kindle great strife be- 
 tween these two peoples. There would be no great motive 
 to forbear and adjust the occasions of dispute. The United 
 States and England, on the other hand, have a yearly trade 
 of four hundred and fifty millions of dollars, which inter- 
 poses itself between the nations, however angry, a great 
 standing policy of peace. 
 
 AU general economic principles urge the extinction of 
 war. All special economical interdependences postpone 
 and weaken the provocations of war. Resting on this prin- 
 ciple, we shall find nothing good in the scheme of making 
 nations independent, that they may the better fight. We 
 
112 EXCHANGE. [BOOK III, 
 
 shall recognize commerce as the great bond of hnman 
 brotherhood. 
 
 But, after all argument has been closed on the principles 
 of protection, we still find one plea remaining. If freedom 
 of intercourse, it is said, were only universal, it would be 
 well ; but, since it is not, each nation must protect itself, 
 and do as it is done by. 
 
 Let us suppose that England refuses to take our wheat. 
 Would that be a good reason why we should not take iron 
 from her, if we get it so, cheaper than by making it ? We 
 have already shown that the protected suffers more than 
 the excluded community. If England should exclude our 
 wheat, whom would she injure ? Ourselves somewhat, that 
 is, to the extent of the profits we should have made ; her- 
 self still more, that is, to the extent of the vastly enhanced 
 cost of the grain. If, in retaliation, we exclude her iron, 
 whom do we injure ? Her somewhat ; ourselves much more. 
 
 Let us examine more in detail the consequences of our 
 exclusion from foreign ports. If partial, we could still, by 
 selling o\ir wheat, get iron cheaper than by making it. 
 
 If total, the closing of our markets for wheat could turn 
 our industry towards other forms of -production. This 
 would constitute one of the conditions under which manu- 
 factures would legitimately arise ; and it would be more 
 sensible and healthful than if it came as the result of our 
 own restrictive legislation. 
 
 The full consequences of the policy of retaliation would 
 be, each people refusing to receive the products of others, 
 trade annihilated, industry crippled, all nations isolated, 
 -with no mutual interest but robbery and plunder. 
 
 We have said, that England, by imposing a duty, say of 
 fifty per cent, on our wheat, would injure us to the extent 
 of our possible profits, and herself to the extent of the 
 enhanced cost of the grain. On a closer inquiry, we shall 
 see that the injury to ourselves is compensated in part ; that 
 to herself is aggravated. 
 
CHAP. V.J PROTECTION. 113 
 
 The consequence of such a duty would be, that the con- 
 sumption would fall off in some degree. Her poor would 
 subsist more on potatoes, or other articles cheaper than 
 flour. But, notwithstanding these shifts, it would be found 
 that it cost her laboring population more to live, even 
 though they lived more meanly. Their wages must be 
 raised: this is certain. All taxes laid on commodities 
 which the laborer must use have the effect to reduce the 
 quantity or quality of his food to a certain point ; but he 
 must live, and his wages must be raised to enable him to 
 do so with the enhanced price of wheat. This would make 
 it more expensive for England to manufacture her goods, 
 and would, in part, so far reduce her ability to compete in 
 the markets of the world. By such a policy, she would 
 weaken her own industry, and to a degree exclude herself 
 from commetce. This would afford another condition 
 under which manufactures would legitimately arise in this 
 country, whose wheat was excluded. 
 
 That this is no impossible supposition, will be evidenced 
 by the condition of England before the repeal of the corn 
 laws. Tlie movement in favor of that great measure origi- 
 nated in Manchester, and was carried, against the nobility 
 and the landed interest, by the resolute efforts of the manu- 
 facturing class. 
 
 What advantage is there in refusing to buy of a nation 
 because it refuses to buy of us ? It is retaliation and 
 revenge, not self-defence or self-vindication. The first 
 historical instance of such retaliatory legislation is the 
 establishment, by the Venetians, of customs duties, to de- 
 prive foreigners of the benefit of their trade ; in return for 
 which, Charles V. imposed twenty per cent duty on all 
 Venetian merchandise. The most wise and useful econom- 
 ical act of this century was that by which, by the exertions 
 of Mr. Cobden, England and Prance, so long contending 
 only in exclusions and mutual injuries, threw open their 
 ports to the free entry of hundreds of articles, to the com- 
 
114 EXCHANGE. [BOOK HI. 
 
 mon benefit of both, and to the advancement of good feeling 
 and hearty alliance ; a measure, that, between the years 
 1859 and 1863, increased by seventy-three per cent the 
 trade of Great Britain with France, while proving no less 
 beneficial to the labor of the latter country. 
 
 We infer, from all that has preceded, that " protection " is 
 an unfortunate expression. To restrict industry, to put the 
 bad on the level of the good, to remove from industry its 
 only guaranty of a full reward, to contract trade and neu- 
 tralize the gifts of Nature, is not protection, in any proper 
 sense of the word. It is spoliation. 
 
 In conclusion of the subject, it may be proper to allude 
 to the great natural characteristics of our national indus- 
 try. We see that the important fact of our condition is 
 unequalled agricultural power. Possessing such an advan- 
 tage, with an active, enlightened, and enterprisitig population, 
 and an industry perfectly untrammelled, we should naturally 
 become the granary of the world, and create, as a certain 
 consequence, the most extensive and powerftd commercial 
 and naval marine on the globe. We should secure, by sea 
 and land, a greater power to give help to friends, or hurt to 
 foes, than any other people, and should rapidly attain our 
 best national condition. 
 
 We should have, not only the most profitable, but the most 
 salutary industry, as favorable to the acquisition of unlim- 
 ited wealth as to a sound physical development and high 
 moral culture. We should have manufactures, also, in their 
 spontaneous growth. They would arise — they were arising 
 previous to any tariff — as fast as the best interests of the 
 country required them. 
 
 States and sections, like New England, would naturally 
 and profitably undertake manufactures, because they have a 
 thinner soil, a denser population, and a larger capital relar 
 tively, than others. Such regions would be the workshops 
 of the nation, while the prairies of the West and the rich 
 uplands of the Middle States would be the nation's farms. 
 
CHAP, v.] PROTECTION. 115 
 
 What manufactures arise of themselyes should be wel- 
 comed, for they come in obedience to natural laws ; they are 
 founded on extraordinary facilities, on high natural protec- 
 tion, on local necessities. But we bind the swelling thews 
 of the youth when we endeavor to force on America the 
 industry of Europe. "We grow enough every year to cover 
 some of the kingdoms of the old world. Every year's 
 growth stretches over and appropriates some country, fer- 
 tile as the plains of the Nile, and bearing every manner of 
 precious or useful ore. Hero is our destiny. This is our 
 wealth. 
 
 It cannot be too often repeated, because it is the great 
 fact in regard to manufactures, that they only need to be 
 " let alone." When a distinguished French minister of 
 finance called the manufacturers of that country to Paris, 
 and asked what he could do for them, they made the well- 
 known answer, " Laissez nous faire." It is within our 
 personal knowledge, that, when the proposal was made to 
 impose the protective tariff of 1816, the leading manufac- 
 tures of Rhode Island, amongst whom was the late Mr. 
 Slater, the father of cotton-spinning in this country, met at 
 the counting-room of one of their number, and, after delib- 
 erate consultation upon the matter, came unanimously to 
 the conclusion, that they had " rather be let alone." Their 
 business had grown up naturally, and succeeded well ; and 
 they felt confident of its continued prosperity, if uninter- 
 fered with by government. On the other hand, they argued, 
 that, by laying a protective tariff, the business would be 
 thrown out of its natural channels, and become fluctuating 
 and uncertain. How well founded were these anticipations 
 subsequent events have fully shown. 
 
 It will, doubtless, be a matter of profound astonishment 
 to the future historian, that a people who had a free and 
 untrammelled industry, with natural advantages for the 
 most productive agriculture in the world and for the legiti- 
 mate growth of every kind of manufacture, should ever 
 
116 EXCHANGE. [book HI. 
 
 have asked for restrictions upon trade. But, in truth, they 
 did not ask for protection at the outset. It was forced 
 upon them hy politicians, irrespective of their wishes, for 
 the avowed purpose of securing a home market for cotton. 
 
 All New England was opposed to the poUcy, and pro- 
 tested against it; yet it was carried. Special forms of 
 manufacturing were brought into existence ; and, as these 
 were sickly and needed all the help they could obtain from 
 government, an interested party was formed which clam- 
 ored incessantly for protection. Yet it was not until the 
 third tariff, that of 1824, had gone into operation, that the 
 Northern and Central States became the partisans of pro- 
 tection. As New England was the last to assent to restric- 
 tive legislation, so she will undoubtedly be the first to ask 
 for its abandonment. No policy could be more adverse to 
 her permanent interests. She has great natural advantages 
 for manufacturing. "With these, she can carry them on 
 successfully. By high protective duties, other sections of 
 the country, not having the same natural advantages, will 
 be led to introduce the same branches of industry,* and she 
 will find her severest competition at home ; while all parts 
 of the nation will be crippled by a false system, equally 
 against the laws of nature and value ; since protection, as 
 previously shown, puts the bad on the level with the good, 
 and destroys aU natural" tests of usefulness in production. 
 It should always be borne in mind, that protective duties 
 must be high enough to enable the home manufacturer to 
 get, at least, average profits ; that is, such profits as com- 
 modities in general afford. He will not make broadcloth 
 unless it is as profitable as. any other branch of trade, manu- 
 facture, or agriculture. Nothing short of this is protection ; 
 and the duties must be carried upwards, until they arrive 
 at that point in which those who are manufacturing to the 
 greatest disadvantage can make average profits ; otherwise 
 there will be a call for higher duties. This is one of the 
 * This Is already becoming quite apparent. 
 
CHAP. VI.J BALANCE OF TRADE. 117 
 
 practical difficulties of protection. Tlie higher the duties 
 imposed, the greater will be the rush into the protected 
 branch of industry ; and none will be satisfied until they 
 make the business profitable, however imperfectly con- 
 ducted. Hence there will be a constant call for increased 
 diities. Witness the history of protection in the United 
 States, — a tariff in 1816, a higher one in 1820, higher yet 
 in 1824, still higher in 1828, with continued changes from 
 that time to this. 
 
 CHAPTER VI. 
 
 BALANCE OF TRADE. 
 
 What is meant by the balance of trade ? 
 
 An actual balance of trade is the difference between the 
 amount of values exported and the amount of values import- 
 ed. This seems a very simple proposition ; yet the question 
 is one of great complexity, from the fact that it is difficult 
 to determine with certainty whether the exports of a nation 
 do or do not actually equal the imports. Superficial ob- 
 servers resort to the financial returns made to the govern- 
 ment ; and finding, for example, that the imports of 1854 
 amounted to $304,662,381, while the exports were but 
 $278,241,064, leaving a difference of 126,321,317, they has- 
 tily conclude that the balance of trade was against this 
 country to that amount. Such a conclusion would not 
 have a sufficient foundation. 
 
 To understand this subject, we must notice that the 
 exports are stated at their value at our own custom-houses, 
 while the amount imported is stated at the value in foreign 
 countries.* If we suppose the amount exported in 1854 
 was on American account, and paid a profit of only nine 
 
 * Besides, exports are estimated at currency prices; imports, in gold 
 values, — a very wide difference under a depreciated currency. 
 
118 EXCHANGE. [BOOK IH. 
 
 per cent on the custom-house valuation, we shall find that it 
 ■will amount to $26, 041, 695, a sum very near the assumed 
 balance ; and, if so, the commodities exported actually 
 paid for the amount imported, and the supposed unfavor- 
 able balance is annihilated. As the goods exported should 
 sell for enough abroad, and as they do generally sell for 
 enough to pay all charges of freight, insurance, &c., with 
 reasonable commissions, say in all fifteen per cent, we may 
 justly infer that there was, in fact, a balance in favor of this 
 country in 1854. But the question whether there was or 
 was not an actual balance that year can only be determined 
 by ascertaining whether our exports generally sold for an 
 advance sufi&cient to pay for the imports. This is known 
 only to those engaged in or familiar with the results of 
 the export trade of 1854. The balance might have been 
 greater or less than what it appears from custom-house 
 statistics. 
 
 On the other hand, in 1855, our exports exceeded our 
 imports by 113,688,326. Does that show a balance in favor 
 of the United States ? Apparently ; yet there might have 
 been a loss upon our exports which would more than bal- 
 ance the 113,688,326. 
 
 Although the financial tables of the Secretary of the 
 Treasury do by no means decide the balance of trade, and 
 the custom-house returns are never conclusive evidence, 
 yet there are cases in which there is no reasonable 
 doubt on which side the balance is. In 1836, for example, 
 we exported one hundred and twenty-eight millions, and 
 imported one hundred and eighty-nine millions ; an excess 
 of sixty-one millions, making a difference of sixty per cent 
 over exports. In this case, there could be no doubt there 
 was a larger actual balance against the coimtry, because the 
 profits could not have been equal to the excess. So too, to 
 go further back, in 1816, the exports were fifty-two mil- 
 lions ; imports, one hundred and twelve millions ; excess, 
 sixty millions, or more than one hundred per cent. The 
 
CHAP. TI.] BALANCE OP TRADE. 119 
 
 unfavorable balance in both cases caused great distress by 
 the necessary exportation of specie. 
 
 Balance of trade how adjusted. 
 
 We have heretofore said that an unfavosable balance 
 must be liquidated with specie. This is the general fact ; 
 but it is not always disposed of in that way. For example, 
 the balance against the United States in 1853, as per Finan- 
 cial Report, was thirty-seven millions. Now, if this were in 
 fact an actual balance, a part of this might have been 
 extended to the next year, and paid in cotton or wheat ; or, 
 what is more probable, several millions of railroad or other 
 stocks might have been sent abroad and sold, and the bal- 
 ance settled from the proceeds. 
 
 If the commerce of a country is in a really prosperous 
 condition, the value of its imports will, in the long-run, 
 exceed its actual exports, because its export trade should 
 pay a profit. No country is enriched by trade, unless its 
 aggregate imports do exceed in value its exports. It is 
 no matter whether the excess of imports over exports is 
 brought into the country in specie or any other desirable 
 commodity, provided its own currency be a true standard 
 of value. 
 
 The trade of the United States for 1863 showed the fol- 
 „ lowing results: Exports (Financial Report, 1864), $350,> 
 152,125; imports, 1252,187,587; balance, 197,864,538. 
 The returns also showed an export of gold to the amount 
 of $82,864,482, an hnport of gold of $9,584,105, giving a 
 balance of $72,780,377. A considerable part of this gold 
 was, doubtless, sent abroad for safe keeping by timid capi- 
 talists, and not over-loyal citizens. The large balance of 
 seventy-two millions in favor of the United States was no 
 indication of a profitable trade that year ; quite otherwise. 
 The balance of gold exported in 1864 was ninety-one mil- 
 lions. Another fact, that throws additional conjecture upon 
 the apparent balance of trade, is, that false invoices are 
 used to an enormous extent at our American custom-houses. 
 
120 EXCHANGE. [BOOK III. 
 
 Whenever duties are charged upon the cost of the com- 
 modities, it is an object to have them invoiced as low as 
 possible. Fraudulent invoices are often made out abroad 
 and sworn to by the importers here, and thus the actual 
 value or amount paid for the foreign merchandise is not 
 accurately exhibited. The Eevenue Commissioners (see 
 their Report to the Secretary of the Treasury, January 29, 
 1866, page 45) estimate that the frauds at the New-York 
 Custom-House alone are from " twelve to twenty-five mil- 
 lions annually." The aggregate of these frauds throughout 
 the country has been estimated as high as forty millions per 
 annmn ; but, if they amount to only thirty millions, the 
 " balance of trade " is seriously influenced by them. 
 
 There is still another consideration ; viz., that the United 
 States are much indebted abroad, and a large simi is 
 required to pay the annual interest. This can only be paid 
 by our exports of merchandise or specie ; for both are alike 
 reckoned in our list of " exports." We owed 1500,000,000 
 abroad in 1860 (see Foreign and Domestic Commerce, 1863, 
 page 42, Treasury Report). The Comptroller of the Cur- 
 rency, in his Report for 1865, page 7, estimates the amount 
 of our securities sent abroad the last five years at 1713,000,- 
 , 000, — in all, then, $1,213,000,000. The interest on this 
 sum, at six per cent, will be 172,780,000 ;» and this must be 
 provided for in our exports. 
 
 Many considerations of this general character might be 
 brought forward ; but sufficient has already been said, we 
 trust, to show what the real nature of a balance of trade is, 
 and how difficult a matter it must always be to determine 
 with accuracy upon which side it actually is, and what its 
 amount. 
 
CHAP. I.] BARTER AND CUBRENOT. 121 
 
 PART SECOND. — INSTRUMENTS OF EXCHANGE. 
 CHAPTER I. 
 
 BARTER AND THE DIFFERENT FORMS OP CUERENCT. 
 
 We have discussed the principles upon wliich exchanges 
 are made. We now come to consider the instruments by 
 which they are effected. 
 
 These are of three kinds : — 
 
 1st, Barter. 
 
 2d, A common medium, or currency. 
 
 3d, Different forms of credit. ■* 
 
 No person produces every thing he wishes to consume. 
 Even in the savage state, men will obtain different products, 
 as they have skill and opportunity. These they will ex- 
 change among themselves in kind. 
 
 As the civilized state appears, the necessity for inter- 
 change of commodities increases. Every mechanic must 
 exchange his products with every other mechanic, and all 
 these with the agriculturist and fisherman ; so that ex- 
 change becomes one of the greatest departments of human 
 industry. But, under these circumstances, barter, or ex- 
 change in kind, becomes a very inconvenient and clumsy 
 mode of effecting the desired object. For example, the 
 farmer may wish to exchange wheat for a hat ; but the hat- 
 ter is already supplied : what, then, will the hatter accept ? 
 A table. The farmer must then go to the cabinet-maker, and 
 offer his wheat for a table. But the cabinet-maker is sup- 
 plied with wheat. He would, however, accept a pair of 
 boots. The farmer applies to the boot-maker, who happens 
 to wish for wheat and accepts the offer. "With the boots the 
 farmer gets the table, and with the table gets the hat which 
 he desired. 
 
122 EXCHANGE. [BOOK IH. 
 
 In such a state of. things, this was the only process by 
 which exchanges could be effected ; circuitous, and expen- 
 sive in time and labor, as it was. 
 
 We might have supposed a far more difficult case ; but 
 this is sufficient to illustrate the inconvenience of barter, or 
 the direct exchange of commodities. But there is still 
 another difficulty, of scarcely less magnitude. When arti- 
 cles to be exchanged became numerous, it would be found a 
 very intricate matter to establish satisfactorily the relative 
 value of each. For example, how many sheep shall be 
 given for a cow ? How many cows for a horse ? How 
 much corn for a bushel of wheat ? How much butter for a 
 gallon of molasses ? How many eggs for a pound of tea, 
 sugar, or coffee ? How many of any or all of these for a 
 cart, plough, spade, chair, table, &c., through an intermina- 
 ble series of exchanges ? 
 
 Under such circumstances, there could be no such thiag 
 as price, because there would be no common standard, to 
 which the value of all articles could be referred. 
 
 What, then, was wanted ? Evidently, some article which 
 all persons, either by common consent or the force of law, 
 shall accept for whatever they have to sell, and by which 
 they will measure the value of any thing sold. 
 
 That article would perform two important functions ; viz., 
 it would be an instrument of exchange, and a standard of 
 value : in other words, it would be money. 
 
 We learn the true nature of money, then, from its origin 
 and the functions it performs. These offices or functions 
 we must examine in detail. 
 
 1st, As a medium of exchange. This may be wholly con- 
 ventional. Any thing, which, by general consent or in 
 obedience to law, all receive in exchange, will answer the 
 purpose. So far as this function is concerned, it is of no 
 consequence whether the article has value or not: safety 
 and convenience are the only considerations of importance. 
 
CHAP. I.] BARTEB AND CUERENCT. 123 
 
 Money, in this respect, is simply a counter, token, or uni- 
 versal- equivalent. 
 
 2d, As a standard of value. Value is not conventional. 
 It attaches to all objects which are desired, but cannot be 
 had without effort or labor. Since the value of any thing 
 is its power in exchange, we say that nothing is valu- 
 able which will not command labor, or that which costs 
 labor. 
 
 " Value implies comparison, appropriation, estimation, measure. 
 In order that two things should measure each other, it is necessary 
 that they be commensurable ; and, in order to that, they must be of 
 the same kind." — Bastiat. 
 
 Therefore, if we would measure value, we must use an 
 article that has value in it. The measure must evidently 
 have the same quality as the thing to be measured, — 
 weight to measure weight, length to measure length, vol- 
 ume to measure volume, value to measure value. 
 
 The standard must be as nearly invariable as possible. 
 Aji absolutely invariable standard is unattainable, because 
 the standard itself must be subject to the same laws as the 
 objects to be measured ; that is, cost of production, supply 
 and demand, &c. 
 
 Hence we must take that for a standard, which, on the 
 whole and in the long-run, is subject to the least fluctua^ 
 tion. Of all objects of this kind, we shall see that the 
 precious metals are the least hable to great and violent 
 changes in value. 
 
 In examining the principle of barter, we were forced, by 
 its practical difficulties, to accept the resource of a universal 
 equivalent for all commodities. This, in its original form, 
 is money. But the course of civilized industry has intro- 
 duced several forms of such an equivalent, of which the 
 money, by which men first escaped from the difficulties of 
 barter, is only one. All these forms are classed as cur- 
 rency ; and therefore, in discussing the instruments of 
 exchange, next after barter we come to the subject of — 
 
124 EXCHANGE. [BOOK III. 
 
 CUEBENOT. 
 
 This is a general term for all the contrivances by which 
 society seeks to effect a general exchange of values, and 
 discharge pecuniary obligations. There are four distinct 
 kinds or species- of currency, each differing from the others 
 in important particulars. 
 
 1st, The first of these instruments is called money. Any 
 article, which, having a universally recognized value in 
 itself, all persons accept as an equivalent, or medium of 
 exchange, and which, consequently, becomes the standard 
 by which all other values are measured or determined, and 
 in which all pecuniary obligations are expressed and dis- 
 charged, is money. Being composed generally of the pre- 
 cious metals, it is often known as " hard-money currency," 
 but is more properly a value currency. Real money is 
 simply value in a form the most available for commanding 
 all other values, a service which all will accept for any 
 other kind of service, which measures all other services or 
 values most conveniently. 
 
 2d, The second kind of currency consists of written pro- 
 mises, made usually by governments, to pay money at a 
 distant or indefinite period, which nevertheless, by force of 
 law or other circumstances, are accepted as money, and 
 perform its general functions. The notes issued by the 
 treasury of the United States, and familiarly known as 
 " greenbacks," now (1865) in circulation, are of this de- 
 scription. 
 
 They form a strictly credil^ currency, but, in common par- 
 lance, are called paper money. 
 
 3d, A third description of currency is formed of writ- 
 ten promises to pay specie on demand, issued in excess 
 of the actual amount of specie, or money, in possession of 
 the promisors absolutely held for the redemption thereof. 
 These notes or promises are generally issued by corpora- 
 
CHAP. I.] BARTER AND CURRENCY. 125 
 
 tions, called banking institutions, and circulate, while cur- 
 rent, as money, performing all its functions. This is called 
 a MIXED cur'renct. 
 
 4th, A fourth kind of currency consists of written prom- 
 ises, payable on demand, issued by responsible parties, for 
 ths payiuent of which, in full, the specie is^ actually held in 
 trust by the promisors. As such a currency is precisely 
 adapted to aU the wants of the trading and business classes, 
 and fally combines convenience with safety, the two great 
 desiderata, it is with great propriety called a mercantile 
 currency. 
 
 Of the four kinds of currency, it will be observed, that 
 two, the first and fourth, are classed as value currency ; the 
 second, as credit; the third, as mixed, consisting of value 
 and credit. 
 
 The following is a brief recapitulation of the different 
 kinds of currency : — 
 
 I. Money i.e. , Specie. 
 
 II. Credit currency . . . i.e. . Promises without specie. 
 
 m. Mixed currency . . . i.e. . Promises with part specie. 
 
 TV. Mercantile currency . . i.e. , Promises with full specie. 
 
 After this statement and classification of the different 
 kinds of currency, it is proposed to examine each in detail, 
 and determine their several characteristics, and also the 
 influence of each upon the industrial interests and general 
 welfare of mankind. 
 
 No subject is more involved in mystery and uncertainty 
 in the popular mind than that of currency. This arises, 
 principally, from the fact, that the different kinds are con- 
 founded, and the whole matter thereby rendered incompre- 
 hensible. The general use of mixedrcurrency notes, which, 
 to a superficial observer, seem to possess all the attributes 
 of money, has a tendency to produce this result. 
 
 To obtain a clear and intelligent view of the subject, it ia 
 therefore quite necessary, that we divest it of all its usual 
 
126 EXCHANGE. [BOOK m. 
 
 environments and associations, and, for the time being, even 
 of the forms and terms with which we are familiar, and 
 regard the question as abstractly as possible. 
 
 CHAPTER n. 
 
 I. MONET. 
 
 Having examined the nature and functions of currency, we 
 shall now speak of the actual money of commerce, or the 
 universally accepted equivalent. 
 
 In all ages and countries, this has consisted of the pre- 
 cious metals, gold and silver, with the baser metals or alloys 
 for fractional purposes. 
 
 Local currencies have been various. Lacedsmon had 
 iron money. The Romans are supposed by many to -have 
 used cattle and sheep in the early periods of their history ; 
 and their coins bear the images of those animals, as indi- 
 cating their value.* 
 
 Tobacco was once currency, and a legal tender, in 
 Virginia. 
 
 The first currency legally established in Massachusetts 
 was bullets. The " General Courte ordered [March 4, 
 1635] that bulletts of a full boare shall passe currently for 
 a farthing a peice, provided that noe man be compelled 
 to take above 12* at a time." Again, it was enacted " that 
 merchantable beaver shall pass at X' the pound." In 
 1637, the " Courte ordered that- Wampumpege should pass 
 at six for a penny, for all sums under 12*." In 1640 and 
 1641, additional laws were enacted, making wampum a law- 
 ful tender. 
 
 Many expedients like these have, at different times and 
 
 different countries, been adopted to secure a temporary and 
 
 partial currency ; but from the days of Abraham, who paid 
 
 " four hundred shekels, current money with the merchants, 
 
 * Hence called pecunia, money, from pecus, a flock. 
 
CHAP, n.] MONEY. 127 
 
 for the field of Bpliron," to the present time, the money 
 used in commerce has always been composed of gold and 
 silver. These, and these only, have formed the universal 
 medium of exchange and standard of value. 
 
 The use of these metals arises from nothing conventional. 
 No international agreement was ever made respecting them ; 
 yet they are everywhere and at all times, without hesita- 
 tion, received in exchange for whatever any one may wish 
 to dispose of. They secure their currency simply by their 
 peculiar adaptedness to the purpose. 
 
 "What their peculiarities are we propose now to consider. 
 
 1st, They 'possess value, that is, have power in exchange. 
 They cost labor, and are objects of desire. They cannot be 
 had without labor, or an equivalent. We have already said 
 that the article used as a standard of value must possess 
 value in itself, since we can only compare value with value. 
 Gold and silver have this indispensable requisite. They are 
 subject to all the laws of value as truly as wheat or any 
 other commodity. 
 
 2d, These metals are stable in value ; that is, the most so 
 of known commodities. They are subject to no violent 
 changes, like flour or cotton: for example, wheat often 
 varies from twenty-five to fifty per cent in a few months. 
 They change in value, indeed, from age to age ; but so grad- 
 ually is this accomplished as to be quite imperceptible at 
 the time. 
 
 The discovery of the Western Continent, which opened to 
 the commercial world the accumulated treasures of Mexico 
 and South America, caused the greatest change known to 
 history; yet it is calculated, that from 1492 to 1650, a 
 period of one hundred and fifty years, gold and silver fell 
 only seventy-five per cent, equivalent to half of one per 
 cent per annum ; so that even this great change must have 
 been so gradual as to have inflicted little injury on individ- 
 uals, and could only have been appreciated by those holding 
 long annuities or similar securities. 
 
128 EXCHANGE. [BOOK HI. 
 
 3d, They are conveniently portable; the most so, in fact, 
 of all commodities existing in adequate quantity. One 
 pound weight of gold will ordinarily command, in exchange, 
 fifteen thousand pounds of wheat, thirty thousand pounds 
 of Indian corn, five tons of rice, or a ton and a half of 
 cotton. 
 
 4th, These metals are malleable. They can be wrought 
 into any shape, will receive and retain any impression, may 
 be divided into the minutest quantities, and again united, 
 mth the smallest possible loss. Hence they are admirably 
 adapted for coinage, or a great variety of alternate uses. 
 
 5th, They are of uniform quality. Gold and silver are 
 always and everywhere the same. Found in California, 
 Australia, or Russia, gold is everywhere gold. The iron 
 of different countries varies greatly. The copper of Siberia 
 is better than that of Germany, while that of Sweden is 
 better than that of Siberia, and that of Japan surpasses that 
 of Sweden. It is not so with the precious metals. 
 
 6th, They may be readily alloyed or refined. By alloy 
 they are made harder, and so adapted to use as money. 
 However alloyed, they can easily be restored to their origi- 
 nal purity without loss. 
 
 7th, They are indestructible by accident. Fire does not 
 consume them ; atmospheric influences cause no decompo- 
 sition : so that the gold and silver in use in the time of 
 the Ptolemies may form a part of the currency of the world 
 to-day. 
 
 8th, They are universally appreciated. The precious met- 
 als are regarded as beautiful and desirable in all countries, 
 and among all races, civilized or savage. The demand for 
 them is without limit. 
 
 9th, They are generally diffused. These metals are 
 found in every principal section of the globe, — Europe, 
 Asia, Africa, North and South America, and Australia. 
 
 10th, They are sufficiently plentiful. Not more than two 
 thirds of the gold and silver now in the possession of man 
 
CHAP. II.J 
 
 MONET. 
 
 129 
 
 is believed to be used as money, the balance being in plate 
 or other objects of utility and ornament. 
 
 11th, They are nearly inconsumable hy use. Tlie use of 
 almost all other commodities causes their rapid destruction. 
 Articles used as food or clothing, for example, disappear 
 entirely in a comparatively short period. Even iron, as 
 used for most purposes, — in railroads, agriculture, the me- 
 chanic arts, &c., — lasts only a few years. 
 
 With gold and silver it is quite diiferent, though the 
 exemption from waste is more remarkable in the case of 
 gold. Indeed, its ordinary and principal use can scarcely 
 be called consumption, it is so gradual. 
 
 It has been ascertained, from data carefully obtained in 
 the Bank of England, that gold in coin loses only 4.16 per 
 cent in one hundred years, or about one per cent in twenty- 
 five years. 
 
 The following comparison exhibits approximately the. 
 great difference in this respect between gold and other 
 commodities : — 
 
 Potatoes consumed within 
 
 "Wheat 
 
 Cotton 
 
 "Wool 
 
 Lead 
 
 Iron 
 
 Gold and silver in coin 
 
 say . . 
 
 . 
 
 
 average, 
 
 say 
 
 
 » 
 
 » 
 
 
 5! 
 
 » 
 
 
 )J 
 
 )j 
 
 
 » 
 
 )» 
 
 
 1 year. 
 
 2 years. 
 
 4 years. 
 
 5 years. 
 10 years. 
 20 years. 
 
 2400 years. 
 
 Investigations made at the United States Mint, as by Re- 
 port of .1862, showed that the wear and tear of gold and 
 silver used as coin was only as 1 to 2,400 ; that is, it costs 
 but one dollar to keep 2,400 dollars in circulation. Gold 
 half-eagles only as 1 to 3,500 per annum. 
 
 "When used for gilding and similar purposes, it is much 
 more rapidly consumed ; but the amount so employed is 
 very small; in comparison with the whole mass. "When 
 used in plate, the consumption is even less than in coin; 
 and a larger part of that which goes into jewelry returns 
 
 9 
 
130 EXCHANGE. [BOOK III. 
 
 into bullion in the lapse of time. So that we must esti- 
 mate the yearly consumption of gold, in all its uses, exceed- 
 ingly small as compared with the annual production. 
 
 COINAGE. 
 
 Having seen how admirably adapted the precious metals 
 are for use as money, we pass to a consideration of those 
 artificial arrangements by which they are still further and 
 more completely fitted for that purpose. 
 
 At first, these metals were used in ingots and bars, and 
 passed by weight. Whenever a pecuniary transaction was 
 made, scales were required to determine the quantity given 
 in exchange. 
 
 This was a clumsy and imperfect mode of payment ; for 
 there would arise the question of quality as well as quan- 
 tity, — of the pureness or fineness of the metal. This could 
 only be ascertained by assay ; and that could be accom- 
 plished only by persons having the necessary knowledge of 
 metallurgy, with apparatus for conducting the process. 
 
 It was therefore natural, that, at an early period, a con- 
 trivance was hit upon which obviated all dif&culties. 
 
 The bars, or ingots, designed for money, were first as- 
 sayed, and made of one degree of fineness. This degree 
 was called the standard. The metal thus assayed was then 
 divided into pieces, and the weight carefully ascertained, 
 and stamped upon each. These pieces were called coins ; 
 the process, coinage. 
 
 As this coinage involved great responsibility, it very 
 properly became the duty and prerogative of the govern- 
 ment. Each government established an institution for the 
 purpose, called a mint. To these mints the people carried 
 their gold and silver, and, by paying a very trifling seignior- 
 age, had the whole amount returned to them in coin. 
 
 In the United States, one-half of one per cent is now 
 exacted; but in some other countries, no seigniorage is 
 charged, the whole being done at the expense of the govern- 
 
CHAP. III.] CREDIT CURRENCY. 131 
 
 ment. The policy of this is quite doubtful. Government 
 should retain a slight compensation for two reasons : first, 
 a benefit has been conferred, for which the recipient should 
 pay a fair equivalent : additional value, within the particu- 
 lar country, has been given by tlie additional labor; gold 
 in the national coin being more useful than in bars. Sec- 
 ond, because coin should be a slight fraction less valuable 
 for mechanical purposes and for export than bullion ; other- 
 wise it will be wrought up into jewelry at home or shipped 
 abroad, instead of bullion, and thus an unnecessary waste 
 in coinage will be the conseqvience. 
 
 Such is the character of a currency composed entirely of 
 money, or that which has value in itself. Of all subjects, 
 this is one of the most simple, most free from all complexity 
 and mystery. No one can fail to understand it. Govern- 
 ment has not the slightest occasion to interfere with or 
 regulate it. It obeys certain natural laws, which cannot be 
 improved by man. All that government can usefully do is 
 to certify to the weight and fineness of the coinage. It has 
 no further concern with money. 
 
 The main point to be borne in mind, in relation to coin- 
 age, is, that government does not determine the value at 
 aU, but simply certifies to the weight and purity. 
 
 CHAPTER m. 
 
 n. CREDIT CURRENCY. 
 
 This we have already stated to consist of the promises 
 of government to pay money, which, by force of law or the 
 necessities of the people, are received as money. It is 
 simply the credit of the nation, used as currency. The 
 element of value does not enter into it at all. It is pre- 
 cisely the opposite of a value currency 
 
132 EXCHANGE. [BOOK III. 
 
 ITS CHARACTEEISTICS. 
 
 Such a currency may transfer debts, but it cannot pay 
 them. The creditor may accept the promises of the govern- 
 ment in place of that of an individual, but he receives no 
 value. So far as issued by the government and accepted 
 for taxes and other public dues, such notes are mere coun- 
 ters, used for cancelling reciprocal obligations. If such 
 notes are issued beyond the natural volume of the currency, 
 they can never be kept at par with specie, or circulate at 
 their nomiaal value. Gold, as compared with them, will 
 bear a premium, the amount of which will indicate the. 
 excess and depreciation of the currency, and the want of 
 confidence in the promisors. 
 
 This premium is the result of the operation of the laws 
 of value;. and no legislation of free government or edict of 
 despotism can permanently change it. Governors might as 
 well prescribe the height to which the tides of ocean shall 
 rise, as to restrict or reduce the premium on gold. 
 
 Such legislation is not only futile, but injurious, pro- 
 ducing, an effect just opposite to that intended. It disturbs 
 the market price of gold, destroys confidence in its actual 
 price, and, by exciting distrust, drives the premium far up 
 beyond its natural limit. 
 
 The experiment made by the Congress of the United 
 States in 1864 showed most conclusively the utter folly of 
 attempting to interfere with the laws of value. After the 
 " gold bill," so called, became a law, the premium rose at 
 once some fifty per cent above its previous rate. The 
 unwise act was speedily repealed, and the excessive pre- 
 mium it had caused fell off. 
 
 EFFECT OF CREDIT CUEEBNCT ON PRICES AND INCOMES. 
 
 A general rise of prices follows the introduction of a 
 credit currency, because it is always issued in excess of 
 
CHAP, ni.] CREDIT CUEEBNCT. 133 
 
 the natural volume of money ; and consequently, as prices 
 must, in the average, conform to the quantity of currency, 
 they will advance as it is increased. It is quite idle to 
 attempt to evade the operation of this law. When the 
 Secretary of the United States Treasury endeavored to 
 " float " his bonds by the issue of credit currency, he unfor- 
 tunately " floated " all the merchandise of the country at 
 the sanie time, so that the rise of prices compelled him to 
 pay double for all the government needed ; and hence he lost 
 at least one-half of all the bonds that were thus sold. 
 
 The effect on fixed incomes is very marked. Prom what- 
 ever source, fixed incomes are depreciated in value just in 
 proportion to the depreciation of the currency. But there 
 is one exception in the practical operation of this principle. 
 If the income received were to be expended entirely for 
 food, clothing, and other ordinary articles of merchandise, 
 the full depreciation of the currency would be felt. But 
 if, as would usuaHy be the case, a portion of it Vere used 
 for the payment of rent, the depreciation, in so far, would 
 be less operative. Neither the fee nor the use of real 
 estate rises in proportion to other things. 
 
 The price of real estate, and its use, would, however, 
 unquestionably advance to nearly the same extent as com- 
 modities in general, provided a credit currency were contin- 
 ued as the currency of the country for a long period, say 
 from one generation to another. This, however, never has, 
 and, in the nature of the case, is not likely to take place ; 
 credit currency being, necessarily, of limited duration. 
 
 Doubtless, investments have been made, especially in 
 large cities, that would not have been made but for the 
 great inflation in the currency of the United States during 
 the Eebellion ; but the price of such property has advanced 
 slowly, as compared with flour, clothing, &c.* 
 
 * That real estate in some large cities has much advanced, we are well 
 aware ; but, take the whole country through, it is doubtful if there has been 
 an advance of ten per cent. Indeed, none is visible in the country generally. 
 
134 EXCHANGE. [bOOK III. 
 
 A house in New York, worth twenty thousand dollars in 
 1859, was not worth fifty thousand dollars in 1864; but 
 twenty thousand dollars' worth of iiour, at prices of 1859, 
 would have brought fifty thousand dollars in 1864. Why 
 is this ? Because everybody believes that prices have not 
 permanently advanced, but wUl before many years, perhaps 
 before many months, decline. Therefore permanent invest- 
 ments will not be made at prices corresponding to those of 
 ordinary merchandise. This difference between real estate 
 and consumable commodities, ag influenced, by the expan- 
 sions and contractions of the currency, should be borne in 
 mind, as it will explain phenomena that wiU be presented in 
 our further inquiries. 
 
 EFFECT ON CONTKACTS, 
 
 A credit currency, it may be safely assumed, is always 
 redundant ; and, as such, its effect on contracts is twofold. 
 Obligations to pay money made with a specie standard, and 
 paid with credit currency, will impose a loss of value on the 
 creditor equal to the depreciation of the currency. Great 
 injustice and suffering resulted from this cause during the 
 progress of the American wars of the Revolution and of 
 the Rebellion. 
 
 On the other hand, contracts made to pay money during 
 the existence of a credit currency, but which mature and 
 are discharged under a value currency, wiU. subject the 
 debtor to the loss of all the difference in the value of the 
 two currencies. Great injustice and suffering resulted from 
 this source, on the recognition of American independence, 
 in the last century, among the first of which may be reck- 
 oned the Shay's Rebellion of Massachusetts. At what time, 
 and with what results, the return to specie payments at the 
 present period will next be made, it is yet impossible to 
 predict. 
 
 Historically, it is found to be true, that a credit currency 
 has never yet been kept within the natural limit of the 
 
CHAP. III.] CBEDIT CUERENCT. 135 
 
 value currency of the country in -wliich it was established. 
 The "continental money" of the American Eevolution; the 
 assignats of the French Revolution ; the bank money of 
 England during the Napoleonic wars ; and, lastly, the green- 
 backs, or treasury notes, issued during the late Rebellion, 
 and the present paper currency of Russia, are illustrations 
 in point. 
 
 The French assignats were issued in such excess that 
 their utter repudiation by the government became a neces- 
 sity. So of the "mandates" which followed them. The 
 " continental money " became entirely worthless. The notes 
 of the British Bank, which depreciated during the great 
 struggle with France, were finally restored to par at the 
 cost of immense suflfering and loss to the commercial and 
 busmess classes. 
 
 The paper issues of the American government will, 
 doubtless, be paid ; but it will be at an incalculable amount 
 of bankruptcy and ruin to those who are greatly indebted. 
 
 The treasury notes, now acting as currency, will be 
 redeemed ultimately ; that is, be taken in for taxes and other 
 dues to government, and thus annihilated. They could not 
 be paid in coin, but are sufficiently certain to be cancelled 
 in the way just indicated. 
 
 A credit currency never has been regulated in such a 
 manner as to keep it on a par with specie, and probably 
 never will be. The necessities of government are so press- 
 ing that the temptation to increase the amount becomes too 
 great for resistance. As prices rise in consequence, the 
 currency becomes of less and less value, that is, has a 
 decreasing power in exchange, so that the inducement to 
 issue becomes continually stronger as the volume expands. 
 Unless this course can be arrested, final bankruptcy is 
 sure. 
 
 But the issue of a legal-tender credit currency is, under 
 any circumstances, a great wrong,- and can never be justi- 
 fied except in the most extreme cases of national peril; 
 
136 EXCHANGE. [BOOK m. 
 
 and, even in those instances where it has been defended as 
 an indispensable measure, events have generally proved it 
 to have been a mistaken and shor1>sighted policy. 
 
 CREDIT CUEEENCT A FORCED LOAN. 
 
 When a government issues its notes as currency, and 
 makes them a legal tender, or authorizes other parties to do 
 BO, it creates a forced loan. 
 
 All creditors are compelled to receive these notes for 
 ■whatever may be due to them, which is equivalent to mak- 
 ing a loan to the government to the amount so received ; 
 and those who sell their property are obliged to take these 
 promises, since there is no other currency in use, so that 
 the whole amount thus put into circulation becomes a com- 
 pulsory loan to the government. 
 
 CREDIT CUEEENCT A DIRECT TAX. 
 
 As soon as legal-tender credit notes begin to depreciate 
 in value, or, in other words, as soon as commodities rise in 
 consequence, each person who receives them pays a tax 
 equal to their depreciation while in his possession. For 
 example, if he receives a ten-dollar note, which will bring 
 him but eight dollars' worth of merchandise at the gold 
 price, he has contributed two dollars to the government. 
 So, of course, with all who receive notes in payment for 
 debts contracted prior to the issue of such currency. 
 When, as in the case of the " continental money; " these 
 •notes become utterly worthless, those through whose hands 
 they have passed have contributed, at least nominally, the 
 whole amount. We say nominally ; for the contribution 
 thus forced from the people is not in fact to the full amount 
 in actual value. 
 
 For illustration, the government issues one hundred mil- 
 lions of its notes at first ; and for this, as prices have not 
 been raised, it receives an equal amount in value. It issues 
 a second hundred millions ; but prices have advanced in 
 
CHAP. III.] CREDIT CDBBKNCT. 137 
 
 consequence of the first issue, we will suppose, fifty per cent, 
 so that the government gets hut 166,666,666 in value. A 
 third issue is made of one hundred millions ; hut prices have 
 gone up one hundred per cent, and the government gets hut 
 fifty millions in value. Ajiother issue of one hundred mil- 
 lions carries prices up to one hundred and fifty per cent, 
 and only forty millions is realized in value. This is not 
 intended as a statement of the precise fact, but to exhibit 
 the natural operation of such issues. That it is not exag- 
 gerated, appears from what is well known, that the United 
 States government sold many millions of its bonds for that 
 which was equivalent to but forty per cent in gold. The 
 result is shown in the following recapitulation: — 
 
 First $100,000,000, issued at par value, .... $100,000,000 
 Second $100,000,000, issued at 33^ per cent dis- 
 count 66,666,666 
 
 Third $100,000,000, issued at 50 per cent discount 60,000,000 
 Fourth $100,000,000, issued at 60 per cent dis- 
 count 40,000,000 
 
 Government receives in value for $400,000,000 
 
 issued $256,666,666 
 
 Loss to the government, or people 143,333,334 
 
 $400,000,000 
 
 The people must finally pay in taxes $143,333,334 more 
 than the government received in value, if the debt is paid ; 
 but, if it should be repudiated, the loss of actual value to 
 the people would be but $256,666,666, the balance being 
 merely the enhanced prices they have received for commod- > 
 ities furnished. But, unfortunately, those who received the 
 extra prices and those who will lose by repudiation may 
 not be the same identical persons. 
 
 The foregoing illustration shows the operation or general 
 result upon the community of a credit currency as a direct 
 tax : but the effects upon different individuals are diversified 
 in every possible manner ; one man losing, another gaining 
 by it, according to the position in which the parties are 
 
138 EXCHANGE. [BOOK HI. 
 
 found at the time tliey were compelled to accept such a cur- 
 rency instead of money. The laws of value having been 
 violated, universal chaos in all monetary affairs is the inevi- 
 table consequence. 
 
 The final result of the issue of an inconvertible currency, 
 then, is, that, if it is never redeemed, the taxation it imposes 
 is most unequally and uiyustly distributed ; if it is finally 
 paid, then the taxation is not only unfairly distributed, but 
 the amount vastly increased, since the expenditures of the 
 government have been largely enlianced by it. It does not 
 admit of question that a large part of the debt of the 
 United States represents expenditures made solely to meet 
 the excessive prices caused by a credit currency, especially 
 in the years 1863-5, when the premium on gold averaged 
 nearly seventy per cent, and for a considerable period, 
 when the heaviest expenditures were made, as high as one 
 hundred and fifty. Of course, the taxation of the country 
 will be correspondingly increased for the paymeiit of this 
 excess. 
 
 CHAPTER IV. 
 
 III. MIXED CUEEENCT. 
 
 Mixed currency is a modern invention, as yet known 
 only to a small part of the human race, and but partially 
 .understood even in those countries into which it has been 
 introduced. 
 
 The Bank of England, the parent of all mixed-currency 
 institutions throughout the world, was established in 1694 ; 
 but its operations were so limited, and its influence so par- 
 tially felt, during the first century of its existence, that the 
 character of the currency it issued was hardly appreciated. 
 This bank made a grand suspension in 1796, and continued 
 in that state for over twenty-three years. This was the 
 
CHAP. IV.J MIXED CURRENCY. 139 
 
 fii'st occurrence* which demonstrated practically the true 
 nature of this kind of currency. 
 
 If we carefully observe the composition of a mixed cur- 
 rency, we shall find it to consist of promissory notes issued 
 by individuals or corporations legally authorized to do so, in 
 excess of the actual specie held for their redemption. 
 These notes form the circulation or currency, and consist 
 wholly of paper ; yet, as they profess to be convertible, they 
 have the same power in exchange as the specie itself, so 
 long as confidence in the ability and integrity of the promi- 
 sors remains unimpaired. 
 
 This is rightfully called a mixed currency, because it is, in 
 fact, composed in part of value and in part of credit. So 
 far as specie is held for the payment of these notes, this 
 kind of currency is actually convertible, and equivalent to- 
 money ; but, in so far as the credit element exceeds the 
 specie, it is only a promise to pay money, and is inconverti- 
 ble. A mixed currency, therefore, can only be regarded as 
 partially convertible ; the degree of its convertibiUty depend- 
 ing upon the proportion the specie bears to the notes issued 
 and the deposits. It is this proportion of specie, whatever 
 it may be, which determines the quality of this kind of 
 bank-note circulation. Its quality is the great question of 
 interest to aU who use this kind of currency ; and of that 
 we propose now to speak. 
 
 THE QUALITY OP A MIXED CURRENCY. 
 
 This is by far the most important matter in relation to a 
 mixed currency. What is thff" proportion of specie held for 
 its conversion ? To ascertain this, we must know, on the 
 one hand, the amount of notes in circulation, and the in- 
 scribed credits, that is, the deposits ; and, on the other, the 
 amount of specie in bank. We have naught to do with any 
 other inquiry, so far as the quahty of the currency is con- 
 
 * The bank suspended for two years, very shortly after its organization ; 
 but its capital and operations were then too limited to occasion much notice. 
 
140 EXCHANGE. [BOOK III. 
 
 cerned. We have no occasion to make such an inquiry in 
 regard to money, for that was value in itself, and needs no 
 conversion ; nor in relation to a purely credit currency, for 
 that does not profess convertibility : but a mixed currency, 
 to be reliable and beneficial to the public, must be what it 
 proclaims itself to be ; viz., convertible on demand into coin; 
 and therefore a sufiiciency of coin should be held to secure 
 that object. 
 
 And here it is necessary to distinguish carefully between 
 the convertibility and the redeemableness of a currency. 
 The first may be uncertain or impossible, while the last 
 may be sure. A bank may be perfectly solvent, while its 
 ciirrency is almost entirely inconvertible. By convertibility, 
 then, we understand the power of the bank to exchange 
 its promises for specie on demand ; by redeemableness, its 
 power to liquidate or discharge its obligations some time or 
 other, by the resources it may possess for ultimate payment. 
 
 For example, a bank has promised to pay one hundred 
 thousand dollars in specie, while it has only ten thousand 
 dollars in specie to pay with. The same bank has demands 
 against individuals, for their notes discounted, to the 
 amount of two hundred thousand dollars. Now, it is cer- 
 tain that this bank can convert only ten thousand dollars of 
 its bills ; but it can, if sufiicient time is allowed, redeem the 
 whole amount, by taking in its own notes in exchange for 
 those of its debtors. The power of the bank ultimately to 
 redeem or cancel its notes is amply sufficient ; though, for 
 the conversion of them into specie, it has the ability only 
 to the extent of one-tenth. This point needs to be well 
 understood and remembered, because, as we shall have 
 occasion to show, the difference between the redemption and 
 conversion of a currency is a matter of the utmost impor- 
 tance to the business world, and the former cannot be made 
 a sufiicient substitute for the latter. This is evident from 
 the following consideration. 
 
 A bank-note converted into coin, the money still exists 
 
CHAP. IV.] MIXED CURRENCY. 141 
 
 in circulation : a bank-note, redeemed by receiving it for 
 indebtedness to tlie bank, is taken out of circulation ; tbat 
 is, it ceases to be currency, and, for the time being, is prac- 
 tically annihilated. The circulating mediuin of the country 
 is diminished to that extent. 
 
 To illustrate this point, and show how much depends 
 upon the quality or convertibility of a mixed currency, we 
 propose to take that of the United States as an example. 
 
 In doing this, it will be indispensable that we refer to the 
 statistics of banking institutions, and use the terms com- 
 monly employed by them ; and therefore we now proceed to 
 define them. 
 
 LIABILITIES OP A MIZED-CTXBRBNCT BANK. 
 
 1. Capital Stock. — This is the sum total of all the 
 amoimt paid into the bank, to constitute its means of 
 doing business. 
 
 2. Circulation. — This consists of notes of the bank, of 
 diiferent denominations, payable on demand, signed by its 
 ofl&cers, and issued to circulate as money. 
 
 3. Deposits. — These include all sums, from whatever 
 source, that stand on the books of the banks to the credit 
 of individuals. They are properly called inscribed credits : 
 they are nothing more or less. They are all legally payable 
 on demand, in specie, to those persons in whose names they 
 stand. 
 
 A more fiill description of their nature and effects wiU 
 be given hereafter. 
 
 Bank Balances. — " Due to other banks " and " due from 
 other banks " are terms used in the ojfficial returns made to 
 the Treasury Department of the United States. 
 
 They explain themselves. Banks, like individuals, have 
 open accounts with each other. These, in the aggregate, 
 must balance each other ; but there is often a considerable 
 apparent difference, arising from the fact that large sums 
 are constantly in transitu. 
 
142 EXCHANGE. [BOOK IH, 
 
 As affecting the character of a mixed currency, these 
 balances are an important item, because tliey form the most 
 explosive and dangerous element. They are " deposits " in 
 their nature, certain to be drawn in any sudden emergency. 
 This was strikingly illustrated in the autumn of 1857. At 
 that time, the banks in the city of New York owed some 
 sixty millions of dollars which had been left with them by 
 distant banks in order to meet their own liabilities. When 
 the pressure came on, in September and October of the year 
 mentioned, these banks began, of necessity, to call in their 
 balances. 
 
 This placed the New- York banks in a position of great 
 difficulty. To answer these calls would require a large part 
 of all their means ; while, at the same moment, the mer- 
 chants and business men of the city needed all the resources 
 they could command. But the banks must meet the drafts 
 made for their balances, or suspend at once ; and, accord- 
 ingly, were compelled to cut off aU discounts, or loans, to their 
 regular customers. This state of things could not be long 
 endured ; and the merchants of the city, being soon driven 
 to desperation, began to draw upon their own deposits for 
 specie ; and thus a general suspension took place, not only 
 in the commercial metropolis, bilt through the country. 
 
 These balances, as they exist extensively in all great 
 cities, form the train that ignites the magazine, and causes 
 an instant and general explosion. 
 
 The Bank of England was compelled, in 1847, to obtain a 
 suspension of the act of 1844, by the threat of the banking 
 houses to withdraw their balances, and again in 1857. 
 
 Other Liabilities. — These consist of various obligations, 
 which banks incur in the course of their transactions with 
 the public and each other. They are not large in the 
 aggregate, as compared with their aggregate liabilities, but 
 must be taken into the account. They may be immediate 
 or remote liabilities, but are mostly immediate. 
 
CHAP, rv.] MIXED CURRENCY. 143 
 
 RESOURCES OP A MIXED-CURRENCY BANK. 
 
 Loans. — This item includes the sum total due the bank 
 from its customers for discount and advances, and for 
 which the banks hold notes or other obligations, payable at 
 some future time ; say, from one day to four or six months, 
 as the case may be. 
 
 Stocks. — Banks are large purchasers of the various State 
 and national stocks, and also those of towns, cities, rail- 
 road companies, &c. The whole amount so held is included 
 in the term " stocks." 
 
 Heal Estate. — A place of business being indispensable to 
 the operations of banking, buildings are erected for such 
 purposes. These, being often beyond the needs of the bank, 
 are rented in part. 
 
 Other Investments. — A general term that includes all 
 kinds of property the bank may hold, from necessity or 
 choice, not embraced in any preceding title. 
 
 Notes of other Banks. — As banks, in the course of busi- 
 ness, are constantly receiving each other's notes, they must 
 necessarily have, in the aggregate, a large amount, which 
 appear among their assets. Notes thus held in no essen- 
 tial particular affect the general character of the currency : 
 they only concern the relations of the banks to each other. 
 In their nature, they do not differ from other notes in circu- 
 lation : they are held by corporations, instead of individuals. 
 They would not assist a bank in meeting immediate de- 
 mands, as they are not legal tender. 
 
 Cash Items. — Many banks have the practice of reckoning 
 certain assets they hold as equivalent to cash, and class 
 them as " cash items " in their returns. For example, a 
 bank may hold a check upon another bank for a given sum, 
 which, in its account with that bank, and for many other 
 purposes, may be equally available for the time being, with 
 money actually in hand. Checks drawn by individuals on 
 
144 EXCHANGE. [book III. 
 
 other banks, foreign exchange, sight drafts, and the like, 
 are often reckoned among these items. But, whatever their 
 origin or character, they add in no degree to the strength 
 of the currency. They may help the individual bank that 
 holds them, as compared with the debtor banks, but not the 
 general mass. 
 
 Reserved Profits. — Although no such item appears in the 
 returns published by the national government, it is one of 
 some importance. In most banks, it is customary to reserve 
 a certain sum from the profits of each year, to ensure against 
 unexpected losses or contingencies. In some cases, this 
 reserve is large ; in others, small. In Massachusetts, in 
 1863, the amount so reserved was nearly five millions, equal 
 to eight per cent on the capital. This, while it does not in 
 any way change the character of the currency, gives the 
 bank greater ability to make loans. It is, for the time 
 being, an increase of banking capital. It adds nothing to 
 the convertibility of current notes. 
 
 With this explanation of the terms employed, we proceed 
 to give such statistics of the banks of the United States as 
 shall exhibit the character of the currency they issue. 
 
 The first point to be noticed is the aggregate capital of 
 these banks, which we find to be $421,880,095, on the 1st 
 of January, 1860. We have selected that point of time, be- 
 cause the country was then undisturbed, and the currency 
 in its natural condition. This capital, as we have already 
 explained, is the amount which the banks have at their com- 
 mand, and which it is their business to loan out to the pub- 
 lic ; and, let it be recollected, this is all which they can loan, 
 except their own credit, issued in the form of bank-notes, 
 or inscribed in their books as " deposits," in exchange for 
 the notes of individuals or business firms and corporations. 
 
 The next point to be noticed is the aggregate of all the 
 assets or property of these banks ; and by ascertaining this, 
 and subtracting therefrom the capital, as before stated, we 
 shall find to what extent the banks have loaned their credit, 
 
lOHAP. lY.] MIXED CURRENCY. 1^5 
 
 and, of course, to what extent credit enters into the cur- 
 rency. Tlie statistics which show this, present tlie following 
 result : — 
 
 The entire property in possession of the banks, at 
 
 this time, was $887,789,762 
 
 From which deduct the aggregate capital . . . 421,880,095 
 
 Total credit issued by the banks $465,909,667 
 
 On this amount the hanks were receiving interest, or in- 
 come beyond that received for their actual capital. 
 This " total credit" issued by the hanks was — 
 
 Its circulation $207,102,447 
 
 Deposits 253,802,129 
 
 Total currency $460,904,576 
 
 It will be observed, that the " total credit " does not ex- 
 actly correspond with the " total currency." This may be 
 accounted for by the consideration that the item of " reserved 
 profits," though given in the returns of some of the State 
 banks, are not noticed in the returns made to the general 
 government ; so that, as those " profits " increase the actual 
 capital of the banks, some unimportant discrepancies may 
 be found in the accounts. 
 
 This remarkable difference, then, between the capital of 
 the banks and their property in possession,, is the first thing 
 to be noticed in regard to the mixed-currency system, be- 
 caiise it shows how it is that large profits may be made upon 
 mixed-currency banking. Interest is obtained upon twice 
 the amount of actual capital. This income, however, is 
 not uniformly distributed among the banks acting under the 
 system. Some obtain more ; others, less. 
 
 We also see why it is that such banks must be constantly 
 desirous of increasing their loans,' by issuing' their own credit 
 in the shape of circulation and deposits. The more they 
 can get out, the larger the income. This is the motive power 
 that ensures the constant expansion of a mixed currency to 
 
 10 
 
146 EXCHANGE. [BOOK m. 
 
 its highest possible limit. The hanks -will always increase 
 their indebtedness when they can, and only contract it when 
 they must. 
 
 These facts show, too, why a mixed currency exists at 
 all; viz., because those who create it make a profit both on 
 their capital and credit, and as much on the latter as the 
 former. 
 
 But still another view of the currency is necessary, to 
 show the preponderance of the credit over the value element 
 in the actual currency : — 
 
 1860. Circulation, as before $207,102,477 
 
 Deposits 253,802,129 
 
 Whole currency - $460,904,606 
 
 Specie, or value ; . . 83,594,537 
 
 Pure credit $377,310,069 
 
 This will give eighteen cents and one mill on the doUar 
 as the value element, and eighty-one cents and nine mills as 
 the credit element, in the entire currency ; credit being to 
 value as more than five to one. 
 
 But yet another view of the system is necessary, if we 
 would understand the true position of the banks in relation 
 to each other, in case of an actual demand for specie, occa- 
 sioned by want of confidence or demand for exportation. 
 
 Immediate liabilities of the banks of the United States, 
 I860: — 
 
 Circulation $207,102,477 
 
 Deposits 253,802,129 
 
 Due other banks 55,932,918 
 
 Other liabilities ^^'^^^'^^^$531,499,339 
 
 Immediate resources : — 
 
 Specie $83,594,537 
 
 Cash items 19,331,521 
 
 Notes of other banks 25,502,567 
 
 Due by other banks 67,235,457 
 
 ■V f /!• . T VT.- °' ' 195,664,082 
 
 Excess 01 immediate habuities over immediate re- 
 
 , sources $335,735,257 
 
CHAP. IV.] MIXED CURRENCY. 147 
 
 From this statement we perceive tlie real position of the 
 banks in regard to the convertibility of their currency. They 
 owed on demand 1335,735,257, which they had no imme- 
 diate means in their possession to meet ; but tliey held the 
 following assets, or ultimate resources : — 
 
 Loans $691,945,580 
 
 Stocks 70,344,343 
 
 Real estate 30,782,131 
 
 Other investments . • 11,123,171 
 
 Total . $804,195,225 
 
 After deducting the excess of immediate liabilities, 
 
 as above 335,735,257 
 
 Surplus $468,459,968 
 
 This would seem a sufficiently large margin to guarantee 
 the ultimate redemption of the bank currency ; but docs it 
 secure its immediate convertibility ? That is the point ; 
 and the answer must depend upon the question, whether 
 the banks can realize from their assets (loans mainly) as 
 fast as the redemption of their deposits and notes may be 
 called for. If not, they must suspend. Their loans are on 
 time, from one day to six months ahead, and therefore may 
 not be actually due, so fast as the necessities of the banks 
 may require ; but, even if they should mature fast enough, 
 the practical question would still arise, whether, if the banks 
 take in their notes and refuse to put them out again, and 
 decline to make their usual loans, as in the emergency of a 
 large demand for specie they certainly must, how will it be 
 possible for the debtors of the banks to meet their pay- 
 ments ? If the banks could stop their loans just when they 
 pleased, they might perhaps save themselves from dishonor : 
 but they cannot do this, because, unless they continue to 
 make discounts, their customers will certainly fail, since 
 they rely upon discounts to meet their obligations as they 
 become due. 
 
148 EXCHANGE. [gOO£ in 
 
 CHAPTER V. 
 
 ANALYSIS OF DEPOSITS. 
 
 Our analysis of mixed currency will be far from complete, 
 if we do not give a full description of the origin and charac- 
 ter of deposits, as forming an element most dangerous to such 
 a currency, and generally ve'ry mysterious in the popular 
 understanding. 
 
 In the currency of -the United States, deposits constitute 
 the largest item, considerably exceeding the circulation. 
 
 The nature of these deposits has, until Within a very few 
 years, been a matter of serious disagreement amongst those 
 who ought to be well acquainted with their nature and 
 effects. To present the subject in such a light that it shall 
 be clearly understood, we must carefully examine it in all its 
 details. 
 
 First, What are deposits ? We have already defined 
 them as credits given to individuals in the books of the 
 banks, for which they are authorized by law to demand 
 the specie. They indicate what the banks owe on account. 
 
 Secondly, How do they arise ? In various ways. 
 
 1. A customer may deposit coin, and have the amount 
 passed to his credit. The proportion thus deposited is infi- 
 nitesimally small, compared with the aggregate deposits. 
 
 2. He may deposit checks, drawn by himself or others, 
 on other banks. 
 
 3. He may deposit the notes of the same or other banks. 
 
 4. He may deposit the notes of individuals, or bills of 
 exchange running to maturity ; and, when they are collected, 
 the amount will be passed to his credit. 
 
 5. The customer may get his own notes, or the notes of 
 others, discounted at the bank, and the amount is passed to 
 his credit; and this last is the origin of the greater part of 
 all deposits. 
 
CHAP, v.] MIXED CUREENCY. 149 
 
 Of these different kinds of deposits, it will be observed 
 that only one., and that a small one, was in specie ; and yet 
 the bank has promised to pay specie on demand alike for 
 all. But it must be observed, that, while all these stand 
 legally on the same basis, as a matter of fact they are 
 practically held by the banks upon different conditions, 
 expressed or implied. They may be divided into three 
 kinds : — 
 
 First, Permanent or compulsory deposits, made by busi- 
 ness men wishing for bank accommodations, in order to 
 secure larger loans. 
 
 Second, Fiduciary or trust deposits, made wholly for 
 temporary safe keeping, by executors, guardians, treasu- 
 rers of corporations, &c., who are receiving funds to be paid 
 out, or invested at a future period. 
 
 Third, Active deposits, made by business men, to be 
 withdrawn to meet their current payments. 
 
 It will be necessary to explain these different deposits. 
 
 The permanent or compulsory deposits are not used at 
 all by those who make them. They are made with the tacit 
 understanding that tliey are to remain in the bank, and not 
 be drawn upon. They are made to secure favors from the 
 bank, and in order to show a " good account." No bank, 
 perhaps, compels its customers, by any law or rule, to do 
 this ; but custom in such a case is as imperative as law. 
 Banks are conducted wholly with reference to profit, and 
 the most profitable accounts will secure the most liberal 
 discounts. 
 
 These deposits constitute a permanent loan to the banks, 
 without interest ; and the banks can loan the same to their 
 customers upon interest. It is one of the forms in which a 
 bank may secure extra interest in a legal way ; but it is 
 done at the expense of those who make the deposits. 
 
 This kind of deposits forms a very dangerous element in 
 the mixed-currency systeni, for the reason, that, when the 
 merchants of any great city are driven to desperation, they 
 
150 EXCHANGE. [bOOK IJl. 
 
 may demand these deposits in specie, and then the banks 
 must suspend. This was done in New York in October, 
 1857, as before stated. The merchants saw clearly, tha^, 
 unless the banks would make discounts, they could not 
 meet their engagements. The banks refused to do this, 
 because they could not, and continue to pay specie. The 
 merchants then, by concerted action, called for their depos- 
 its ; and the banks themselves succumbed. 
 
 This will always be re-enacted in a time of great pressure, 
 if the mixed-currency system is continued. It is the only 
 remedy which the mercantile interest has within its power. 
 It is properly used, because the banks have no right to make 
 promises which they know perfectly well they cannot keep. 
 
 Another objectionable consideration is, that these deposits 
 greatly and unnecessarily enlarge the immediate liabilities 
 of the banks, and give them a frightful preponderance over 
 the immediate means of payment. This injures the credit 
 of the banks in times of pressure. All sagacious financiers 
 look with suspicion on institutions owing ten or fifteen dol- 
 lars on demand for every dollar they have in their posses- 
 sion. On tlie 29th of August, 1857, the banks of the city 
 of New York owed for eighty-four millions for deposits and 
 nine millions for circulation, — in all, ninety-three mil- 
 lions, — and had but nine millions of specie. 
 
 Here, perhaps, it is proper to remark, that this kind of 
 deposits is probably unknown in any other country than the 
 United States. In England, for example, the rate of inter- 
 est is not arbitrarily fixed by government, but fluctuates 
 from time to time, according to the laws of currency and 
 the demands of trade. Consequently, there is no occasion 
 for this indirect mode of obtaining extra interest, so com- 
 mon in some, if not all, the commercial cities of the Ameri- 
 can Union. 
 
 Compulsory deposits mean, simply, extra interest'; but 
 that interest is paid in a manner most burdensome to the 
 depositors, and most dangerous to the banks. The former 
 
CHAP. T.] ANALYSIS OP DEPOSITS. 151 
 
 must lie out of a considerable part of capital which they 
 need in their business ; the latter must enlarge their de- 
 posits to a most unreasonable extent, and place themselves 
 at the mercy of the depositors in any time of severe pres- 
 sure or panic. 
 
 Of the second class of deposits, viz. those on trust or for 
 safe keeping merely, it may be said, that they are perfectly 
 legitimate, and may, to a certain extent, be loaned by the 
 banks with safety. They should be so loaned for the advan- 
 tage of the public, and thus no capital be left unemployed. 
 An obvious benefit arises to all parties : the depositor has 
 his money securely kept, the borrower has the use of it, 
 and the bank rightfully gets interest upon so much of the 
 sum as it has loaned. 
 
 The third class of deposits may be described as follows : — 
 
 (a) A biisiness man, who is making sales each day, will 
 receive, in payment, notes of all the different kinds in cir- 
 culation. He will also receive checks on different banks. 
 All these he will deposit in bank ; and the amount is passed 
 to his credit, and becomes a bank deposit. 
 
 (J) He will also receive notes of hand, drafts, and biUs 
 of exchange, in payment. All these, when nearly due, he 
 wiU deposit in bank ; and, when paid, they are passed to his 
 credit. 
 
 (c) Or, if he desires to anticipate the payment of such 
 notes, he may ask the bank to deduct the interest (and 
 exchange, if there be any), and place the amount to his 
 credit ; and this the bank wiU, in ordinary circumstances, 
 be ready to do ; and the amount so passed to the credit of 
 the customer will constitute a part of the deposits of the 
 bank. 
 
 ARE BANK DEPOSITS CUEEENCT ? 
 
 Lord Overstone, one of the best authorities, has main- 
 tained the negative ; but most writers * in this country take 
 
 * We do not know of any intelligent writer in this country who now 
 denies that deposits are as truly currency as the circulation itself. 
 
162' fiXCHANGE. [book III. 
 
 tlae affirmative side of the question : indeed, there are, at the 
 present time, few, if any, who doubt that deposits are cur- 
 rency. The New-York Board of Currency has given its 
 Verdict unequivocally as follows : " They constitute at this 
 time five-sixths of the active currency of this city" See the 
 official report of that association for November, 1858. No 
 array of authorities, however, but an examination of facts, 
 should determine the question. 
 
 Deposits are an instrumentality by which by far the 
 greatest amount of values are transferred in commercial 
 centres. They discharge debts, purchase commodities, and 
 perform all the functions of currency. 
 
 For example, A has a deposit in the Merchants' Bank. 
 He purchases of B a bill of sugars, amounting to ten 
 thousand dollars, and pays for the same with a check on 
 that bank, with which B either draws the notes or specie of 
 the bank, or has the check passed to his credit by the bank« 
 This transaction has been equivalent to the transfer of ten 
 thousand dollars in value from one party to the other. 
 
 If A owed B a note of ten thousand dollars, he might pay 
 it in the same way. 
 
 Now, what difference did it make to A whether he had ten 
 thousand dollars of bank-notes in his till, or an equal 
 amount to his credit in the bank ? Clearly, not the slight- 
 est. One was as truly currency as the other. If A was 
 pondering the question whether he should purchase the 
 sugar for cash (i.e., immediate payment), did not the con- 
 sciousness that he had ten thousand dollars to his credit 
 in bank operate on. his decision precisely to the same 
 extent as if he had ten thousand dollars of bank-notes in 
 his pocket-book? Undoubtedly. Where, then, is the dif- 
 ference ? And, if all this would be true in the case of A, 
 then in the case of any one similarly situated ; and therefore 
 we must conclude, that deposits are, in their nature and io- 
 fluence, of the same character as bank-notes, and, of course, 
 are currency. 
 
CHAP V.]' ANALYSIS OF DEPOSITS. 153" 
 
 All bankers and business men are well satisfied that 
 deposits are even more active by far in transferring values 
 tlian the bank circulation ; that a much greater number of 
 exchanges is made with deposits than with an equal amount 
 of bank-notes. 
 
 A little reflection will satisfy any one that such is the 
 fact. The sum of ten thousand dollars,, for example, might 
 easily pay in a single day, in ten different transfers by 
 ehecks,. a total of one hundred thousand dollars. 
 
 This would not be an extravagant supposition ; but it 
 would be quite improbable that bank-notes make ten pay- 
 ments in a single day. 
 
 The efficiency of money, or its substitutes, depends greatly 
 upon the rapidity with which exchanges are made. John 
 Stuart Mill recognizes this principle ; and it is a very obvi- 
 ous one. It is on that principle that we see the propriety 
 of admitting, that, although the active deposits in bank may 
 be less than its notes, yet the greater rapidity with which 
 they are used makes the whole amount equivalent in their 
 effects to an equal amount of bank-notes. 
 
 The currency of any country is as its quantity multiplied 
 by the rapidity of its .circulation. This consideration will 
 lead us to regard the whole amount of deposits as equal in 
 effect to an equal amount of circulation. 
 
 STOCKS AS IMMEDIATE EESOUECES. 
 
 Here it may be proper to explain why we have not placed 
 the item of " stocks " held by the banks amongst their im- 
 mediate resources. Many persons seem disposed to regard 
 them as such. But, so far as the quality and character of 
 the currency are concerned, the stocks held by the banks 
 do not essentially differ from any other securities. Sup- 
 pose a severe pressure for specie comes on, what can 
 they do with them ? Force the sale, and realize the money 
 for them ? This cannot be done, of course, at such 9, 
 
154 EXCHANGE. [BOOK IH. 
 
 time, except at a great sacrifice ; besides, if they do this, 
 what will the banks receive for the stocks sold? Their 
 own notes and deposits. There is nothing else in which 
 the stocks can be paid for. But if, after having received 
 their notes in this way, they refuse again to loan them, 
 they contract the currency by so much, and increase the 
 pecuniary distress by all that amount ; if they do reloan 
 the notes, they have gained no relief to themselves by the 
 operation. The great object desired is to relieve the pres- 
 sure for money : the sale of the stocks wiU have the op- 
 posite effect. Hence they cannot be regarded as the 
 immediate resources. 
 
 CHAPTER YI. 
 
 MIXED CUERENCT. — FLUCTUATIONS IN QUANTITY AND QUALITY. 
 
 We have explained the organization of mixed-currency in- 
 stitutions, the character of their operations, the quality and 
 form of their issues. We pass now to consider this cur- 
 rency in its several relations to the public wealth. Such an 
 inquiry will demand great carefulness and impartiality, and 
 must necessarily be made in detail. 
 
 We have two grand questions wMch arise naturally at 
 the start: — 
 
 1st, Does it perform satisfactorily the functions of mon- 
 ey ? If we answer this inquiry favorably, we have still to 
 ask, — 
 
 2d, What, and how great, are its effects on public inter- 
 ests, beyond the proper effects of value currency ? 
 
 These questions are so full of interest to all the depart- 
 ments of wealth, are so deeply obscured by prejudice and 
 misapprehension, and are so especially important at the 
 present time, that their discussion will be protracted through 
 several chapters. 
 
CHAP. TI.] MIXED CURBENCT. 155 
 
 1st, DOES A MIXED CUEEENCT SATISPACTOEILT PERFORM THE 
 FUNCTIONS OP MONEY? 
 
 Those functions are as already stated, — to act as a me- 
 dium of exchange, and to be a standard of value. 
 
 Does a mixed currency perform them well ? We answer, 
 no. The essential qviality of such a currency, which unfits 
 it to act well as either a standard of value or a medium of 
 exchange, is this : — 
 
 IT IS NOT GOVERNED BT THE LAWS OP VALUE. 
 
 It is subject to quite other laws. It varies as to its 
 volume and character ; but we do not find that it does this 
 out of respect for value. The great principle of value is, 
 demand creates supply ; supply satisfies demand. They 
 are measured against each other, and are found equal. 
 There is no supply which demand does not call for : there is 
 no supply which is not enough for demand. And the reason 
 for this perfect equality is that value cannot exist without 
 labor. The same cause that increases supply, expands de- 
 mand to the same proportions : the same cause that restricts 
 supply, reduces demand correspondingly. 
 
 A mixed currency is not regulated in this way. In so 
 far as it has not value, it is not controlled by the laws of 
 value. 
 
 It is put out or taken in by bank managers at their 
 pleasure, and for their profit. It is not produced by labor. 
 This last fact removes the gravitation which alone can 
 secure a currency. It makes it a thing to be blown about 
 by every breeze, carried up or carried down with the cur- 
 rents, or whirled aromid in the eddies of trade. It should 
 be stable, and not sport for the winds. There should be 
 a reason for the putting-out or taking-in of every dollar of 
 money; and that reason should be found in the laws of 
 value. 
 
156 EXCHANGE, [bOOE; HI. 
 
 Now, this law controls the expansion or contraction 
 of money, or a valne currency. If it is increased, as it may 
 be in the natural course of commercial transactions, it is 
 because actual money has been brought into the country by 
 the balance of trade; but a mixed currency is increas,ed 
 by the voluntary and interested action of bank managers., 
 without regard to the laws of value, and without the addi- 
 tion of a dollar to the real money, or wealth, of the country. 
 The increase of money by importation takes place in obe-. 
 dience to causes that are gradual and appreciable ; and any 
 one who watches the course of commerce can anticipate 
 its arrival. If it comes in excess, from any unusual source, 
 it easily and naturally passes off to other countries, till the 
 balance is restored. Real money is like the water of 
 the globe, rising and falling by natural laws, and keeping 
 its level by its own mobility. If a redundance exists in one 
 spot, there is, for that reason, a deficiency somewhere else. 
 Where it is, it is less valued ; where it is not, it is the more 
 desired ; and the equilibrium is soon restored. No artificial 
 appliances or legal enactments are needed, to keep true 
 money at a level the world over. 
 
 We have found that the quantity of a mixed currency is 
 not governed by the laws of value. Do we, then, find that 
 it is controlled by accident? It would be better so, for 
 there would be more chances of its coming right. But, 
 on the contrary, we find laws positively mischievous sub- 
 stituted for the wholesome operation of supply and de- 
 mand. 
 
 Firstly, Of expansion. The niore that is issued of a 
 mixed currency, the more will be wanted. The supply 
 does not satisfy the demand: it excites it. Like an un- 
 ijatural stimulus taken into the human system, it creates 
 an increasing desire for more ; and the more it is gratified, 
 the more insatiable are its cravings. 
 
 There are two reasons for this : one, that, as the currency 
 is expanded, prices are raised correspondingly, and more 
 
<3HAP. VI.] MIXED C0EEENCT. 157 
 
 currency is demanded to effect the same exchanges ; the 
 other, that the speculation inevitably following the rise of 
 prices leads to an enormous extension and repetition of in- 
 debtedness, vrhich requires, for its discharge, a greatly 
 increased amount of the circulating medium. Thus, by 
 the action and interaction of these causes, the demand 
 for the issue of this kind of currency is certain to be great- 
 est when it is already redundant. All this, of course, is 
 quickened and helped by the fact that the manufacturers 
 of this currency are ready and eager to crowd upon the 
 public all it will take, like a very earnest friend who thrusts 
 his purse into your hand before you are quite decided thait 
 you wish to borrow. 
 
 Secondly, Of contraction. We have seen the forces that 
 raise the currency higher and higher. We have not seeli 
 that it is done for the public good, or in obedience to a call 
 of trade. We might suppose that there would be an 
 unending progress in this direction, till any degree of ex- 
 ■pansion should be reached, inasmuch as the law of value 
 does not govern a product into which the element of la- 
 bor does not enter. It is not, therefore, the expense of 
 multiplying it, nor is its increase limited by any consideration 
 of utility. If every dollar of credit were called a million 
 dollars, it would effect an exchange just as well. The only 
 difference would be the work of adding six ciphers in 
 accounting. No: the cause that limits the expansion, and 
 finally produces contraction, is the liability of the notes 
 to be presented for payment in money. 
 
 The occasion for this cause to operate may be almost any 
 thing, — a political convulsion, an adverse balance of trade, 
 a failure of some large trading or banking company, or an 
 unaccountable mood of the popular mind. 
 
 We will take that one which is most common and sensi- 
 ble, — an adverse balance of trade. If it be large, the demand 
 for specie which it occasions will create a profound sensation 
 jittiohg the banks. With actual money, there is, under 
 
158 EXCHANGE. [BOOK III. 
 
 these circumstances, no reason for excitement or alarm : 
 ten million dollars of the currency will discharge that 
 amount of debt abroad, and the currency at home is re- 
 duced but so much. A mixed currency has, in itself, no 
 power whatever to satisfy a foreign creditor. If ten million 
 dollars are to be paid abroad, it must be taken from the 
 specie of the banks ; the basis of the currency is so much 
 diminished, and the circulation must be curtailed accord- 
 ingly ; that is, notes must be brought in, and not put out 
 again till the basis is restored. If the proportion of specie, 
 as is the case on an average in this coimtry, is only as 
 one to five of notes, then the export of ten million dollars 
 abroad must cause a contraction to the extent of fifty mil- 
 lion dollars at home. The removal of so much currency, 
 and of that very part which circulates most actively, causes 
 stringency ; and stringency causes suspicion. Let another 
 ten millions be called for out of the specie basis, and 
 affairs will become very critical. The legitimate effect of 
 the export, so far, would be to contract the currency one 
 hundred million dollars ; but another cause is introduced 
 now. Vague apprehensions abound, everybody gets prudent, 
 many are scared. Here is another reason for contraction. 
 With a value currency, the fact that it was especially 
 wanted would be a reason why it should stay. Not so with 
 credit money : it won't bear to be looked in the face. 
 
 It is hardly necessary to trace the course of contractions, 
 they are so fkmiliar to the American mind. 
 
 The banks know their own position better than any one 
 else. They understand precisely what they must do. They 
 act instantaneously. They curtail their loans. They know 
 that trouble is at hand, and they propose to meet it in the 
 best way for themselves. They know that their notes may 
 now prove their ruin, and they propose to get them out of 
 the way as fast as possible. 
 
 There are two classes of banks : — 
 
 1st, Those who transact all their business in an honor- 
 
CHAP. TI.] MIXED CUEEENCT. 159 
 
 able manner, and, so far as the nature of the currency they 
 issue will admit, on a secure basis. They are careful not 
 to extend their loans beyond their means, and they keep a 
 respectable amount of specie. 
 
 2d, Those who get out, and keep out, all they can, and 
 carry their circulation, deposits, and loans as high as pos- 
 sible, without regard to the specie in their vaults. This 
 class is numerous, especially among those of small capital. 
 They rely on their baseless circulation for extraordinary 
 profits. 
 
 In case of a demand for specie, the latter class are obliged 
 to call for assistance from the former, who, willing or un- 
 wilHng, are equally obliged to give it. The " feeble banks " 
 must be sustained, or the whole system will be suspected. 
 If these be allowed to dishonor their notes, a run will be 
 made at once on all the rest ; and, having as we see only 
 one dollar in five to pay with, they must, of course, soon 
 stop paying altogether. 
 
 It should be borne in mind that these contractions and 
 expansions are not imaginary, not possible only, not merely 
 occasional, nor at all local, but occur frequently and every- 
 where within the field of such a currency. 
 
 It is commonly said that the banks only increase their 
 issues as demanded by the wants of trade ; that they extend 
 their credits, because the public require them as business 
 facilities. 
 
 If this were true, it would be of no consequence in the 
 discussion; because, the laws of value having been dis- 
 turbed in this matter, the demand is no longer normal. 
 We have no longer the assurance that trade will call into 
 use just that amount of currency which it needs. 
 
 But it is not true. The movement always commences 
 with the banks. When, by a monetary revulsion, their 
 circulation and deposits have been reduced so low that 
 they feel safe in commencing another expansion, the panic 
 being over, the banks begin to ofier extraordinary induce- 
 
160 EXCHANGE. [tBOOK III. 
 
 ■ments to their customers to borrow money. They will 
 ■discount all good paper offered, even if it has a long time 
 ■to run. It is not uncommon, at such times, to solicit the 
 privilege of making loans.* As soon as this state of things 
 takes place, all business men begin speculative operations; 
 for prices have begun to rise. Speculation will give a still 
 greater rise to prices, and cause a still greater demand for 
 currency. The expansive force is now in full operation, 
 and is sure to increase in power till by revulsion the 
 equilibrium is restored. 
 
 But it may be asked, are there not natural tides in busi- 
 ness, irrespective of a mixed currency ? Certainly ; but 
 they are never aggravated or intensified until they end in 
 panic or ruin. They are calculable and healthful. They are 
 tests of business character. They may go to the extent of 
 exposing the emptiness of bad concerns, but never destroy 
 those that are good. When they occur, money will be 
 wanted to pay debts ; but, when one debt is paid, there is 
 just as much money as before with which to pay others. 
 The pressure does not annihilate any part of the cur- 
 rency. The party who receives a payment does not put 
 the money away in vaults, not to appear again till the crisis 
 is past. The means of payment can be reduced only by 
 the amount actually sent out of the country. Gold and 
 silver are as little injured by panic as by fire. 
 
 CHAPTER VII. 
 
 TABLES AND DIAGRAMS OP MIXED-CUBEENCT FLUCTUATIONS. 
 
 We have shown, from the reason of the case, that a mixed 
 
 currency is not governed by the laws 6f value; and that 
 
 therefore its variations are controlled by other . principles, 
 
 * This is within the personal knowledge of the "writer as a bank director. 
 
CHAP. VII.] 
 
 TABLES AND DIAGRAMS. 
 
 161 
 
 which give no guaranty to the public good, but, on the 
 contrary, threaten great mischief to the community, both 
 by expansion and contraction. 
 
 We now propose to show, by facts taken from official 
 statistics, that such fluctuations are frequent and violent. 
 
 We introduce a diagram, carefully prepared, for the pur- 
 pose of showing, in the most compact and striking form, 
 these fluctuations of the currency, both in quantity and 
 quality. 
 
 The followuig table exhibits the fluctuations in the ah- 
 solute quantity of the mixed currency (circulation and 
 deposit) of the United States from 1834 to 1859 inclusive, 
 a period of twenty-six years. 
 
 
 Table I. 
 
 
 1834 . . 
 
 . . 170,000,000 
 
 1847 . . 
 
 . 197,000,000 
 
 1835 . . 
 
 . . 186,000,000 
 
 1848 . . 
 
 . 231,000,000 
 
 1836 . . , 
 
 . 255,000,000 
 
 1849 . . 
 
 . 205,000,000 
 
 1837 . . 
 
 . 276,000,000 
 
 1850 . . 
 
 . 240,000,000 
 
 1838 . . 
 
 . . 200,000,000 
 
 1851 . . 
 
 . 284,000,000 
 
 1839 . . 
 
 . . 225,000,000 
 
 1852 . . 
 
 . 328,000,000 
 
 1840 . . 
 
 . 182,000,000 
 
 1853 . . 
 
 . 348,000,000 
 
 1841 . . 
 
 . 172,000,000 
 
 1854 . . 
 
 . 392,000,000 
 
 1842 . . 
 
 . 146,000,000 
 
 1855 . . 
 
 . 377,000,000 
 
 1843 . . 
 
 . . 114,000,000 
 
 1856 . . 
 
 . 408,000,000 
 
 1844 . . 
 
 . 159,000,000 
 
 1857 . . 
 
 . 445,000,000 
 
 1845 . . 
 
 . 177,000,000^ 
 
 1858 . . 
 
 . 341,000,000 
 
 1846 . . . 
 
 . 202,000,000 
 
 1859 . . 
 
 . 452,000,000 
 
 These facts are collected, as nearly as possible, from the 
 returns made at the beginning of the years mentioned. 
 Therefore the contractions or expansions made during a 
 year do not appear till the return of the next year. For 
 example, the great contractions of 183T and 1857, beginning 
 several months after January, do not exhibit their effects 
 tiU the currency returns of the years 1838 and 1858. 
 
 11 
 
162 
 
 EXCHANGE. 
 
 [book m. 
 
 Diagram No. 1 exhibits the fluctuations in the currency 
 (circulation and deposits), and also the proportion of specie, 
 from 1834 to 1859 inclusive, both reckoned per capita. 
 
 The upper line indicates the currency, the lower the 
 specie, and show the fluctuations of both. 
 
 The annexed diagram shows distinctly the actual fluctua- 
 tions in the currency, because its amount, at the several 
 periods, is reckoned per capita. This is a far more correct 
 mode of getting at the real changes than taking the absolute 
 quantity. 
 
 The diagram is prepared from a table published by the 
 Massacliusetts Bank Commissioners, in their Report of 1861, 
 furnished by J. V. Yatman, Esq., of New York, to whom 
 the public are indebted for valuable contributions of a sta- 
 tistical character. 
 
 The upper line shows the fluctuations in the quantity of 
 the currency : the lower line indicates its quality from time 
 to time. 
 
 The following table shows the extreme fluctuations in the 
 quantity of the currency of the United States per capita, at 
 different times, with the corresponding variations per cent 
 in its quality: — 
 
 Table II., shmdng the Extreme Fluctua&ms in the Owrremcy of the United State* 
 per Capita at different Times, with the Corresponding Variations in its Quality, or 
 the Proportion of Specie held for its Redemption. 
 
 Teara. 
 
 Currency 
 per capita. 
 
 FIuctuatlonB. 
 
 Per 
 cent. 
 
 Quality, or epecie 
 to circulation. 
 
 Variations in quality. 
 
 Per 
 cent. 
 
 1834 
 
 11.82 
 
 
 
 15i to 100 
 
 
 . 
 
 *1837 
 
 17.61 
 
 Expansion 
 
 60. 
 
 13i to 100 
 
 Depreciation 
 
 iH 
 
 1840 
 
 10.70 
 
 Contraction 
 
 «9 
 
 18 to 100 
 
 Improvement 
 
 33 
 
 1843 
 
 6.18 
 
 
 42 
 
 29 to 100 
 
 
 61 
 
 1846 
 
 9.94 
 
 Expansion 
 
 61 
 
 21 to 100 
 
 Depreciation 
 
 36 
 
 1849 
 
 9.18 
 
 Contraction 
 
 7 
 
 21 to 100 
 
 Stationary- 
 
 
 
 1862 
 
 13.31 
 
 Expansion 
 
 45 
 
 15i to 100 
 
 Depreciation 
 
 27 
 
 1855 
 
 13.93 
 
 
 13 
 
 14 to 100 
 
 
 10 
 
 •1857 
 
 15.50 
 
 
 11 
 
 13 to 100 
 
 
 7 
 
 1858 
 
 11.65 
 
 Contraction 
 
 26 
 
 22i to 100 
 
 Improvement 
 
 73 
 
 1859 
 
 14.90 
 
 Expansion 
 
 23 
 
 23 to 100 
 
 )j 
 
 2 
 
 * Years when the banks suspended. Observe the great expansion between 
 the years 1834 and 1837 of some fifty per cent; and between 1849 and 1857 
 of some seventy per cent. 
 
Pen 
 Capita 
 
 ■45 
 
 •'14 
 
 43 
 
 "12 
 
 "11. 
 
 "10 
 
 "9_ 
 
 '■8_ 
 
 ]s:^ 
 
 DIAGRAM N^l 
 
 on I'ltrntjf the /luclua^en, cf lA» car/f/ief 
 
 - of the lui/ff/ Sfaies 
 
 n/ic/ //ii- prcpoj^Hcn o/' specie ft 
 C/rTi//n//r/i mid Depcs&s. 
 
 •6 
 •5: 
 
 
 
 48 
 
 
 
 
 
 .o| 
 
 46 
 
 
 
 
 
 47 
 
 
 
 
 Pet. 
 Capita 
 
 %\1 
 
 - "16 
 
 - "15 _ 
 
 - "14_ 
 "13 
 "18 
 "IL 
 "10 
 
 -"9_. 
 
 fi/-cu,ln.tron a/ul fff^pcsifs per fapiir/ 
 
CHAP. VII.] 
 
 TABLES AND DIAGRAMS. 
 
 163 
 
 Tablk ni. — The foTkmxng Table exhibits the Composition of the Mixed Currencie$ 
 of the several States of the Union, Jan. 1, 1860 ; thai is, the Percentage of Specie to 
 the Grculation and Deposits in the Currency of each State : — 
 
 Louisiana . . 
 
 Missouri . . 
 
 Georgia . . 
 
 Kentuclty . . 
 
 Tennessee . . 
 North Carolina 
 
 Indiana . . 
 
 Alabama . . 
 
 Marj'land . . 
 
 Per 
 
 cent. 
 
 38.6 
 
 3T. 
 
 23.r 
 
 23.4 
 
 23. 
 
 22.08 
 
 22.3 
 
 22.2 
 
 21.4 
 
 Pennsylvania 
 Iowa . . . 
 Virginia . . 
 New York . 
 South Carolina 
 Ohio . . . 
 Massachusetts 
 Florida . . 
 Maine . . . 
 
 Per 
 cent. 
 
 21.3 
 
 20. 
 
 16.7 
 
 15.6 
 
 15.6 
 
 15.2 
 
 15.1 
 
 lO.B 
 
 10. 
 
 Delaware . . 
 New Jersey , 
 Connecticut , 
 Rhode Island _ 
 New Hampshire 
 Wisconsin 
 Vermont . . 
 Michigan . 
 Illinois . 
 
 Pec 
 
 eent. 
 
 9.9 
 
 8.9 
 
 7.6 
 
 6.3 
 
 5.7 
 
 6.5 
 
 4.2 
 
 4. 
 
 2.3 
 
 But there are variations, not only in the general currency 
 of the United States, such as we have indicated, but also in 
 the currency of each State, at different periods. 
 
 We take that of Massachusetts, in illustration : — 
 
 Table IV., exhibiting the Quality of the Currency of Massachusetts. 
 
 Tear 
 
 1835. 
 
 1837. 
 
 1840. 
 
 1843. 
 
 1851. 
 
 1857. 
 
 1859. 
 
 1860. 
 
 Specie, per cent . . 
 
 7.1 
 
 8 
 
 18i 
 
 44.1 
 
 7.5 
 
 8.9 
 
 14.6 
 
 15.1 
 
 From tliis it appears that the highest proportion of specie 
 was in 1843, which year marked the termination of the 
 great monetary convulsion that commenced with the failure 
 of the banks in 1837, at which date the banks of Massachu- 
 setts had but eight per cent, as shown above. The severe 
 pressure began in 1836, when the specie was seven. 
 
 By a law of that Commonwealth, passed in 1858, the 
 banks are required to keep at least fifteen per cent of spe- 
 cie. This law has much increased the average amount of 
 specie. 
 
 Another fact may be noticed in this connection ; viz., that 
 the banks of Massachusetts were, to a considerable extent, 
 responsible for all the mixed-currency circulation in New 
 England, because the banks of the neighboring States had 
 all their bills redeemed in Boston. Those of Vermont, for 
 example, whose average specie is only four or five per cent, 
 kept bank balances (not actual specie, as often supposed) 
 
164 EXCHANGE. [BOOK III. 
 
 ■with certain banks which were under obligations to redeem 
 all their bills as fast as presented. ' This, of course, greatly 
 enhanced the responsibilities of the Massachusetts banks, 
 and decreased the strength of their currency. 
 
 The currency of New England was thus made a complete 
 unit. The system of redemption, first established by the 
 Suffolk Bank of Boston about forty years ago, was so per- 
 fected, that, while the banks of each State might act inde- 
 pendently, they were bound together by a common tie, and 
 involved in a common fate. This was known as the " Suf- 
 folk-Bank system." 
 
 Volumes of statistics might be given of the same general 
 character ; but these, it is presumed, are sufficient to show 
 the fluctuating character of the mixed currency of the United 
 States, both in quantity and quality ; and of course, in de- 
 gree, of all other countries where such a currency exists : 
 for it is, at all times and everywhere, the same in its gen- 
 eral characteristics. The quality may and does vary greatly 
 in different communities, as we have seen it in the different 
 States of the American Union. But this is merely a ques- 
 tion of degree. 
 
 CHAPTER Vni. 
 
 MIXED CUEEENCT AS A MEDIUM OP EXCHANGE. 
 
 Having shown that a mixed currency is certain to expand 
 and contract, without reference to the healthful and harmo- 
 nious provisions of value, and to a degree more extreme and 
 dangerous than a currency composed of real money, we are 
 prepared to answer summarily the principal question. 
 
 Does a mixed currency perform satisfactorily the functions 
 of money ? 
 
 1st, Does it act efficiently as a medium of exchange ? 
 
 Currency, i-egarded merely as a medium of exchange, may 
 be said to perform two offices : (a) To transfer commod- 
 
CHAP. VIII.] MEDIUM OP EXCHANGE. 165 
 
 ities from one person to another. For this purpose, a 
 mixed currency, having a circulation wholly of paper, is 
 found to be portable, readily counted, easily carried, safely 
 kept, and is, consequently, as convenient as any agent that 
 could reasonably be desired. (6) To discharge indebted- 
 ness between different parties. For this purpose, the thing 
 to be desired is, that currency should be reliable ; that is, 
 that there should be nothing in its own nature, wliich dis- 
 qualifies it to act fully, at all times, as a means of discharg- 
 ing obligations. 
 
 Coin is always perfectly reliable for the payment of debts. 
 When one debt has been discharged by it, the coin is just 
 as available and acceptable for the discharge of a second or 
 any succeeding debt. If gold and silver are called for by 
 foreign obligations, they retain their full power to discharge 
 them. 
 
 There can never he a scarcity of them that an earnest demand 
 will not create a supply for. If a community wants them 
 very much, it will certainly get them. 
 
 They crowd to their best market, as truly as cotton or 
 wheat. 
 
 "We here make two principal statements : — 
 A foreign demand is the only cause that can take away 
 the real money of a people. We have seen that an indefi- 
 nite number of causes may take away a currency based, in 
 any degree, on credit. 
 
 But, again, a foreign demand can only take away its own 
 amount of real money. We have seen that such a cause 
 takes away an amount of mixed currency of which the quan- 
 tity required abroad is only one factor ; the other factor 
 being that number which represents the proportion between 
 the bulk of the currency and the specie basis. In these two 
 statements are clearly shown the entire unreliability of mixed 
 currency to discharge indebtedness. The man who prom- 
 ises to pay money can never know what may be the demand 
 for specie, arising from a wajit of confidence in the banks, 
 
166 EXCHANGE. [BOOK HI. 
 
 or from a necessity of export ; and, of course, can never be 
 safe in giving liis notes predicated upon the currency as it 
 exists at the time. 
 
 So far as the fluctuations we have shown derange general 
 plans of business, distort prices, work injustice to one party 
 of every bargain, and tend, by such inequalities and un- 
 certainties, to discourage steady enterprise, they do not 
 present themselves here for examination. We shall meet 
 them, when discussing a mixed currency as performing its 
 function as a standard of value. "We have to do here, not 
 with the unfairness and injustice with which indebtedness is 
 discharged under such a currency, but with the difficulty 
 or impossibility of discharging it at all. 
 
 To falsify the standard of value is a serious, but not neces- 
 sarily a ruinous error. It takes from one unjustly, and 
 adds to another ; but it destroys nothing directly. There 
 are fluctuations in the currency, found in our national ex- 
 perience and depicted in the diagrams given, which proceed 
 to an entire revulsion of the body of trade. Panic is not a 
 century plant. It blossoms and bears fruit once or twice 
 while a child is growing up ; many times while a man re- 
 mains in business. 
 
 How does a mixed currency perform the functions of mo- 
 ney, so far as discharging indebtedness in such times ? 
 
 Let us suppose the case of the best man in the commu- 
 nity. He has, in the legitimate course of business, con- 
 tracted obligations, all within the limit of his abilities, now 
 coming due. The banks are withdrawing their circulation 
 as largely as possible, and do not mean to let it out again. 
 The fact of his own excellent standing is of no moment in 
 securing discounts ; for there is just as much danger to the 
 banks in his having their notes as in their being anywhere 
 else. It is the peculiar hardship of good men, in such 
 times, that it is not their credit, but the credit (that is, the 
 condition) of the banks, which is to decide the question of 
 loans. With a value currency, on the other hand, the only 
 
CHAP. Vin.] MEDIUM OF EXCHANGE. 167 
 
 matter of importance is tlio solvency of the applicant him- 
 self. 
 
 If he cannot get money, he cannot meet his obligations ; 
 for he cannot pay in merchandise or real estate. The 
 money is not to be had ; that is, if the banks would accom- 
 plish -what they must do to save their credit. 
 
 Of course, there are individuals and institutions, who, in 
 consideration of high premiums and full security, will grant 
 accommodations to a limited amount. He may try to get 
 along, sacrificing his property to save his name, and paying 
 twenty-four or thirty-six per cent for loans. Perhaps, if 
 others stood well, he might get throiigh ; but all are not so 
 firm as himself. Most have less accumulation and less 
 credit. His debtors fail to pay : how can he answer his 
 creditors ? If he tries to go through, the payments are all 
 one way, like the tracks about the lion's den. He has to 
 pay both sides of the ledger. 
 
 "We have spoken of the credit element of a mixed cur- 
 rency. But panic, suspicion, apprehension, are the deadly 
 enemies of credit : when these are aroused in the commu- 
 nity, it cannot go abroad. Just as nearly as the object can 
 be accomplished in the time given, all forms of credit will be 
 withdrawn. But this will produce, in its several degrees, 
 stringency, distress, panic, ruin. 
 
 Is it, then, too much to say that credit is not reliable for 
 the discharge of indebtedness 1 
 
 The element of credit introduces a direct hostility between 
 the interests of those who control the currency and those 
 who wish to use it. The interest of the one requires that 
 the notes shall be withdrawn. The interest, nay, the life, 
 of the other requires that they shall be kept in circulation. 
 Is there any such hostility in a value currency ? Not at all. 
 No matter how intense the apprehension, how manifold the 
 suspicion, how frenzied the panic, there is never a moment 
 when it is not better for the owner that such money should 
 be used than kept out of use. 
 
168 EXCHANGE. [BOOK in. 
 
 We have said that a sudden and severe contraction is 
 necessary whenever any cause threatens the specie basis of 
 a mixed currency. Such a contraction deprives the commu- 
 nity of the means of meeting obligations undertaken when 
 the currency was redundant. 
 
 But this contraction, when it has become inevitable, does 
 not take place without danger and loss to the banks them- 
 selves ; danger and loss being the proper consequences of 
 such operations. The banks make no more loans, or as few 
 as possible. The means of discharging debts become less 
 and less in the community each succeeding day, until the 
 rate of interest goes up to two or three per cent a month, 
 and money can hardly be had at all. 
 
 The banks now find themselves in this dilemma : if they 
 make loans, they must keep paying out their specie. This 
 will soon become exhausted, and they must suspend and be 
 dishonored. If they do not continue to accommodate their 
 customers with the usual means of paying debts, the latter 
 must succumb. But, if their customers generally fail, the 
 banks will lose their capital (it being chiefly in the form of 
 notes given by individuals), and be permanently ruined. 
 The history of the country shows on which horn of the 
 dilemma they choose to be impaled. They suspend or stop 
 specie pa;fments, and then furnish the public with an abun- 
 dance of their notes, such as they are. 
 
 After this has been accomplished, and after the credit of 
 the banks has been exchanged for the credit of the individ- 
 uals who owe them, and after the demand for specie has 
 ceased, the banks can resume payments. 
 
 It may be said, at this point, that the result we have 
 reached does not seem very formidable ; that, let it but be 
 understood the banks are to suspend in such circumstances, 
 we can by this means still have the advantages of a mixed 
 currency in favorable times, and relieve the distress when 
 a contraction is threatened. The answer to this plea will 
 be deferred to the chapter on " Fallacies," in preference to 
 interrupting the present line of argument. 
 
CHAP. IX.] STANDARD OP VALUE. 169 
 
 CHAPTER IX. 
 
 MIXED CUEEBNCT AS A STANDARD OP VALUE. 
 
 2d, Does a mixed currency act justly as a standard of 
 value ? 
 
 This function of money is of a very important character. 
 It lies at the foundation of all credit -and all business calcu- 
 lations. If no man dealt with or trusted another, or waited 
 a day to receive and consume the reward of his labor, there 
 would be no great need of such a standard. It would then 
 be only of scientific interest, to show what was the compara- 
 tive wealth of different communities and ages, and what the 
 fairness of their several systems of distributing the result 
 of industry among the producing classes. If every act of 
 labor received its own reward, in a distinct form, at the 
 time, to be consumed then and there, a standard of value 
 would be of less practical importance. 
 
 But whenever there is the slightest exchange of com- 
 modities or association of laborers ; whenever one man 
 trusts another for recompense of service, or applies wealth 
 and toil to an enterprise in the faith of receiving a reward at 
 a future time, — a standard of value must be had, so that all 
 can be done safely, expeditiously, and justly. Unless some- 
 thing possessed the property of being a standard of value, 
 all exchange would inevitably be conj&ned to the gross and 
 clumsy form of barter. It has already been included in the 
 definition of money, that it performs this office. There is 
 not a possibility of taking a scientific exception to this state- 
 ment; yet a great deal of popular controversy has arisen, 
 which we are obliged to stop here to notice. It has been 
 said, that a dollar, for example, no more measures the value 
 of wheat, than wheat does the value of the dollar ; that 
 " the dollar is wholly an arbitrary, conventional standard, 
 forced on the people, unjustly, by legislative enactment." 
 
170 EXCHANGE. [book HI. 
 
 Miich confusion has undoubtedly been caused by mis- 
 taken views of what is really meant by a standard of value. 
 
 Suppose A sells B a tract of land, and agrees to take five 
 hundred oxen in payment at a future day. The value of the 
 land sold is, in this case, clearly measured by the oxen. 
 These latter are the standard by which the value of the 
 land is determined. They form the money, or currency, by 
 which the debt is legally and rightfully to be discharged. 
 The oxen here occupy precisely the position of the dollar 
 in ordinary contracts ; and, if we suppose a community in 
 which they are altogether used as money, they become, 
 without any necessary legal enactment, the universal stand- 
 ard, or that by which all other values are measured and 
 expressed. Value must be determined in some way ; and it 
 can only be done by comparison, — by measuring the land 
 against oxen, wheat, gold, or something else that has value. 
 As long as the land was measured, in the single instance, 
 by the oxen, so long each measured the other' alike ; but, 
 when the use of the oxen was extended to a comparison 
 with each other commodity in the market, and all others 
 together, then it became as improper to say that the land 
 measured tiie oxen as to say that the wood or the cloth 
 measure the yardstick by which their length and breadth are 
 universally determined. The government does not insist 
 that length or breadth shall be determined in all bargains 
 by the yardstick. Men can and do take arms and fingers 
 for the purpose, or any thing else they please : it is nothing 
 to government, which only says what a yard shall be. 
 
 So, by universal consent, mankind have agreed to measure 
 every thing by the precious metals. The laws of the United 
 States, for example, enact that a certain coin, or planchet, 
 of gold, nine-tenths fine, and weighing 25^^ grains, shall 
 be called a dollar. That is all the government does, all it 
 ought to do. It compels no one to receive the dollar for 
 any thing, unless he has agreed to do so, any more than it 
 compels him to receive hats or boots, wheat or cotton. But, 
 
CHAP. IX.] STANDARD OP VALUE. 171 
 
 the government having provided the coin, — that is, having 
 certified to its weight and iineness, — the people, of their own 
 choice, make use of it to measure every other thing. If 
 they buy merchandise or land or cattle, they agree to take 
 so many of these dollars in payment. They might say, so 
 many oxen or horses, or any thing else ; but they prefer 
 dollars, merely because they have the most convenient form 
 of value, and are universally acceptable. As society in 
 general adopts this way of determining the worth of prop- 
 erty, the dollar, not by law, but by the voluntary preference 
 of the people, becomes the measure, or standard, of value, 
 in aU transactions. 
 
 So far as indebtedness between individuals is concerned, 
 the government makes the dollar lawful tender ; that is, if 
 an individual has a just claim for a given number of dollars, 
 the government enacts that the same number of dollars shall 
 discharge the debt. 
 
 True it is, that every object, having value and used in 
 exchange, is really, in so far, and for the time, a measure 
 of value ; but that which has been selected by mankind as 
 the best adapted for a universal equivalent, and actually so 
 used, is emphatically, and for all purposes, the measure 
 or standard. 
 
 Some writers have insisted that people should not be 
 compelled to pay so many dollars in coin ; then they should 
 not promise dollars merely, but any thing else. 
 
 The establishment of such a standard is no wrong to the 
 people ; for it can easily be seen that payments in any other 
 specific product would be more likely to involve hardships ; 
 e.g., an obligation to pay wheat or potatoes or cotton at 
 any certain time, would bring infinitely more chances of 
 distress resulting from a failure of the crop in that particu- 
 lar article. 
 
 Neither is it an arbitrary act on the part of the govern- 
 ment. It is purely a favor, an accommodation, provided at 
 great cost, for the benefit of the public. All objections, on 
 
172 EXCHANGE. [BOOK IH. 
 
 the ground that it is arbitrary and unjust to compel men 
 to discharge indebtedness in coin, are idle and absurd. 
 Those who make them are bound to show, what has never 
 yet been found, a better standard. 
 
 During the suspension of the Bank of England from 
 1796 to 1819, it was gravely argued, by some gentlemen in 
 the House of Commons, that " the pound sterling was really 
 an abstraction ; " but the return to specie payments in the 
 latter year showed that the pound sterling was really a con- 
 cretion of 113.001 grains of fine gold, by which all debts, 
 public and private, were to be discharged. 
 
 A mixed currency, wherever it exists, forms the standard 
 of value for the community, just as certainly as the precious 
 metals where they alone are used. That of the United 
 States, to be sure, is not a legal tender,* like the Bank-of- 
 England notes ; but, as no other currency exists, as there 
 is no other money of importance in circulation, it must be 
 employed for all purposes, and so, to all practical intents, is 
 the standard of value. 
 
 We are now prepared to inquire how a mixed currency 
 performs this function. 
 
 We have seen its fluctuations, certain to occur, yet whoUy 
 uncertain as to direction and degree. These fluctuations 
 make it plain enough, that, as a standard of value, a mixed 
 currency must work injustice and mischief, both in expan- 
 sion and contraction. Destructive as are the great occa- 
 sional convulsions of trade, it is doubtful whether they 
 produce as extensive evil as those minor disturbances which 
 come every year, and, indeed, affect the entire transactions 
 of the people. Arithmetic will hardly suffice to compute 
 losses on a scale of such magnitude. Every bargain, in an 
 industry of three thousand millions a year, is more or less 
 vitiated by a harsh and unnatural change, one way or the 
 other, of the currency. 
 
 * This whole discussion supposes this currency^ in the state it occupied 
 before the war of the Rebellion. 
 
CHAP. IX.] STAND ABD OF VALUE. 173 
 
 In the mildest form of such a currency, fluctuations to 
 the extent of fifteen per cent arc shown by our diagrams 
 to be as commonplace as yearly occurrence can make them. 
 If the yardstick were stretched to 42 inches one year, and 
 shrunk to 30 another, or both should happen the same 
 year, without any possibility of anticipating the change, or 
 any public proclamation of it, that fact would influence man- 
 ufactures, and every branch of production, greatly ; would 
 not only cause injiistice to individuals, buyers and sellers, 
 but would have a bearing on the trade and public prosperity ; 
 would influence investments, and affect labor no less. 
 
 Yet, under the fluctuations of a mixed currency, buyers 
 and sellers of all classes experience injustice as great and 
 as distressing as would result to the dealers in cloth from 
 the falsification of the yardstick. If the great changes are 
 destructive, the more ordinary are constantly embarrassing. 
 Arbitrary interference with currency produces mischief and 
 injustice, just so far as it operates at all. The quantity 
 cannot be artificially increased or diminished, but some one 
 is wronged ; either he who relied on obtaining it at ordinary 
 rates to discharge his obligation, or he who trusted to get 
 quite another value from what he does. 
 
 Enormous transfers of property take place under this sys- 
 tem, without any desert in the party who receives what is 
 another's, and without any fault in the party who gives up 
 what is his own. This it is which makes business a very 
 complicated kind of gambling. This it is which tosses up 
 or pulls down prices enough to ruin the merchant and man- 
 ufacturer or make their fortunes, while their goods are in 
 their hands, before they can be turned. 
 
 Not to insist here that injustice between the parts is in- 
 jury to the whole, or to dwell on the claims of public morals, 
 if we turn to that large class especially entitled to social 
 and governmental care and consideration, who put out 
 money at interest or invest in stocks, or rely on permanent 
 salaries or wages for support, we shall here find a mischief ' 
 
174 EXCHANGE. [BOOK IH. 
 
 ■without relief, a wrong without a remedy. These receive 
 no appreciable benefit from any of the changes of a mixed 
 currency, but all its evils fall heavy and unbroken upon 
 them. 
 
 This matter is so near our daily observation as scarcely 
 to need enforcement, so plain as to be scarcely susceptible 
 of illustration. The sad effects of such a currency are 
 strongly set forth in the following extract from an article in 
 the " North- American Eeview " of January, 1840, under- 
 Stood to have been written by one who has been long and 
 intimately connected with the banking institvitions of Mas- 
 sachiisetts : — 
 
 " It is the standing reproach of our commercial life, that it in- 
 volves more intellectual suffering from violent fluctuations than any 
 other pursuit. With all our recuperative powers, there is a vast 
 waste of life amongst us as a people, growing out of our financial 
 disasters. Witness the fact, stated to be derived from accurate 
 statistics, that, among one hundred merchants or traders, not over 
 three ever acquire independence. Add to this the other fact, also 
 deduced from trustworthy records, that commercial and financial 
 revolutions produce excessive mortality amongst business men in 
 maritime cities. Here we have the cause and effect. Meanwhile 
 we have statistical data of the still severer calamities to widows 
 and orphans." 
 
 P E I C B. 
 
 Currency performs the function of a standard of value, 
 by fixing the price of commodities. In order to examine 
 the subject intelligently, we shall be called first to notice the 
 import of the term " price." It expresses the relation of all 
 objects to a common measure or standard. For example, 
 if the standard were sheep, it might be said that an ox was 
 worth twenty sheep ; the price of the ox would be twenty 
 sheep. If the standard were dollars, — that is, certain well- 
 known coins, — we should say that the ox was worth twenty 
 dollars, and that would be its price. And it would be the 
 
CHAP. IX.] STANDARD OP VALUE. 175 
 
 same, if by dollars we meant only certain pieces of paper, 
 promising to pay these coins. 
 
 Price and value are often confounded together. The dif- 
 ference is this : value is the relation which all objects have 
 to each other in exchange ; while price is the relation of all 
 commodities to one special object, viz. money or currency. 
 
 Price may be increased without increasing value. For 
 example : the price of flour in 1859 was f 5 ; in 1864 it was 
 $10. Yet a barrel of flour had no more value at the latter 
 date than before the war, because it would command no 
 more of other value ; that is, of broadcloth or tea, or 
 other commodity. 
 
 This discrepancy is found, not only at different periods in 
 the same country, but between different countries at the 
 same time. If all commodities in all coimtries were always 
 measured by the same standard, price and value would be 
 synonymous ; but if, as often happens, a standard is adopted 
 in one country less valuable than that of others, commodities 
 will adapt themselves to the currency, and the agreement 
 between price and value is destroyed in the act of vitiating 
 the standard. 
 
 " The value of a thing is its purchasing power : the price of 
 any thing is its power to command gold, silver, or that which con- 
 stitutes the currency of the country. Value may be expressed in 
 any commodity whatever : price is expressed in one commodity 
 only." — Bascom, p. 22. 
 
 If an inventory of all the property belonging to the people 
 of the United States had been made in 1864, at the then 
 prevailing prices, it would have amounted to nearly double 
 what it was two years before, even though the quantity of 
 all commodities had been identically the same. This, be- 
 cause prices were measured not by gold, but by credit, or 
 the promises of government and the banks ; but the value 
 of all these commodities in the commerce of the world, and 
 among themselves, was no greater than two years before. 
 
176 EXCHANGE. [BOOK III. 
 
 The difference between price and value was also strikingly 
 exhibited in the history of the Confederate States during 
 tiie Rebellion. In both sections of the country, the varia- 
 tions in 1864 were so great as to attract universal attention ; 
 but they always exist, in greater or less degree, under a 
 mixed-currency system, because the standard of value, ex- 
 cept at short intervals, is not sound. The difference begins 
 to manifest itself whenever the currency is inflated beyond 
 its natural volume, and increases with that inflation. 
 
 We here present a table, showing the historical variations 
 in certain commodities, for a series of twenty-six years, 
 under the undisturbed operation of a mixed-currency sys- 
 tem. 
 
 We have selected, for the purpose, the period 1834-1859, 
 inclusive, because it is the only one for which we have cor- 
 rect data, — that is, well-authenticated returns ; and for the 
 additional reason that the period was one of general peace, 
 at home and abroad. 
 
 The articles we have selected for this comparison are the 
 most common in use, whose prices are best known and 
 least liable to variations, except from changes in the value 
 of the currency, and therefore, it is supposed, most proper 
 for our illustration. 
 
CHAP. IX.] 
 
 STANDAED OP VALUE. 
 
 177 
 
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CHAP. IX.] STANDABD OF VALUE. 179 
 
 These facts are shown geometrically in Diagram No. 2. 
 
 This Diagram may require some explanation. The upper 
 line represents the variaiions in the prices of the ten com- 
 modities chosen, for each year, from 1834 to 1859 inclusive, 
 as already given in the tables. The lower line repre- 
 sents the bank currency, per capita, for the corresponding 
 years. 
 
 Several important facts appear in this figure. The first 
 to be noticed is the remarkable correspondence between the 
 first and second lines, rising and falling together ; proving 
 most conclusively, by their agreement through so long a 
 series of years, that prices depend on the quantity of cur- 
 rency in circulation. 
 
 The average currency, per capita, from 1834 to 1859, 
 
 26 years, was $11.99 
 
 Average prices during that time 20.80 
 
 Highest amount of currency (1837) 17.61 
 
 Highest prices (1836) 29.46 
 
 Next highest prices (1837) 28.40 
 
 Difference between lowest and highest currency . .185 per cent. 
 Difference between lowest and highest prices . . .121 per cent. 
 
 It will be observed, that the difierence in prices is not as 
 greatj^er cent, as the difference in currency per capita. This 
 is in accordance with what has been already laid down in 
 regard to the unnatural extension of credits, caused by the 
 expansion of the currency. These, of course, require a 
 larger amount for their discharge. The currency has rela- 
 tion to credits as well as commodities. 
 
 The correspondence exhibited, in the foregoing tables and 
 diagram, between the quantity of currency and the rate of 
 prices, shows conclusively and impressively the effects of a 
 mixed currency as a standard of value ; viz., that as it 
 expands or contracts from arbitrary hut resistless causes, so 
 prices are elevated or depressed, — variations which are often 
 sudden and excessive. 
 
180 EXCHANGE. [BOOK HI. 
 
 In 1857, the highest point of expansion was attained, 
 amounting to 103 per cent over 1849 ; and the price of 
 commodities had advanced 69 per cent. 
 
 The hst (see United-States Financial Eeport, 1863) from 
 which the foregoing table of ten items was selected contains 
 seventy articles, the prices of which correspond essentially 
 to those we have presented. 
 
 Two important articles are omitted, viz. cotton and flour, 
 from the list here given, because their prices are more 
 affected by the foreign market than by our own, and may be 
 noticed hereafter. 
 
 After making due allowance for those fluctuations which 
 arise from supply and demand and from accidents, the evi- 
 dence is most conclusive that the quantity of currency in 
 existence does determine, essentially, the prices of commod- 
 ities ; and that, as a mixed currency must fluctuate greatly 
 in amount from its inherent properties, it cannot perform 
 satisfactorily its function as a standard of value. 
 
 The foregoing calculations, it will be observed, are made 
 on the currency as estimated per capita. This is regarded 
 as the most correct mode ; since, as population increases, it 
 is presumed that the industry and trade of the country is 
 increased proportionally, and, if so, a larger amount of cur- 
 rency will be needed. If the increase of currency is greater 
 than the increase of population, the per-capita calculation 
 will show it. 
 
 It may be said, at this point, that the same efiect on prices 
 would be produced by an equal expansion or contraction of 
 a value currency. Granted; but such rapid and violent 
 changes could not take place. Specie cannot be increased 
 like paper. It costs labor, like corn or cotton, and is sub- 
 ject to the same laws of supply and demand. It can only 
 be brought in because it is wanted, — because some one 
 wishes to give its price for it ; but tliis desire to bring it in 
 decreases regularly with the amount obtained. The more it 
 is introduced into the country, the less, by the natural laws 
 
CHAP. IX.J STANDARD OP VALUE. 181 
 
 of trade, is it worth ; the weaker the inducement to send 
 for it. If, by any chance, it comes in till there is a redun- 
 dancy, the prices of other things are raised, its own value 
 is therefore lowered, and it flows off till the equilibrium is 
 restored. Such an exportation would cause no more anxiety 
 or alarm than the shipment of an equal value of flour. 
 With a mixed currency, there is the embarrassing fact, that 
 it cannot be exported. The foreign balances must be taken 
 out of the specie basis. We have seen the course of con- 
 traction that must ensue. 
 
 To observe further the operation of mixed currency as a 
 standard of value, and its effect, not on trade generally, but 
 on ordinary production, let us take the case of the wheat- 
 grower. 
 
 A farmer, we will suppose, has a crop of one thousand 
 bushels of wheat, which he sells at ninety cents per bushel, 
 which is thirty cents more than it would bring under a 
 real-money system. Now, the question — which is of great 
 concern to him, and, if to him, to all producers of all com- 
 modities — is, whether he gains or loses by this transaction. 
 
 Take a single bushel. He gets ninety cents for it. With 
 that, he purchases six pounds of sugar at fifteen cents. This, 
 he observes, is five cents more than he used to pay for sugar, 
 when his wheat was but sixty cents. He perceives, that, 
 having paid five cents per pound extra on the sugar, he has 
 just lost all the additional price of thirty cents on the 
 bushel of wheat. 
 
 On further reflection, he discovers that he is not so well 
 oflf as when he sold his wheat at the money price of sixty 
 cents, because it cost him more to raise the wheat.* He had 
 to pay more for the labor employed in its production, — 
 equal, say, to five cents per bushel, which, on one thousand 
 
 * It may be objected to this view of the case, that, the wheat having 
 risen in price, it would require less in quantity to pay for the labor, so that 
 the farmer's crop would actually cost him no more than before the rise in ' 
 wages. 
 
182 EXCHANGE. [BOOK IH. 
 
 fcushels, amounts to fifty dollars; and that sum he will 
 actually lose, although selling his wheat at fifty per cent 
 advance in price. 
 
 This transaction of selling one hushel of wheat for six 
 pounds of sugar fairly represents the result of selling the 
 whole crop, and investing the proceeds in other kinds of 
 property ; because all commodities have alike risen in price. 
 
 But it may be asked, Suppose the farmer paid a debt of 
 nine hundred dollars with the money he obtained for his 
 wheat, has he not gained by the rise in price ? K he con- 
 tracted the debt before the rise, he certainly has made a 
 large gain in the payment of the debt ; for, as things were 
 when the debt was contracted, it would have taken fifteen 
 hundred bushels of wheat at sixty cents to pay nine hun- 
 dred dollars. Here he has gained three hundred dollars, or 
 saved five hundred bushels of wheat, less, be it recollected, 
 the extra expense of fifty dollars in the raising of the crop. 
 His net gain is two hundred and fifty dollars. 
 
 But how is it with his creditor ? He finds, on re-invest- 
 ing the money in cattle, horses, sheep, ploughs, wagons, and 
 the like, that the nine hundred dollars will purchase but 
 two-thirds as much as when he loaned the money. He has 
 lost three hundred doUars. The farmer promised to pay 
 " dollars ; " but he did not, he only paid the promise of dol- 
 lars ; and these promises were so easily made, became so 
 plenty, proved so cheap, that they were really worth but 
 two-thirds of what they professed to be. This he found 
 when he came to use them in buying articles for his 
 family. 
 
 But, to carry the inquiry entirely through, we must ask 
 who gained the fifty dollars the farmer, in the case sup- 
 posed, lost by the extra cost of labor ? The laborer ? He 
 was certainly paid an extra price; but he gained- no value 
 by it, because all the commodities he purchased with the 
 proceeds of his labor were raised more than his wages, so 
 that he lost more than he gained. The rise in price has, ia, 
 
CHAP. IX.] STANDARD OF VALUE. 183 
 
 fact, benefited nobody but the debtor, and him only at the 
 expense of the creditor, who was virtually swindled out of a 
 part of his property. This is the final result, when care- 
 fully analyzed, of an expansion of prices through the expan- 
 sion of the currency. 
 
 Every advance in price, occasioned by the depreciation of 
 the currency, is sure to be followed ultimately by a return 
 to the specie standard. Suppose that, during an expansion, 
 a farmer, encouraged by the high price of wlieat, purcliases 
 land to the amount of nine hundred dollars, in the expecta- 
 tion that he can pay for it with one thousand bushels of 
 wheat, at ninety cents per bushel. A contraction takes 
 place, the price of wheat goes down to sixty cents, and, to 
 pay his note of nine hundred dollars, he must sell fifteen 
 hundred bushels of wheat. He has lost five hundred bush- 
 els, just what the debtor, in the other case supposed, gained, 
 less fifty doUars which he will now save in the labor cost of 
 his wheat. 
 
 "We here see that the effect of raising prices without 
 increasing values is to vitiate all existing contracts to pay 
 money. If the farmer, in the case supposed, had promised 
 to pay so many bushels of wheat, all would have been well ; 
 but he promised to pay dollars ; and, when the price of 
 wheat was measured by dollars under a contraction, it made 
 the difference stated. 
 
 Much misapprehension arises from confounding special 
 and general prices, or the price of an individual article, as 
 distinguished from that of the great mass of commodities. 
 We are told that a variety of considerations enter into and 
 affect prices ; viz., demand and supply, cost of production, 
 &c., &c. All this is perfectly true of an individual article, 
 whose price may and does vary from time to time, as com- 
 pared with other commodities, under the operation of these 
 causes. One article may be very high, while all others are 
 low, or the reverse ; but this does not tend to disprove the 
 principle, that general prices are determined by the quantity 
 
184 EXCHANGE. [BOOK HI. 
 
 of the currency. We can take into view all the circum- 
 stances which act upon a particular commodity, and by 
 which it is made, for the time being, an exception to the 
 general rule, without disturbing the principle laid down, or 
 casting any doubt upon its operation. 
 
 CHAPTER X. 
 
 EFFECTS OF A MIXED CUERENCT. 
 
 We stated two principal questions in regard to mixed cur- 
 rency : — 
 
 1st, Does it perform satisfactorily the functions of money ? 
 
 2d, What, and how great, are its effects on public inter- 
 ests, beyond the proper effects of value currency ? 
 
 In the four chapters immediately preceding, we have dis- 
 cussed the first question, with a result unfavorable to such 
 a currency. We now approach the second of these ques- 
 tions,^ What are the effects of mixed currency? 
 
 I. A mixed currency endangers domestic tranquillity. 
 This is a proposition which we shall consider solely with 
 reference to society in the United States. 
 
 That mixed-currency banks can never, in fact, fulfil their 
 agreements, if called on to do so, we have already shown ; 
 and, since they are ever liable to such calls, there is con- 
 stant danger from this source. At any moment, there may 
 reasonably arise, through this cause, such general dissatis- 
 faction among the lower classes as shall tend to extensive 
 disturbances of the public peace. 
 
 This danger is greatly enhanced by the fact, that, within 
 the last forty years, there has been created a vast system of 
 savings institutions, which receive the money individuals 
 are disposed to deposit with them, and promise to return it 
 on demand, or at short notice ; generally on demand. 
 
^r. 
 
 BaiiTi' Liri/'i/ihi's in A/a.^sru/mse/ls 1S60 
 and Jraxis //' ^peric 
 
 Depcsits in Sayinys BcmJis 
 
 4S .V///767/S 
 
 
 Deprsifs 
 
 in 
 
 fiirrf/icr Banlis 
 
 30 Jf>//U7,S 
 
 
 
 
 rirriiioHni 
 
 or 
 
 rurri'f) rr ficui/ls 
 25 'A/7l/in,.s 
 
 
 
 
 
 Sprnp 
 ffk itfi//ini,\- 
 
 
 
 Lirrhi/i/ifS JOO MV/rf//s 
 
 Specie 6i :tfi/Jifns 
 
CHAP. X.] EFFECTS OP A MIXED CUREENCT. 185 
 
 Now, should any cause operate by ■which confidence in the 
 solvency of the general banking system of the country is 
 shaken, it will naturally, nay, inevitably happen that a run 
 will be made on the savings institutions. These can only 
 meet their engagements by drawing on the banks. But, if 
 these have all their resources strained to meet the ordinary 
 wants of the business community, how can the drafts of the 
 saving banks be met ? How can currency be supplied for 
 this extraordinary demand ? This question can only be 
 intelligently answered by reference to the condition of both 
 these kinds of institutions. 
 
 We will, for this purpose, take the currency of Massachu- 
 setts as it stood in 1860 : — 
 
 The savings banks had on deposit $45,000,000 
 
 30,000,000 
 
 .circulation 25,000,000 
 
 The currency banks had -) . ^ 
 
 (. circulatic 
 
 Total $100,000,000 
 
 The currency banks had specie 6,500,000 
 
 Difference $93,500,000 
 
 This is exhibited in Currency Diagram No. 6. 
 
 Here, then, are legal immediate demands, upon the cur- 
 rency banks, of fifty-five millions ; and, upon the savings 
 banks, of forty-five millions. Suppose there should arise 
 some dissatisfaction, or public uneasiness, which should 
 prompt to a run on both these kinds of banks. It ceij'tainly 
 is possible, not to say probable. Suppose that the institu- 
 tions for savings are called on for only one-fourth of their 
 deposits. They must look to the banks for eleven millions 
 of currency at once. The banks begin to pay out their bills ; 
 but the specie is at once demanded, and of that they have 
 but six and one-half millions against their own immediate 
 liabilities of fifty-five millions. They could not stand a run 
 of two days, because their own deposits would be drawn in 
 specie just as soon as the real state of affairs was discov- 
 
186 EXCHANGE. [BOOK IH. 
 
 ered. The banks must, therefore, suspend at once. What 
 ■would naturally follow in a time of great public excitement, 
 when the interests of some party or faction required a gen- 
 eral breaking-up of society ? 
 
 It is not enough to evade this, by saying that such an 
 event has never happened, though the banks have several 
 times suspended. That is quite true ; yet it does not follow 
 that it never will. Previous suspensions have originated in 
 commercial causes. Suppose, on the other hand, a run were 
 made on accoxint of political or social disturbances ; that 
 the laboring class — factory operatives, railroad gangs, the 
 servants in our families — were incited to demand their de- 
 posits in the savings institutions. Could they not prostrate 
 the entire currency in twenty-four hours, by merely demand- 
 ing their just dues ? 
 
 Whether such a probability is remote or uncertain, it 
 does not seem wise to maintain a system which can, by any 
 possibility, produce results so disastrous ; especially, if there 
 are no advantages whatever in such a state of things. 
 
 Premonitory symptoms have not been wanting of such a 
 catastrophe as, under aggravating circumstances, might over- 
 throw all the moneyed institutions of the country, and even 
 endanger the government itself. 
 
 We are not the homogeneous people we were. We 
 have elements of weakness and discord that did not exist in 
 earlier times. We have, especially, a large foreign popular 
 tion, as much interested as any other in the funds of our 
 savings institutions, which might, at any moment, if pro- 
 voked to do so, throw our whole banking system into sus- 
 pension. 
 
 It cannot be wise to ignore these palpable facts, or the 
 consequences that, in the natural course of things, are likely 
 to come out of them. The danger can only be removed by 
 a change of system. 
 
 n. A mixed currency has a demoralizing influence upou 
 a community, industrially and socially. 
 
CHAP. S.] EFFECTS OP A MIXED CURRENCY. 187 
 
 If what has been said in regard to this kind of currency 
 is correct, such an influence cannot for a moment be ques- 
 tioned. If it excites to wild and extravagant speculation at 
 one time, and plunges its victims into bankruptcy and ruin 
 vnthout fault at another ; if it excites hopes and expecta- 
 tions which must necessarily come to disappointment and 
 distress ; if it increases to an enormous extent the natural 
 risks of trade, and exposes all business operations to an in- 
 calculable hazard, — then the mercantile character and the 
 general tone of morals cannot but be imfavorably affected. 
 
 The influences that hold men to strict probity, steady 
 industry, and a strong sense of honor, are feeble enough, 
 and have enemies enough, without the discouragements and 
 embarrassments arising from such causes as we have de- 
 scribed. 
 
 Society should place its premium on virtue, and not on 
 vice. 
 
 Those who have witnessed the terrible convulsions occur- 
 ring in the United States within forty years, know but too 
 well how sad has been the effect on individual and national 
 character. 
 
 It is unnecessary to dwell upon a point so evident, and so 
 generally admitted by all who understand the matter ; yet 
 its recognition could not properly be omitted in the exami- 
 nation of the mixed-currency system. 
 
 III. A mixed currency endangers the national safety in 
 war. 
 
 "With the existing ideas and institutions of society, and 
 while no preparations are made in time of peace to prevent 
 the recurrence of war, but every effort to meet it, and thus, 
 of course, to strengthen and perpetuate the war system, it 
 becomes a matter of great interest to inquire as to the effects 
 of a mixed currency on the safety of a nation in the event 
 of war. 
 
 "We have already shown that a mixed currency is greatly 
 affected by a demand for specie to send abroad. Hence, as 
 
188 EXCHANGE. [book III. 
 
 war must always call for an extraordinary importation of 
 foreign merchandise and materials, and as such extraordi 
 nary importation must require the shipment of specie, a 
 contraction and panic, or speedy suspension, must be the 
 certain consequence. 
 
 Again, since so great a part of a mixed currency usually 
 consists of credit, and since credit rests wholly on confi- 
 dence, any thing which impairs the latter compels a con- 
 traction or withdrawal of the currency. 
 
 Now, war generally, we may say uniformly, does this : for 
 how long it may last, how great may be the demand for 
 money, how large the destruction of capital, and what the 
 final issue, must be a matter of doubt ; and therefore itn 
 occurrence always impairs public confidence to a greater or 
 less extent. 
 
 These two causes, then, are at once brought to bear upon 
 a mixed currency with fatal effect. The result has always 
 been, and always must be, that, under such circumstances, 
 the mixed-currency banks suspend ; because their circula- 
 tion cannot be withdrawn at the time without producing 
 universal bankruptcy, annihilating their own capital, and 
 stopping the wheels of government. 
 
 It was so in England during the war with Napoleon ; in 
 the United States during the war of 1812, and in the time 
 of the great Rebellion. 
 
 What comes in consequence of all this ? The nation is 
 obliged to carry on its vast pecuniary operations with a 
 broken-down currency. This, of course, involves the finan- 
 ces in great embarrassment, vastly increases the public 
 expenditures and the national indebtedness. The whole 
 financial system of the country is crippled, and becomes as 
 weak as its currency. 
 
 No better illustration of the truth of this statement was 
 perhaps ever afibrded than that found in the experience of 
 the United States during its great struggle. 
 
 The country was suddenly involved in a stupendous war, 
 
CHAP. X.J EFFECTS OF A MIXED CUERENCT. 189 
 
 — technically, only a civil war, but, practically, a great inter- 
 national struggle, so vast were its dimensions, so strictly 
 was it sectional ; a conflict between two different civiliza- 
 tions, on different though contiguous portions of the Amer- 
 ican continent. 
 
 At the commencement of the struggle, the currency, as 
 we have before said, amounted, circulation and deposits, to 
 four hundred and sixty millions against eighty-three mil- 
 lions of specie. Upon the mere threat of secession, so 
 greatly did it impair public confidence that the banks at the 
 South began to suspend ; and their example was followed 
 until most of the Western, and many of the Eastern, were 
 in a state of suspension. After the first shock had passed 
 by, most of the banks in the loyal States resumed specie 
 payments ; but the large demands of the government, in the 
 course of about a twelvemonth, compelled a universal sus- 
 pension by both the national treasury and the banks, and 
 the whole country was thrown upon an irredeemable paper 
 currency. 
 
 All this happened, not because the currency was so redun- 
 dant, but because it was so unsound. Had it been based in 
 full on specie, this disastrous result would have been avoided. 
 
 Now, if it ever could be supposed politic or safe to send 
 away the real money of a country and live on credit, if this 
 could ever be regarded as good economy or statesmanship, 
 when should it be done ? When the nation is in prosperity, 
 and does not need this little gain, or wh'en it is strained to 
 agony in the struggles of war ? If this is really a resource, 
 should it be spent in time of peace for extra imports of 
 wine and silks, or reserved to the great trial of life for the 
 people, when it may bring back the munitions of war ? 
 
 If we were to dispense with three hundred millions of 
 gold that form our material currency, was it wise to send 
 it off in years of quiet and prosperity, instead of reserving it 
 to the decisive hour of our nationality ? 
 
 In time of war, a mixed currency always becomes an un- 
 
190 EXCHANGE. [BOOK m. 
 
 mixed paper currency. Being at all times really inconvert- 
 ible, any disturbance in public affairs which destroys, or 
 even essentially impairs public confidence, will cause a gen- 
 eral suspension of the mixed-currency banks, and, of course, 
 of the government, and the substitution of a credit for a 
 value currency. 
 
 If this is true, — and all the facts of history go to prove 
 it, — then every nation, which, in time of peace, relies upon 
 a mixed currency, must, in time of war, suffer all the dis- 
 asters incident to an irredeemable paper currency; must 
 pay a great deal more in all its purchases, require larger 
 loans, and accumulate greater debt, — greater in proportion 
 as the currency is deficient in the element of value. 
 
 " A nation may almost as well go to war with paper guns as a 
 paper currency." — J. Y. Smith. 
 
 The truth of this was certainly very strongly exhibited in 
 the experience of the government of the United States dur- 
 ing the Eebellion. The failure of the currency compelled 
 the national legislature to adopt the arbitrary measure of 
 making its own irredeemable notes legal tender. 
 
 This was a palpable violation of the most sacred rights of 
 the people, and involved the treasury in a labyrinth of em- 
 barrassment and wasteful expenditure. Necessity, which 
 knows no law, demanded all this ; and there may be little 
 or no blame on the immediate agents. The law of value 
 had already been violated by the introduction, in peace, 
 of the element of credit into that currency, which the gov- 
 ernment was obliged to make use of in time of war. It was 
 not easy to change its character at such a crisis, and it 
 was allowed to go on to its proper consequences. 
 
 If these are the natural and inevitable results of a mixed 
 currency in such an event, is it not true that a people im- 
 posing on themselves a mixed currency can never be finan- 
 cially " prepared for war " ? 
 
 IV. A mixed currency discourages domestic manufac- 
 
CHAP. X.] EFFECTS OP A MIXED CURRENCY. 191 
 
 tures, disturbs the proper relation of exports and imports, 
 and puts the balance of trade against the people employing 
 the greater proportion of credit. 
 
 These effects will be recognized as injurious by all classes 
 of persons ; but those who are so solicitous for the positive 
 encouragement of domestic manufactures, and for the re- 
 straint of imports, as to favor the enactment of prohibitory 
 or protective laws imposing duties on the foreign article, 
 will, of course, most fully appreciate and deeply feel this 
 tendency of a mixed currency. 
 
 The course of this will be best observed in an illustration 
 from the manufacture of a specific article : — 
 
 " Suppose that a certain kind of broadcloth can be afforded by 
 the foreign manufacturer, delivered at New York, for two dollars 
 per yard ; the same article might be made in this country, but 
 would cost two dollars a yard, without any profit whatever. Of 
 course, then, we cannot afford to make the article. The govern- 
 ment, in order to encourage its production here, lays a duty upon 
 the imported article of fifty cents per yard ; but, at the same time, 
 establishes banks which manufacture a mixed currency, and double 
 the natural amount of money. The American manufacturer now 
 proceeds to erect his mills ; but wages and materials have so ad- 
 vanced in price, by the expansion of the currency, that it costs him 
 twenty-five to fifty per cent more than it otherwise would have 
 done. He builds machinery ; but this also costs him proportionably 
 high. He proceeds to purchase raw materials, and employ labor 
 in manufacturing ; but all are advanced in price for the same reason. 
 His own expenses for living are also greater ; and, should he be 
 obUged to hire money, that will generally be found to have advanced 
 in price, or rate of interest. Under these circumstances, he cannot 
 make the cloth so as to afford a profit ; and it will not be surprising 
 if he should clamor for more protection. But it may be said, that 
 the same causes that have advanced the expenses of living, and, 
 consequently, of labor, will equally have advanced the price of 
 broadcloth. Not so. The price of the broadcloth will be deter- 
 mined by the rate at which it can be afforded by the foreign manu- 
 facturer ; and if he can pay the duty of fifty cents per yard, and 
 yet obtain a feir profit, he will send all the market demands. 
 
192 EXCHANGE. [BOOK HI. 
 
 " There iB another view of the matter. Suppose we would ex- 
 port our plain cottons, for example, to India. "We there meet the 
 English article, made under a currency more valuable than our 
 own, which can consequently be afforded for less ; since, with the 
 same amount of the money of India (i.e., value money), the English 
 manufacturer can pay for much more labor in England than the 
 American manufacturer can in America. It is true that the rate 
 of wages is lower in England than in this country ; but, in addition 
 to this, England has the very great advantage of a currency nearer 
 the currency of international exchange, which is always strictly 
 value money. In such a state of things, not all the tariffs that ever 
 were or ever will be imposed can adequately protect our manu- 
 factures. So far as they have arisen or flourished, it has been in 
 spite of these disadvantages." * 
 
 During the continuaiice of the compromise tariff, estab- 
 lished in 1832, and which terminated in 1842, the currency 
 varied from fll.82 to $17.61 per capita, equal to an expan- 
 sion of more than fifty per cent ; while, during the same 
 period, prices (as shown by table V., page 177) fluctuated 
 to a greater extent. The variation in prices was larger even 
 than the percentage of protective duties. 
 
 So the tariff of 1842, which began to take effect in 1843, 
 when the currency was 16.18 per capita, was more than 
 counterbalanced by the expansion of the currency to $9.94 
 in 1846. But the manufacturer suffered as much from the 
 periodical contractions as from the expansions that pre- 
 ceded them ; for while, by the latter, the duties were ren- 
 dered nugatory, all business men met great losses from the 
 failures and the general derangement and stagnation which 
 the former produced. No tariff of reasonable extent, such 
 as the people of the whole nation would endure, can ever 
 place the domestic manufacturer in a position of security 
 and of reliable profit, while competing with such an immense 
 advance in prices as must certainly accompany an expansion 
 of the currency. Nor can it fail to be true, that the normal 
 industrial development of any country, in which such a 
 
 * Walker on Money and Mixed Currency, p. 39. 
 
oil 
 
 
 N 5- 
 
 ^ 
 
 
 
 1^ 
 
 
 to 
 
 ■^ 
 
 « 
 
 ^S 
 
 
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 J 
 
 t^ 
 
 
 0, 
 
 
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 ^ 
 
 
 s 
 
 <S 
 
 
 
 
 
 
 
 
 
 e. 
 
 s 
 
 
 1 
 
 
 
 k 
 
 
 
 
 =>- 
 
 
 =^^ 
 
 
 ^ 
 
 
 
 
 
 •t 
 
 
 3 
 
 <t 
 
 
 
 
 
 1 
 
 i 
 
 
 s 
 
 n 
 
 
 
 "(: \ 1 
 
 
 Isf 
 
 J: 
 
 1 
 
 
 i 
 
 sL 
 
 
 -90- ! '"= :i - r - . , 
 
CHAP. X.] EFFECTS OF A MIXED CURRENCY. 193 
 
 currency exists, must, to a very great degree, be interrupted 
 or distorted. All ordinary business calculations are over- 
 turned. An element of hazard is introduced, fatal to the 
 shrewdest schemes. 
 
 The terrific struggles through which American manufac- 
 turers have passed, ever since the establishment of the first 
 tariff in 1816, have been caused, not by foreign competition, 
 solely or mostly, but by a false and delusive' domestic cur- 
 rency. Fully as we are opposed to the policy of protective 
 duties, we are still more opposed to that system of currency 
 which neutralizes them, and renders the legitimate success 
 of home manufactures impossible, even after so great sacri- 
 fices to introduce them. 
 
 There is a still more striking view of the Connection be- 
 tween protection and currency. 
 
 It is generally believed that high tariff duties restrict the 
 importation and consumption of foreign merchandise. It is 
 a popular cry, that " government ought to lay heavy duties, 
 so as to prevent an adverse balance of trade, and the conse- 
 quent shipment of specie abroad." 
 
 It is true, as a principle, that, the greater the price, the 
 less the consumption ; and that, as the imposition of taxes 
 on the foreign article iiicreases price, so it must, other 
 things equal, decrease consumption. But other things are 
 not equal. They have not been so in this country during 
 this century. The facts in the case do not show that heavy 
 duties necessarily reduce the consumption of foreign arti- 
 cles. On the contrary, it is found that the largest importar 
 tion has often taken place during the existence of the 
 highest tarifis. Diagram No. 7 will exhibit the relations of 
 the tariffs to the amount of imports, from 1816 to 1861. 
 
 Of this diagram, showing the tariffs and the consumption 
 of foreign commodities under each, it must be remarked, 
 that the line indicating the different tariffs does not ex- 
 press with precision the actual percentage of tax imposed 
 by each, because that is not practicable : it is only given as 
 
 13 
 
194 EXCHANGE, [BOOK HI. 
 
 an approximation. Each of the tariffs imposed different 
 rates per centum on different items ; and some of the tariffs 
 have a large proportion of specific duties, or so much per 
 yard, gallon, or pound ; so that the exact per centum cannot 
 be ascertained, nor is this necessary to our purpose. We 
 are able to determine, with sufficient accuracy, the general 
 percentage of each tariff, to enable us to judge whether the 
 consumption rises and falls in correspondence. 
 
 The tariff of 1816 was the first ever laid for protection, 
 and is estimated at twenty-four per cent. Four years after- 
 wards, viz. in 1820, the tariff was increased. Eight years 
 afterwards (1828), a very great advance was made, which is 
 placed in our estimate at forty-eight per cent ; but it may 
 have been much higher than that, as many articles were 
 charged with high specific duties, amounting to from one 
 hundred to two hundred per cent. It was almost prohibi- 
 tory, and gave such umbrage to South Carolina and other 
 cotton-growing States, that the celebrated compromise tariff 
 of 1832 was enacted, which reduced the duties at the rate 
 of ten per centum, on all over twenty per cent, for ten years ; 
 so that, at the end of that time, there would only remain the 
 twenty-per-cent duty. 
 
 This tariff came down to its minimum in 1842, a time of 
 great depression of prices and trade, growing out of the 
 monetary revulsion through which the country had just 
 passed. A strong and successful appeal was made for an 
 increase of duties ; and the tariff known as that of 1842 
 was established, giving high protection. This occasioned 
 so much dissatisfaction, that, after four years, the rates were 
 again reduced by the tariff of 1846. This remained in op- 
 eration for the unprecedented period of eleven years, when 
 another reduction was effected by the tariff of 1857. This 
 lasted for four years, when the necessities of the treasury, 
 in consequence of war, required the imposition of higher 
 duties in 1861 ; since which they have been still further 
 advanced. 
 
N"5. 
 
 Sfiatiny ihi> /'o/iui/f c/" the Currencf ii//f/ /he hiiftcrty 
 
 ^r Consum/Jlun for 86 frr/n 
 A/i//if/i.\ of rwfvjt.CY^_ 
 
 
 
 57 
 
 
 
 
 36" 
 
 - 
 
 — 
 
 S4 
 
 
 
 L^ 
 
 - 
 
 — 
 
 
 
 "'. 
 
 
 38 
 
CHAP. 2.] EFFECTS OF A MIXED CUERENCT. 195 
 
 Witli these explanations of the diagram, we are prepared 
 to Inquire into its teachings. 
 
 Is there any such correspondence between the two lines 
 as to indicate that one is governed by the other ? Does it 
 appear, that, as tlie tariff rises, importations fall off; that, 
 as it is lowered, importations increase ? Certainly not. We 
 can perceive no such striking correspondence between the 
 two lines as to lead us to believe that importations are gov- 
 erned greatly by the tariff. 
 
 There seems to be a disturbing influence which deranges 
 the natural movement of the line of consumption. 
 
 The two lines clearly do not show such a correspondence 
 as to prove that impoi'tations are uniformly governed by the 
 tariff. 
 
 A reference to Diagram No. 8 will, we think, show the 
 disturbing cause, or rather by what law importations are 
 controlled. 
 
 Here we find a correspondence so uniform and persistent 
 as to decide the question, beyond cavil, that the demand for 
 foreign merchandise depends upon the qviantity of currency 
 in the country ; and, as that increases or diminishes, so does 
 the consumption of imported articles. 
 
 The immense expansion of 1836 carried the consumption 
 up to $10.93 per capita, under a medium tariff; while, under 
 a still lower one, in 1840, the consumption was but 15.21. 
 Whereas, if consumption is governed by the tariff, it should 
 have been higher than in 1836. 
 
 According to the natural effects of the tariff (the en- 
 hanced price of foreign commodities), consumption should 
 be highest when the tariff is lowest, and vice versa. We 
 have seen that such correspondence does not take place. 
 We then conclude that some other force or influence oper- 
 ates to neutralize the power of protective duties, and even 
 reverse the natural effect. The last diagram proves the 
 existence of such a cause, and shows its effects on im- 
 ports. 
 
196 EXCHANGE. [BOOK HI. 
 
 Hence we may lay it down as a principle, that a sound 
 currency is more important, as affording protection against 
 foreign competition, than a high tariff. 
 
 We close our remarks on this subject, by quoting the fol- 
 lowing forcible and just statement, found in the " Bankers' 
 Magazine " (New York) for 1859-60, page 2 : — 
 
 " So far as the currency of a country is alloyed, so far as any 
 thing inferior to bullion is allowed to ride as a dead weight on bul- 
 lion's back, it is of little consequence whether such dead weight 
 be composed of lead or copper, paper or leather ; nor, so far as the 
 country's home trade is concerned, does it matter whether the sub- 
 stitute for bullion circulates in distinct pieces, or is incorporated 
 into the gold and silver coin at the mint. It is of great importance 
 to the profits of our foreign trade, however, that every fraction of 
 gold and silver in our currency should have its own proper share 
 of alloy, or paper inseparably attached to it ; so that foreign pro- 
 ducers, after they have taken paper-money prices of us for their 
 goods, shall not wind up their business (as they have done hitherto) 
 by palming their share of paper money upon us at par for actual 
 gold. As things now are managed, American trade and industry 
 are made to huy paper at the banks at the price of gold, and sell 
 gold to foreigners at the price of paper.'' 
 
 CHAPTER XI. 
 
 EFFECTS OP A MIXED CUERENCT (concluded). 
 
 V. A MIXED currency causes unnatural and extreme fluc- 
 tuations in the rate of interest. 
 
 If a mixed currency is in its nature constantly fluctuating, 
 at one time very redundant, at another very scarce, it would 
 seem to follow, as a necessary consequence, that the rate of 
 interest, which is merely the sum paid for the use of money, 
 or currency, would be equally so. Practically, we find that 
 such is the fact. While the currency is in the process of 
 
CHAP. XI.] EFFECTS OP A MIXED CURRENCY. 197 
 
 expansion, and is enlarged by new issues from day to day, 
 money must be plenty, and tbe rate of interest low. 
 
 When the currency has become largely increased, and 
 speculation has been engendered by the rise of prices, the 
 demand for money will increase faster than the supply, and 
 the rate of interest will begin to advance. 
 
 When the banks have arrived at that point at which they 
 must of necessity contract, and they begin to take in their 
 currency, and, of course, to create a scarcity of the means 
 of paying debts, then the rate of interest will rise to a very 
 high point, not unfrequently to four or six times its natural 
 rate. 
 
 The indebtedness which the expansion has encouraged 
 must now be met, at all events and at any sacrifice. Sales 
 of property cannot be made for cash, because all cash re- 
 sources are needed to meet existing indebtedness, rapidly 
 maturing ; and, consequently, a great pressure is made upon 
 the money market. The severity of this is indicated by the 
 rate of interest. 
 
 Such being the facts in the case, we need not be surprised 
 to find that the highest rates of interest are paid at times 
 when there is far more than the average amount of cur- 
 rency. 
 
 On the other hand, when indebtedness has been dis- 
 charged, both by the banks and individuals, and the cur- 
 rency reduced to very moderate dimensions, we find the rate 
 of interest very iow. 
 
 Take the years 1837 and 1857. Interest was up to 
 thirty-six per cent ; yet there was a greater amount of cur- 
 rency, per capita, then in use, than ever before or since. 
 Take the years 1842-43, for an opposite example, when there 
 was less currency than ever before. Money was very plenty 
 and very cheap. 
 
 This law has governed the rate of interest at all times 
 under our currency, and is strikingly exhibited in our Dia- 
 gram No. 6, inserted herewith. 
 
198 EXCHANGE. [BOOK in. 
 
 By tins diagram, we see, — 
 
 FirBt, The frequent and extreme fluctuations in the rate 
 of interest. 
 
 Second, That the highest rates of interest occur when 
 there is the greatest expansion of the currency, as witness 
 1836, 1839, 1854, and 1857. 
 
 Third, That the lowest rates of interest are found where 
 there is the smallest amount of currency, as in 1843-45. 
 
 Fourth, We observe some remarkable exceptions to these 
 general facts. 
 
 lu 1834, we find the interest up to twenty-four per cent, 
 while, in the following year, it was down to five. This is 
 easily explained by those cognizant of the facts. The 
 United-States Bank then in existence was extrenaely de- 
 sirous of recharier ; and, to secure this, it was thought 
 necessary to produce a tremendous pressure in the money 
 market, or, in the expressive language of the day, " put on 
 the screws." This result was a high rate of interest. 
 
 The following year, 1835, the bank took the opposite 
 course, and interest fell below the natural rate. 
 
 In 1836, there was a great expansion of the currency, as 
 shown in the lower line of the diagram. Speculation was 
 rife, the banks could not meet the demand for money, and 
 interest went up to thirty per cent. In 1837, the banks 
 suspended, then issued freely, and interest went down to a 
 low point. In 1838, the work of contraction began ; a mul- 
 titude of banks in the West and South failed, and the 
 pressure upon the solvent banks became great ; interest 
 went up to eighteen per cent. The year 1839 witnessed 
 still greater distress for money. Resumption of specie pay- 
 ments by the banks began to take place, and consequently 
 a great contraction of the currency. There was also a very 
 large exportation of specie that year ; and, by these combined 
 causes, the rate of interest ran up to thirty-six per cent. 
 In 1840, on the other hand, more specie was imported than 
 exported. The indebtedness of the country had been, in 
 
N?6 
 
 ^rt 
 
 c/z/ 
 
 
 
 
 
 Sh 
 
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 f/if Iliutualicns 
 
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 »59 - ffW mams cf Currener }^ ■ 
 
 35 . ^ __ _ _ _^_ 
 
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 34 
 
 
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 33- __ __ 
 
 
 
 
 
 32._. 
 
 
 
 
 
 31 
 
 
 
 
 
 
 30 
 
 1806 
 
 
 
 29 
 
 
 
 
 
 
 
 28 
 
 
 
 
 
 
 
 27 
 
 
 
 
 
 
 
 26 
 25 
 
 24 _is34 
 
 
 
 
 
 
 
 
 
 
 
 
 
 23 
 
 
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 22 
 
 
 
 
 
 
 
 
 
 21 
 
 
 
 
 
 
 
 
 
 20 
 
 
 
 
 
 
 
 
 
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 17 
 
 
 
 
 
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 15 
 11 
 15 
 
 
 
 
 
 
 
 
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 7 
 
 
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 n 
 
 
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 - lag. .. 
 
 Currency per- Capila. 
 
CHAP. XI.j EFFECTS OP A MIXED CURRENCY. 199 
 
 great measure, discharged, and money was plenty. Inter- 
 est was down to five or six per cent. In 1841, there was 
 again an export of specie, and also in 1842 ; and the rate of 
 interest went up to nine and twelve per cent. But, in 1843, 
 the lowest point was reached, more than twenty millions of 
 gold were imported, and money was a drug. Interest was, 
 for a while, almost nominal. Large amounts were nego- 
 tiated as low as three and a half per cent. 
 
 From this time forward, we have only the natural results 
 of a mixed currency in its fluctuations. In 1847, the rate of 
 interest was high, — eighteen per cent, — though the cur- 
 rency was not redundant. This was the year of the Irish 
 famine ; and we imported twenty-two millions of gold above 
 the exports. From 1849 to 1857, the currency was con- 
 stantly increasing. Severe fluctuations in the money market 
 took place, but no grand revulsion until 1857, when^so great 
 was the inflation of the currency, and consequently the 
 general credit of the country, that an explosion took place ; 
 interest going up to thirty-six per cent. All these facts are 
 significant, and form an essential part of the history of 
 mixed-currency banking. 
 
 The comparative fluctuations in the United States and 
 England is shown by the following table of rates of interest 
 from 1844, when Sir Robert Peel's act was passed, up to 
 1858, inclusive, — fifteen years. The rates of the Bank of 
 England are from ofiicial sources : those in the United States 
 are furnished by one * who has kept himself acquainted with 
 the street rates in the city of Boston. The banks being pro- 
 hibited by legislation from taking more than a fixed per 
 cent, the actual value of interest, or the use of money, can 
 only be ascertained from quotations of transactions outside. 
 These are essentially correct, as applied, not only to the par- 
 ticular market in which they were taken, but to the other 
 large money markets of the country. 
 
 * Joseph G. Martin, Esq., Boston, author of many valuable statistical 
 tables, &c. 
 
200 
 
 Table YI., 
 
 EXCHANGE. 
 
 [book in. 
 
 the Fluctuations in the Rates of Interest in England and tha 
 United States from 1844 to 1858, inclusive. 
 
 Yeab. 
 
 Rate, Bank 
 of England. 
 
 Bemarks. 
 
 Bate, 
 United Statei. 
 
 1844 
 
 1845 
 
 4-2J 
 2J-3i 
 3J— 3 
 3 — 8 
 
 5 — 3 
 3 — 2J 
 2i— 3 
 3 
 
 8 — 2 
 2 — 6 
 
 6 — 5J 
 6 — 6 
 6-4i 
 5J— 10 
 
 9 — 2i 
 
 Passage of English Bank Act . 
 
 4-5i 
 5 6 
 
 
 4 12 
 
 1847 
 
 1848 
 
 Irish famine 
 
 7—18 
 12 18 
 
 
 
 7 16 
 
 1850 
 
 
 6i-10J 
 6 — 16 
 
 1851 
 
 
 1852 . . . 
 
 
 5i-9 
 6 18 
 
 1853 
 
 
 1654 
 
 1855 . . 
 
 Crimean Trar 
 
 8 —IB 
 6i— 15 
 7 11 
 
 1856 
 
 
 1857 
 
 1858 
 
 The great revulsion .... 
 
 9 —36 
 3J— 9 
 
 
 
 The average rate of interest in the Bank of Eng- 
 land, from 1844: to 1858, as computed from tables 
 in the " Merchants' Magazine," vol. li. page 465, 
 was 3.82 per cent. 
 
 Approximate average for the same time in the 
 
 United States 10.5 „ 
 
 We say approximate average; for the data are too imper- 
 fect in this country to give any exact results. The average 
 of 10.5 may be somewhat too high ; and yet, as computed 
 upon transactions made in Boston, New York, Philadelphia, 
 Baltimore, Cincinnati, Chicago, and St. Louis, it is doubt- 
 ful whether it is much in excess of the true average rate. 
 
 The dividends which the banks of this country make, 
 after pajdng heavy taxes and general expenses, show, that 
 the rate of interest they obtain, notwithstanding the legal 
 restriction, must be high with them; and it is notorious 
 that interest " outside " at all times, when money is in 
 demand, is greater than that charged by the banks. The 
 interest paid upon mortgages and other permanent invest- 
 ments is most commonly six per cent. It is mainly on 
 business paper that the high rates are obtained. 
 
CHAP. XI.] EFFECTS OP A MIXED CIJRRBNCT. 
 
 201 
 
 Table VII., shmdng the Fluctuations in the Rate of Interest at the Banh of Englamd 
 for 160 Years, divided into different Periods. 
 
 Date. 
 
 Term. 
 
 ^1 
 
 II 
 
 Average 
 Term. 
 
 Rate of 
 Interest. 
 
 
 Teara. 
 
 
 T'ram.a'ya 
 
 
 1704 to 1814, inc. 
 
 Ill 
 
 6 
 
 20 5 20 
 
 4 to 5 
 
 1815 to 1835, „ 
 
 21 
 
 S 
 
 r 
 
 4 to 5 
 
 1836 to 1843, „ 
 
 8 
 
 8 
 
 10 
 
 4 to 6 
 
 1844 to 1858, „ 
 
 15 
 
 49 
 
 3 2 
 
 2 to 10 
 
 1859 to 1863, „ 
 
 5 
 
 44 
 
 2 8 
 
 2 to 8 
 
 Bank in suspension last 17 years. 
 Bank in suspension first 6 years. 
 
 Bank Act of 1844 suspended 1847. 
 Bank Act suspended 1857. 
 
 ThQ foregoing table presents a striking view of the 
 mixed currency of England. 
 
 1st, The great contrast between the stability of the rate 
 
 of interest for the first one hundred and forty years and the 
 
 last twenty years ; only sixteen changes in the rate during 
 
 jbhe former, and ninety-three changes during the latter 
 
 period. 
 
 2d, The great and violent fluctuations within the last 
 twenty years, ranging from two to ten per cent, corre- 
 sponding to the variations in the United States from four 
 to thirty-six. 
 
 3d, We observe the several suspensions of the Bank of 
 England, and of the Bank Act of 1844. 
 
 4th, We observe the same succession of panics as have 
 been witnessed in the United States. Sir Robert Peel, in 
 his speech on the suspension of the Bank-charter Act in 
 1847, specifies the following : " the panics of 1784, 1793, 
 1810, 1819, 1826, and 1837." The panics of 1847 and 
 1857 have since been added. 
 
 Between the years 1784 and 1857, inclusive, — a period 
 of seventy-three years, — there have been eight panics, or, 
 on an average, one in nine years, if we reckon that of 1784. 
 
 They correspond very nearly with those panics which 
 have occurred in the United States. And here it may not 
 be improper to present some additional facts in regard to 
 the British currency, showing in how far it corresponds 
 to our own in its character and effects. 
 
202 EXCHANGE. [BOOK III. 
 
 THE CUERENCIES OP GREAT BRITAIN AND THE UNITED STATES 
 COMPARED. 
 
 From 1844 to 1859, inclusive (sixteen years), the average 
 circulation of all the banks — English, Irish, and Scotch — 
 was thirty-seven millions sterling ; average specie, eighteen 
 millions. 
 
 We have not at hand any account of the deposits in any 
 of these banks, except the Bank of England. In that, the 
 average of deposits, public and private, was about sixteen 
 millions, while the circulation was nearly twenty-one. It 
 is well known that the deposits of the United Kingdom are 
 made chiefly in those joint-stock banks which do not issue 
 currency, but are confined to the operations of legitimate 
 banking. In addition to this, we have the consideration 
 that the Bank of England receives very largely of public 
 deposits, which go to make up the sum already stated. 
 We shall therefore be safe in estimating that the deposits 
 of all the currency banks of the United Kingdom are less 
 in proportion to their circulation than are those of the Bank 
 of England. If, then, we assume the deposits to be on the 
 average, in all the remaining banks, fifty per cent of the 
 circulation, we shall have the following result for the cur- 
 rency of Great Britain : — 
 
 Bank of England's circulation 21,000,000 
 
 „ „ deposits 16,000,000 
 
 Other Banks' circulation 16,000,000 
 
 „ „ deposits (estimated) 8,000,000 
 
 61,000,000 
 Total specie, as before 18,000,000 
 
 This would be equal to nearly thirty per cent against 
 eighteen per cent in the currency of the United States, 
 showing a considerable superiority in quality. 
 
 But this is only a partial view of the matter. The Bank 
 of England issues no notes of less denomination than five 
 
CHAP. XI.] EFFECTS OF A MIXED CUREBNCT. 203 
 
 pounds. The banks of Ireland and Scotland issue none 
 less than one pound (or five dollars) ; while, in the United 
 States generally, bank-notes are issued as low as one dollar 
 (or four shillings sterling). This makes a vast difference 
 in the amount of specie in the hands of the people. 
 
 All small transactions are made in gold. A traveller 
 may pass months in England, and expend thousands of 
 dollars, without ever seeing a bank-note in the hands of any- 
 body. 
 
 Probably it would not be extravagant to suppose, that 
 there was, on an average, a sum equal to two pounds to 
 each inhabitant. It has, indeed, been estimated much 
 higher; but allowing only two pounds each, equal to ten 
 dollars, we should have, on a population of twenty-six mil- 
 lions, fifty-two millions sterling, equal to, say, two hundred 
 and fifty million dollars. 
 
 From the foregoing statements, it will be seen how much 
 greater is the stability of the currency of Great Britain 
 than that of the United States. 
 
 The currency of Scotland approaches more nearly to that 
 of this country than any other section of Great Britain. 
 One-pound notes are issued to the extent of two-thirds of 
 its whole circulation ; and the proportion of specie held by 
 the banks is smaller. 
 
 The consequence is, that monetary affairs are more fluc- 
 tuating, and the number of bankruptcies greater, than in 
 the other part of Great Britain. 
 
 There are no reliable statistics by which to determine the 
 relative proportion of failures in each of the different mixed- 
 currency countries of the world; but, had we the data, it 
 would undoubtedly appear that the proportion of failures in 
 each country was governed strictly by the character of its 
 currency. 
 
 In the United States, where the currency for the last 
 thirty-five years has been weaker than any other in the 
 woz-ld, the proportion of failures are well known to be 
 
204 
 
 EXCHANGE. 
 
 [book m. 
 
 greater than anywhere else. The common estimate has 
 been ninety in one hundred. There is notliing myste- 
 rious in this result. It is the natural consequence of a 
 fluctuating and unreliable currency. Notwithstanding this 
 gi-eater stability of the English currency, as compared with 
 that of the United States, it is still so essentially defective, 
 so alloyed or adulterated with the element of credit, that it 
 produces in degree, though not in extent, the same evils 
 suffered in the United States. The commerce of the vast 
 empire of Great Britain is kept in a state of continual per- 
 turbation. The " reserve " of the Bank of England is 
 watched with the greatest solicitude : as it rises or falls, so 
 every business man in the nation is affected. This has 
 become more strikingly apparent within the last twenty 
 years. The fluctuations in the bank rate of interest have 
 been more frequent and violent than previously, and seem 
 to be growing worse from year to year. 
 
 We annex a Table VIII., showing the bank reserve for 
 each year from 1844 to 1858, and the corresponding rates 
 of interest charged by the Bank of England, together with 
 a diagram. No 7, representing the same. 
 
 Table VIII., shamng the Rates of Interest each Tear in the Bamk of England, 
 with the Aimnmtofthe Bank Eeserve at the corresponding Date, from 1844 to 1858, 
 inclusive, and ike Su^eTisions of the Bank Act. 
 
 Teab- 
 
 Bank Beserre. 
 
 
 Bonk Bate of 
 Interest. 
 
 1844 
 
 8^ millions 
 
 10 ;; 
 n* :; 
 
 12* ,, 
 13 „ 
 
 1* II 
 6 „ 
 
 * II 
 
 12 1, 
 
 li I, 
 18i I, 
 
 
 2J per cent. 
 8i „ „ 
 
 8 " " 
 3 " " 
 
 184B 
 
 
 1846 
 
 1847 
 
 1848 
 
 Suspension of Bank Act 
 
 1849 
 
 
 2| ;; ;; 
 
 2i „ „ 
 
 1850 
 
 
 1851 
 
 
 1852 
 
 
 2 " " 
 
 1853 
 
 
 6 " " 
 
 1854 
 
 
 6i „ „ 
 3i II II 
 ii I, „ 
 10 II „ 
 2i „ „ 
 
 1855 
 
 
 1856 
 
 
 1857 
 
 1868 
 
 Suspension of Bank Act 
 
 
 
NH. 
 
 Mcsrri't' 
 14 J/i//if/h\ ^'^lerliTin _ 
 
 13_ 
 IL 
 
 BANK OP KNGUND 
 
 M5a 
 
 IXSQ 
 
 10_ 
 9_ 
 
 5_ 
 
 2_ 
 1 
 
 1844 
 
 Ban^ MeserA'e. 
 
 Interest 
 /'crre/i/ 
 
 — ,- 
 
 
 
 
 
 
 - - 
 
 
 -- 
 
 
 
 
 
 
 
 
 
 is-n 
 
 - - 
 
 
 
 
 
 
 - 
 
 - 
 
 
 
 
 
 
 
 
 
 - 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1'^ 
 
 54 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 58 
 
 
 
 _ 
 
 
 
 
 
 
 45 
 
 1 . 
 
 
 48 
 
 W5l 
 
 
 55 
 
 
 
 
 
 
 
 1*« 
 
 
 
 
 
 40 50 
 
 
 ffi 
 
 
 
 
 
 
 
 . „ 
 
 
 
 
 
 
 
 
 - 
 
 
 
 
 
 fto/c rf Interest . _ 
 
 
 
 
 
 
CHAP. XI.] EFFECTS OP A MIXED CURRENCY. 205 
 
 Observe the correspondence between Diagrams No. 6 
 and 7. The rate of interest in both countries is evidently 
 affected by the same disturbing force, thougii in different 
 degrees. 
 
 EFFECTS OP MIXED CURRENCY UPON AMERICAN AGRICULTURE. 
 
 Unfavorable as the influence of mixed currency is upon 
 all branches of industry, the agriculture of the United 
 States is especially injured by it, because, as a people, we 
 have a large surplus of agricultural products, that must find 
 sale in foreign markets. Whatever such surplus is worth 
 for export, determines the price of the whole crop ; and 
 the value or price is determined by its value or price in 
 gold.' Such products are virtually sold for gold. It is 
 always a matter of choice with the merchant whetlaer to 
 send wheat,* for example, or gold, as a remittance. The 
 produce of the farmer, then, must be sold at a gold stand- 
 ard ; but all he purchases for himself and family is boiight 
 at currency prices. How much difference this may make 
 is seen at the present time, when commodities in general 
 are one hundred and twenty per cent above par, while gold 
 is but forty. 
 
 The currency is now (1865) a credit, or inconvertible 
 one ; but we are to inquire whether the principle does not 
 hold good at all times, under a mixed or partially converti- 
 ble currency. We therefore refer to the statistical tables 
 of the Financial Report of 1863, as heretofore, for prices, 
 and construct a table which exhibits the price of flour and 
 the price of cotton for fourteen years prior to 1860. We 
 also give the general prices of certain commodities, as shown 
 in our Table V., previously given (see page 178,) and also 
 the volume of the currency, per capita, at corresponding 
 dates : — 
 
 * Wheat may be taken as an exponent of all agricultural products ex- 
 ported. 
 
206 
 
 EXCHANGE. 
 
 [book m. 
 
 Table IX., lowing the Price of Flour and Cotton from 1846 to 1859, inclusive 
 (14 Years), with the Currency per Capita, and General Prices at corresponding 
 Dates. 
 
 Tears. 
 
 
 7i 
 
 = '2- 
 
 ii 
 
 11 
 
 Years. 
 
 o o 
 
 
 i::s 
 £3 
 
 H 
 
 1846 . . 
 
 S5 06 
 
 $9.94 
 
 $1669 
 
 1853 . . 
 
 $6.77 
 
 lOi 
 
 $13.65 
 
 $22.47 
 
 1847 . . 
 
 6 67 
 
 8 
 
 9.38 
 
 20.82 
 
 1854 . . 
 
 8.94 
 
 9 
 
 14.95 
 
 20.84 
 
 1648 
 
 5.96 
 
 8* 
 
 10.67 
 
 16.53 
 
 1855 . . 
 
 8.76 
 
 n 
 
 13,93 
 
 22 78 
 
 1849 . . 
 
 5.50 
 
 8 
 
 9.18 
 
 16.45 
 
 1656 . . 
 
 6.42 
 
 10* 
 
 14.64 
 
 25 02 
 
 185U . . 
 
 5.65 
 
 12 
 
 10.39 
 
 16.20 
 
 1867 . . 
 
 6.78 
 
 14 
 
 16.50 
 
 25.13 
 
 1851 . . 
 
 4.52 
 
 10 
 
 1186 
 
 19.42 
 
 1868 . . 
 
 4 30 
 
 13 
 
 11.55 
 
 21.92 
 
 1862 . . 
 
 5.00 
 
 9 
 
 13.31 
 
 21.42 
 
 1859 . . 
 
 6.10 
 
 Hi 
 
 14.90 
 
 22.11 
 
 The foregoing table shows conclusively, that, while gen- 
 eral prices conform remarkably to the existing quantity of 
 currency, flour and cotton do not rise and fall with its fluc- 
 tuations. Flour, for example, in 1846, with a currency of 
 9.94, was at |5.06 ; while in 1851, when the currency had 
 risen to 11.86, an advance of twenty per cent, flour was at 
 $4.50, a decline of ten per cent. Cotton was at 12 cents, 
 under a currency of 10.39, in 1860, and but 9 cents, under 
 a currency of 14.95, in 1854. But we need not point to 
 these facts ; they are quite apparent throughout the whole 
 table, and show beyond cavil that the prices of agri- 
 cultural products in the United States are not governed 
 by its mixed currency, as other products are which the ag- 
 riculturist must purchase for consumption. Hence he is 
 always a sufferer, as compared with the manufacturer and 
 all other classes whose productions are not exported ; for the 
 commodities of the latter, while they are advanced in cost 
 by currency inflation, are also, unless they come especially 
 into competition with foreign products, correspondingly 
 enhanced in price in the home market. 
 
 Ordinarily, this operation of a mixed currency is not ap- 
 parent to superficial observers ; but the effects are, never- 
 theless, always as certain as at the present time, when they 
 are seen by every one. 
 
CHAP. XII.] MIXED-CUERENCT FALLACIES. 207 
 
 At the time we are writing, the people of the West are 
 suffering prodigiously from the influence of a redundant 
 currency. All they consume of purchased commodities 
 they pay one hundred and twenty per cent advance upon ; 
 while their products, wheat, corn, &c., can only be advanced 
 about forty per cent, — the premium on gold. They feel dis- 
 tressed, and clamor against the tariff, as they have much 
 reason to do ; but they suffer a loss of ten dollars from the 
 currency, to one from the tariff. Whenever they see this, 
 the evil will be remedied ; for the agriculturists of tlie na- 
 tion hold the political power of the country in their hands, 
 and all this class of producers. East or West, North or 
 South, in Maine or Texas, Florida or Minnesota, are alike 
 interested in this matter. 
 
 Again, agriculture is more disturbed by speculative op- 
 erations than other branches of industry. Its products 
 are great staples, the necessaries of life. They are not 
 subject to quick decay ; hence can be monopolized and held 
 for a rise of prices. The sudden and excessive expansions 
 of a mixed currency afford great opportunities for operar 
 tions of this sort; and no products, probably, are so much 
 speculated upon as those of the farmer and planter. The 
 profit of all this goes to those who can command the re- 
 sources of the banks. The producers are far more injured 
 than benefited by these unnatural disturbances of the 
 market. 
 
 CHAPTER XII. 
 
 FALLACIES REGARDING A MIXED CURRENCY. 
 
 Fallacy 1st. That, by means of mixed-currency banks, 
 the capital of a country is greatly increased. 
 
 Capital is the portion of wealth employed in reproduc- 
 tion. Money is one form of capital. To the banker or 
 
208 EXCHANGE. [BOOK IH. 
 
 money-lender, it may be his entire capital ; but, to the mer- 
 chant, manufacturer, or agriculturist, it is capital only as 
 the instrument by which he obtains those commodities 
 ■which constitute his main capital, upon which he does his 
 work, and from which he makes his profits. 
 
 Of the great mass of the world's capital, money is but a 
 small fraction. Credit is no part at all. Capital, we have 
 said, is that portion of wealth employed iu reproduction. 
 Money is that portion of capital which is employed in re- 
 production, for the special purpose of effecting easily that 
 exchange of values which itself confers value, because done 
 by labor. 
 
 To the greater part of mankind, money is only the means 
 by which capital is obtained from those who have it. 
 
 Now, were it not for mixed-currency banks, all the capi- 
 tal loaned in the form of money would be reliable. Mixed 
 currency, for the time being, takes the place of actual 
 money, and becomes an instrument by which capital is 
 transferred. But its nature is, as we have seen, to issue 
 in greater volume than necessary for the wants of com- 
 merce, and, by this, to disturb the business of the country, 
 cause an unnatural rise of prices, an increase of imports, a 
 decrease of exports, and finally a call for real money, which 
 will cause the withdrawal of all the extra currency at the 
 very moment when, owing to the incfeased indebtedness it 
 has caused, it is more needed than at any other period. It 
 will then be discovered that this, excess was not capital, or 
 Actual value, but credit, in the guise ®f capital, which the 
 mixed-c\irrency banks had issued, and which they were 
 compelled. to withdraw when most wanted. 
 
 Fallacy 2d. That mixed currency is cheaper than a value 
 currency, more economical, and therefore more desirable. 
 
 Specie costs much labor. Paper costs but little in com- 
 parison : therefore, as it answers the same purpose, and is 
 more conveniently handled, it confers a benefit. This is a 
 popular idea. 
 
CHAP. XII.] MIXED-CURRENCY FALLACIES. 209 
 
 Money, we have said, is an instrument, nothing else ; we 
 do not eat, drink, or wear it. All tools, instruments, or 
 appliances should be as cheap as possible, provided, always, 
 they are safe and efficient. It would be cheaper to have 
 ploughs made wholly of wood. They would be lighter, and 
 quite as handsome, as when made partly of iron. But 
 would they be as useful, and, in the end, as profitable ? 
 
 A paper cap is cheaper than one of leather or cloth ; but 
 would it be as durable and comfortable ? If not, although 
 in the first instanoe it costs less, it would not be desirable 
 for use. The same principle applies to money. 
 
 If what we have already said of a mixed currency is 
 true, it is wanting in those qualities which would make 
 it cheaper than a value currency. It does not discharge 
 fully or perfectly a single function of money.. It deranges 
 trade, because it does not obey the laws of trade. It in- 
 creases credit enormously, by its expansions, because it is 
 itself credit; and impairs it by its contractions when its 
 own credit is blown upon. 
 
 But the gain by this substitution of credit for value in 
 the currency is insignificant, when compared with the great 
 interests of trade. 
 
 The average of paper circulation in the United States from 
 1850 to 1859, inclusive, ten years, was not more than f 6.25 
 per capita. If from this we deduct the average specie per 
 capita for the same time held by the banks, viz. f2.25, we 
 shall have left 14.00, as the amount for each individual of 
 credit circulation. On that amount, the saving, if any, is 
 to be made. If we compute the interest at six per cent, 
 we have twenty-four cents as the annual saving to each in- 
 dividual by the use of credit currency ; a saving worth the 
 attention of the statesman, if it could be properly and safely 
 made, but paltry in comparison with the losses and disturb- 
 ances incident to a mixed currency. 
 
 In this connection, it seems proper to introduce a distinct 
 
210 EXCHANGE. [BOOK III. 
 
 calculation of the damage occasioned to the people generally 
 from this cause. 
 
 On the 7tli of January, 1841, Congress requested of the 
 Secretary of the Treasury, first, a return of the losses sus- 
 tained by the government from using banks as depositaries, 
 and by its connection generally with them ; and, secondly, 
 the amount the people had lost on account of the banks and 
 their issues. The replies were in substance as follows : * — 
 
 Lbsses sustained by governmeiit to the year 1837 . . $15,492,000 
 
 „ sustained by the public "... 108,885,721 
 
 „ 'by bank suspensions and by depreciated notes . 95,000,000 
 
 „ by destruction of bank-notes 7,121,332 
 
 „ by counterfeits beyond losses by coin .... 4,444,444 
 „ by fluctuations, revulsions, sacrifices .... 150,000,000 
 
 Aggregate $380,943,497 
 
 Such were the estimates of the losses to the people and 
 the government resulting from the use of a mixed currency 
 up to 1841. There can be no doubt, in the minds of men 
 who were in business during the period covered by these 
 figures, that they are so far correct that they fail only by 
 reason of being set too low, particularly those of the last 
 item ; viz., " losses by fluctuations, revulsions, and sacrifices." 
 
 Twenty-four years have elapsed now (1865) since the 
 foregoing table was prepared ; and, during that time, the cur- 
 rency has been doubled, the country has passed through 
 several contractions and one or two explosions, and has 
 suffered as much probably as in the preceding period. If 
 so, the total loss would amount to seven hundred and sixty 
 million dollars. But suppose it to be only five hundred mil- 
 lion dollars : that amount would furnish gold and silver 
 currency sufiicient, not only to supply our wants at present, 
 but for generations to come. 
 
 Some have supposed that a great saving is made by the 
 use of paper money instead of coin. But it is not necessary 
 
 * See " Merchants' Magazine," vol. 1. p. 9. 
 
CHAP. XII.] MIXED-CURRENCY FALLACIES. 211 
 
 to have a mixed ciirrency in order to avoid abrasion of the 
 coin. A mercantile currency, based wholly on specie, would 
 equally avoid loss from this cause, and yet secure all the 
 advantages of a value currency. 
 
 But, in fact, the abrasion of paper currency is far greater 
 than that of gold ; that is, it costs more to keep out one 
 hundred dollars of currency than it does to keep out 
 one hundred dollars in coin. Gold and silver circulate 
 themselves ; but it requires a formidable machinery to circu- 
 late paper promises, — a machinery far more costly than the 
 slow wear of the precious metals. No banker would venture 
 to say that a paper currency can be maintained for one- 
 twentieth of one per cent per aunum. 
 
 It may be said that the banks gain a considerable sum by 
 the accidental destruction of their notes. Doubtless ; but 
 what they gain somebody loses. The amount estimated to 
 have disappeared in. this manner up to 1841, as we have 
 seen in the table just cited, was put at seven millions of 
 dollars. A very large proportion of this fell on the poorer 
 classes, as also do the losses by counterfeiting. 
 
 But, if we would comprehend the question of economy, 
 we must appreciate the expense of maintaining all the offi- 
 cers, managers, and subordinates of fifteen hundred banks, 
 with all the incidental charges of their operations. At a 
 moderate calculation, this would not average less than four 
 thousand dollars to each bank, or a total sum of six milhon 
 dollars per annum. 
 
 This argument of economy in the use of credit money 
 was presented by Dr. Adam Smith eighty years ago. Even 
 then the danger was apparent, though the system had not 
 been developed to Its proper character and consequences. 
 Had the writer witnessed the great convulsions from 1797 
 to 1867, he would have dismissed, as wholly an idle fancy, 
 the scheme of substituting the " Daedalian wings " (say, 
 rather, the Icarian wings) of credit for the " solid ground " 
 of value. He says : — 
 
212 EXCHANGE. [BOOK HI. 
 
 " The gold and silver money which circulates in any country 
 may very properly be compared to a highway ; which, while it cir- 
 culates, and carries to market all the grass and corn of the country, 
 produces itself not a single pile of either. The judicious operations 
 of banking, by providing, if I may be allowed so violent a metaphor, 
 a sort of wagon-way through the air, enable the country to con- 
 vert, as it were, a great part of its highways into good pastures and 
 cornfields, and thereby to increase very considerably the annual 
 produce of its land and labor. The commerce and industry of the 
 country, however, it must be acknowledged, though they may be 
 somewhat augmented, cannot be altogether so secure, when they 
 are thus, as it were, suspended upon the Dtedalian wings of paper 
 money, as when they travel about upon the solid ground of gold 
 and silver. Over and above the accidents to which they are ex- 
 posed from the unskilfulness of the conductors of this paper money, 
 they are liable to- several others, from which no prudence or skill 
 of those conductors can guard them." 
 
 This comparison is full and just' in every particular. 
 Nations have been trying to make a small saving by dis- 
 pensing with the vital condition of all their wealth. These 
 political farmers have always ached to be ploughing up and 
 seeding down the very highways of their industry; far 
 more intent on this than to improve the land already at 
 their disposal. "A wagon-way through the air" is no 
 violent, but rather a modest, metaphor for the schemes by 
 which they propose to make nothing do the work of some- 
 thing. A man might as reasonably try to make a saving 
 by selling his own blood as a nation gain aught by robbing 
 its commerce of money. It is an attempt to cheat the house 
 of its foundation, the animal of its food. 
 
 Nor is it even economy, at the first and on the face. Ex- 
 perience has shown that this extensive system of aerial 
 railways is rather more costly in its outlay than the more 
 natural one that rests upon the ground. Industrial bal- 
 looning has always been difficult and dangerous. 
 
 Fallacy M. That the use of mixed currency has been 
 the cause of the great prosperity of the United States. 
 
CHAP. XII.] MIXED-CURKBNOT FALLACIES. 2lS 
 
 This is, doubtless, a very idle assumption, un-worthy of 
 discussion. Yet thousands are influenced by it. 
 
 A coincidence is taken, by force, for a cause. 
 
 The United States have prospered greatly, and at the 
 same time there has been a large consumption of intoxica- 
 ting drinks. Surely this does not prove that the prosperity 
 of the country was caused by the use of liquor. 
 
 Has the country flourished by reason of, or in despite of, 
 such use ? Intoxicating liquors stimulate men to greater 
 effort ; therefore they increase production. Mixed currency 
 stimulates exchanges, increases prices, promotes specula- 
 tions ; therefore it is favorable to production. 
 
 Such is the reasoning, and it is equally good in each case. 
 In both, the misdirection of effort and the certain depression 
 of energy are kept out of sight. Mixed currency never 
 gave strength or wisdom or skill or economy to any hu- 
 man being, and therefore never can have increased the 
 products of the country, or enlarged its wealth, in any man- 
 ner whatever. Its unnatural excitements are followed by 
 unnatural prostration. Men do not work more, but they 
 trade more, speculate more, and squander more, during the 
 flood-time of an expansion. More is ex;pended for foreign 
 luxuries ; there is more extravagance and waste, which 
 superficial observers take to be indications of prosperity. 
 In the time of reckoning, trade is as much depressed as it 
 was falsely stimulated. 
 
 Fallacy Ath. That there is not gold and silver enough in 
 existence to form a currency adequate to the rapidly ex- 
 tending operations of commerce ; and therefore resort must 
 be had to paper substitutes. 
 
 Twenty years ago, this was regarded as an unanswerable 
 argument in favor of credit currency. The recent discov- 
 eries of apparently inexhaustible mines, and the immense 
 production already realized, have to a great extent silenced 
 the senseless clamor once raised on this point. Yet the 
 assertion is as true now as ever. Only about one-half of 
 
214 EXCHANGE. [BOOK III. 
 
 the wbole amount of precious metals in possession of man, 
 from the fifteenth to the middle of the nineteenth centuries, 
 ■was required for coin ; the balance remaining in plate and 
 ornaments, mostly in Europe and the East. 
 
 The reason of such general error on this point is found in 
 the totally inadequate ideas prevailing as to the amount of 
 currency needed for trade. People are informed, that- the 
 annual products of thte United States, for example, are, say, 
 four thousand millions ; and they fancy that four thousand 
 millions of currency, or something near that sum, is neces- 
 sary to transfer this immense production : whereas it is 
 true thUt a very small fraction of the amount is required. 
 
 Mr. Colwell, in his " Ways and Means of Payment," esti- 
 mates that all the securities issued in the United States, 
 including " promissory notes, bank-notes, bank credits, and 
 other currency, — in short, all which intervene between 
 buyer and seller," — amount to one thousand million dol- 
 lars every three months, or four thousand million dollars 
 per year. Yet we know that all tliis is wiped off with, at 
 the most, not more than foiir hundred million dollars of cur- 
 rency, or about one-tenth of the aggregate indebtedness. 
 
 Now, that the people of the United States could not com- 
 mand sufficient gold to furnish a currency equal to their 
 wants is preposterous, since the yearly production of Cali- 
 fornia, for at least twelve years, has amounted to fifty mil- 
 lions, — in all, say, six hundred millions of gold ; a sum about 
 double our requirements for a sound currency. 
 
 Instead of using this, we find that the amount of specie 
 in all the banks in 1848, the time of the discovery of the 
 gold mines, was forty-six millions, and that on the first of 
 January, 1860, the amount was eighty-three millions ; show- ■ 
 ing, that, of all the gold obtained from California, only thirty- 
 seven millions, or about one-sixteenth, had found its way 
 into the bank currency of the country. In the mean time, 
 the total exports of the nation had increased from one hun- 
 dred and fifty-four to three hundred and sixty millions, or 
 
CHAP. XII.J MIXED-CURRENCY FALLACIES. 215 
 
 more than double. Again, the amount of specie f&r capita 
 in bank for ten years prior to the discoveries, say from 
 1839 to 1848 inclusive, was |2.07; while for the succeeding 
 ten years, 1849 to 1858 inclusive, it was but $2.10, — showing 
 an actual gain of but three cents to each individual, notwith- 
 standing the accessions of gold to the amount of six hundred 
 millions, or twenty dollars per capita. 
 
 What had become of this gold ? It had been exported. 
 Why ? Because the credit currency of the country expelled 
 that part, which, but for itself, would have formed a reliable 
 and sufficient currency for the nation. The actual per- 
 centage of specie to currency from 1840 to 1849, ten years, 
 was twenty per cent; from 1850 to 1859, ten years, only 
 seventeen per cent, — showing that the quality of the cur- 
 rency was actually poorer after than before the gold discov- 
 eries. 
 
 But, while it is thus seen to be practically untrue that 
 there is not enough of the precious metals to furnish all 
 the currency needed in the most extended commerce, it is 
 plainly false in theory. We have already shown, that, as 
 the ciirrency is increased, prices advance; so that money 
 becomes no more plenty by augmenting its quantity. 
 
 John Stuart Mill says: "The uses of money are in no 
 respect promoted by increasing the quantity which exists 
 and circulates in a country, the service it performs being 
 as well rendered by a small as by a large aggregate amount. 
 Two million quarters of corn will not feed so many persons 
 as four millions ; but two million pounds sterling will carry 
 on as much traffic, will buy and sell as many commodities 
 as four millions, though at lower prices." 
 
 Sufficient has been said in refutation of a fallacy, which, 
 though popular, is really not entitled to much consideration. 
 
 Fallacy 5th. That mixed-currency banks are particularly 
 favorable to those who have little capital, and must, of ne- 
 cessity, depend upon credit, since they increase the facilities 
 for obtaining capital. 
 
216 EXCHANGE. [BOOK IH. 
 
 Whatever impairs credit and increases the risk of loaning 
 must be unfavorable to those who most need to borrow. 
 Other things being equal, it must be easier to get credit in 
 a community where only one in twenty fails than where 
 one in five fails ; the less the risk", the less the hesitation ia 
 giving credit. Now, does the credit money of a mixed cur- 
 rency diminish the risk of general credits ? Far from it. 
 Common-sense teaches, and statistics prove, that the haz- 
 ards of credit must be just in proportion to the credit money 
 of any country. Instead, therefore, of being favorable, it is 
 adverse to all persons wanting the use of capital. The haz- 
 ards of credit in the United States are at least four times as 
 great as they would be under a value money currency. 
 
 The more credits are extended, the more difficult it is for 
 persons of limited means to do any thing on their own ac- 
 count. Unless an interest can be secured in some large 
 banking institution, business on a large scale is impossible, 
 because the manufacturer or dealer will give long credit, if 
 he can get credit at the banks. If it be true, as we liave 
 seen, that introducing credit into the currency extends aU 
 the indebtedness of the country, this must operate to the 
 disadvantage of all men of limited capital. 
 
 That all this is quite unnecessary, is proved by the con- 
 dition of things in the years 1863 to 1865, when no credits 
 were given, all transactions being essentially on immediate 
 payment. The war effected this, by destroying all confi- 
 dence; but the fact that the business of the country was 
 carried on without extensive credits shows that such were 
 always unnecessary. 
 
 A mixed currency, far from being advantageous to persons 
 needing credit, has an entirely opposite influence, and is 
 constantly tending to reduce the number of those who can 
 obtain sufficient to participate in the profits of business. 
 
 Fallacy Qth. That, without a mixed currency, banks could 
 inot exist, and all the advantages now derived from them 
 would be lost. 
 
CHAP. XII.] MI2ED-CUBRENCT FALLACIES. 217 
 
 Such is the general impression among the masses of the 
 people. Propose to them the expulsion of the credit ele- 
 ment ; that is, to forbid the issue of notes beyond the specie 
 in hand : the reply comes at once that there would be no 
 object in banking, and we should have no banks. 
 
 This view of the matter arises from the fact that we have 
 never had in the United States any banks that did not man- 
 ufacture currency out of their credit. We have therefore 
 come to regard the two things as inseparable. But this is 
 an entirely erroneous view. Banking and currency-making 
 are two perfectly distinct functions, though here uniformly 
 united. 
 
 Banking may be carried on to any degree, and in the 
 most profitable manner, without the issue of a single bank- 
 note. This is done in Great Britain, to a wonderful extent, 
 by joint-stock and private banks. Only a very small pro- 
 portion of all the banks in the United Kingdom issue their 
 own notes; yet they make dividends so large as to aston- 
 ish us. 
 
 As an illustration of this species of banking, we mention 
 the fact, that, while the Bank of England, with a capital of 
 fourteen millions, has deposits, public and private, of but 
 twenty mUlions on an average, the three principal banks 
 of London, with an aggregate paid-up capital of only 
 £2,320,000, have on deposit £46,158,105; and that, while 
 the Bank of England declares a dividend of about six or 
 seven per cent, these banks make an average profit of about 
 thirty per cent, and furnish the commercial and manufac- 
 turing interest a much larger amount of capital than the 
 Bank of England itself. And yet they manufacture not a 
 dollar of currency. We present the following statement of 
 their condition : — 
 
 Paid-ap capltAl. 
 
 London and Westminster £1,000,000 
 
 Union 720,000 
 
 London Joint Stock . . 600,000 
 
 £2,320,000 
 
 Deposits. 
 
 Net profits 
 for mga. 
 
 Percentage 
 por ann. 
 
 £15,629,095 
 
 £147,816 
 
 29.56 
 
 16,472,279 
 
 114,324 
 
 38.11 
 
 14,066,731 
 
 80,573 
 
 26.86 
 
 £46,158,005 
 
 £342,713 
 
 
218 EXCHANGE. [BOOK III. 
 
 Of all kinds of banks, -with their branches, there are, in 
 the United Kingdom, about five thousand, a small portion 
 only of them being banks of issue. Yet, as a general rule, 
 all make large dividends. Such as are regarded as " suc- 
 cessful," divide from fifteen to twenty-five per cent. It is a 
 curious and instructive fact, that, while the average rate of 
 interest is there only half as great as in the United States, 
 the bank dividends are much greater. The largest divi- 
 dends are made by those banks which issue no notes what- 
 ever. 
 
 This fact gives sufiicient proof, if any were needed, that, 
 in order to make large dividends, it is not necessary for a 
 well-established, well-managed bank to manufacture cur- 
 rency. 
 
 Banks belong to civilization. A bank is an institution 
 intrusted by one class of persons with money to loan 
 another class. The existence of such institutions iihplies 
 the existence of capital and confidence ; and these indicate 
 culture and social elevation. Banks are labor-saving ma- 
 chines, of vast power and utility. Their legitimate purpose 
 is simply to facilitate the use of money, to make it more 
 effective in exchange, to give it greater activity in circu- 
 lation. This they accomplish. A large amount of capital 
 is collected in one building, fitted especially for the purpose. 
 This gives greater security and convenience than if the same 
 were scattered abroad in many hands, and accidental places 
 of keeping. The lender knows where to go to dispose of 
 his surplus funds ; the borrower, where siich funds can be 
 obtained. The bank introduces these parties, who otherwise 
 would probably remain unknown to each other. 
 
 No well-informed man can be opposed to banking insti 
 tutions conducted in a proper manner. It would be as 
 reasonable to object to railroads. 
 
 Banks, until a comparatively recent period, were as harm- 
 less as they were useful. They did no injury to any intei- 
 est, but benefited all. "When confined to the loaning of 
 
CHAP. XII.] MIXED-CUBRBNCT FALLACIES. 219 
 
 actual values, to the negotiation and collection of notes and 
 bills of exchange, and to the reception and transfer of 
 money, they performed an immense service to the world. 
 
 But when they undertook, not only to loan money, but to 
 make it, to issue credit in the form of notes promising value, 
 their character was changed. 
 
 The Bank of Hamburg, which has existed since 1619, 
 never promised a dollar which it did not hold in its vaults. 
 It never expanded the currency, and therefore never had 
 occasion to contract it. It has never suspended specie pay- 
 ments for an hour,* and, while so conducted, never will. It 
 has created no panic, and has in no way disturbed the busi- 
 ness of the city. It has conferred incalculable benefits on 
 European commerce, while contributing steadily to the 
 growth and prosperity of Hamburg. 
 
 Confining itself to the loan of its capital and of money 
 actually left on deposit, to the transfer of surplus funds, 
 and to the negotiation of commercial paper, a bank can, if 
 honestly and ably conducted, make good dividends, and 
 perform valuable services for the community, and furnish 
 the public with all the notes their convenience and that 
 of the banks require. 
 
 Fallacy Ith. That a mixed currency can be effectually 
 regulated by law. 
 
 Many of the mischiefs arising from a mixed currency are 
 so obvious that all persons desire their removal, and nat- 
 urally resort to legal enactments for that purpose. The 
 statute-books of every State in the American Union contain 
 laws for the regulation of mixed-currency banks. Commis- 
 sioners have been appointed in many States, and a Bureau 
 of Currency established. Ingenuity has been burdened to 
 devise regulations by which these evils may be removed or 
 modified, — with what success ? 
 
 There is but one defect in a mixed currency ; and that is, 
 it wants the element of value. There is no sufficient rem- 
 
 * Various reports in 1857 to the contrary notwitlistanding 
 
220 EXCHANGE. [BOOK HI. 
 
 edy, but to supply this, by providing that banks shall issue 
 no promises of their own for which they have not in posses- 
 sion the actual values they promise. But this would be to 
 change the whole system, to make the currency mercantile, 
 and to cut off all the profits arising from the issue of bank 
 debt as currency. The only complete remedy, then, is res- 
 toration ; that is, a return to the original design and purpose 
 of banking. 
 
 Fallacy 8th. That it is for the interest of the public, that 
 the banks, in times of panic or stringency, should be ena- 
 bled to " stave off" suspension. 
 
 On the contrary, this can be obviated only to the misfor- 
 tune of the business community. A severe pressure for 
 money, as in the United States in 1847, 1851,. and 1854, is 
 experienced, and yet the banks do not suspend. But how 
 do they avoid it ? By throwing the strain upon the mercan- 
 tile and business community. This they can always do to 
 a limited extent, and thus maintain tlieir own credit ; but it 
 is done at an enormous amount of embarrassment and loss 
 to all engaged in business affairs. 
 
 The banks may not only escape damage, but may even 
 profit very much by a pressure, if it does not come to be a 
 panic ; for it greatly enhances the rate of interest. The rate 
 of interest in the Bank of England, from 1848 to 1856, did 
 not average three and a half per cent. In 1857, when there 
 was a severe pressure, the bank was able to obtain ten per 
 cent. It had a harvest of profit. 
 
 The banks of the United States had a similar opportunity 
 in 1847, when the price of money " in the street " (for we 
 have no means of knowing what it was on an average in 
 bank) was up to eighteen per cent ; in 1851, when it went 
 up to sixteen ; and in 1854, when it rose to eighteen. In 
 all these cases, the banks profited by the distress they had 
 themselves created ; but, in 1857, the pressure became over- 
 whelming, and, after having run the street rate up to three 
 per cent per month, they suspended payment. 
 
CHAP. XII.J MIXED-CUERENOT FALLACIES. 221 
 
 If it were necessary, we might multiply instances from 
 the history of the mixed currency of the United States and 
 England of the same kind. A semi-revulsion is sure to 
 take place, under such a currency, every three or four years, 
 and a general hreak-down once in about nine or ten. 
 
 The greater strength of the British banks, together with 
 the temporary suspension of the Bank Act of 1844, ena- 
 bles the Bank of England to throw the sacrifices incident to 
 a great pressure more entirely upon the public than can be 
 done in this country. Indeed, since the law of 1844 just 
 referred to, the bank has increased its average rate of in- 
 terest, as we have seen, very much. 
 
 Practically, mixed-currency banks expand as often and as 
 much as possible ; and, when the re-action comes, hold on 
 to specie payments and a high rate of interest, until thr- 
 bankruptcy of their debtors begins to be so alarming as to 
 endanger their own securities. 
 
 They then suspend, allow their debtors to pay up in the 
 notes they cannot redeem in specie, and thus settle the in- 
 debtedness of themselves and the public. There is no plan 
 or design to do this ; but such is the natural result, and, on 
 the whole, a highly satisfactory one to the banking interest. 
 
 Fallacy 9th. That, whatever the effect upon other classes, 
 bank stockholders at least are made richer by an expansion 
 of the currency. 
 
 That this is not imiversaUy true wiU appear on exam- 
 ination. 
 
 An expansion of the currency raises prices : that we take 
 to be indisputable. If so, the stockholder may be made 
 richer or poorer by the cause that increases his bank 
 dividends. 
 
 For example : suppose he has an income from various 
 
 sources of $5,000 
 
 And from bank stock 1,000 
 
 Total income $6,000 
 
222 EXCHANGE. [BOOK IH. 
 
 In consequence of an increase of circulation by the banks, 
 he gets an increase of $500, equal to fifty per cent on his 
 bank dividends, making his whole income -$6,500. But 
 prices and commodities have advanced twenty-five per cent 
 in consequence of the inflation. What he would have 
 bought before for $6,000, now costs him $7,500. The re- 
 sult, then, is, that the bank stockholder has gained $500 in 
 his di\'idends, and lost $1,500 in his purchases ; so that 
 he is actually $1,000 poorer, reckoning the real satisfactions 
 or commodities, &c., which he obtains from his income. 
 
 There is nothing fictitious in this statement. The natural 
 and certain operation of an inflation of currency affects in 
 just this way all who hold bank stocks, but have the main 
 part of their income from other sources. But we can sup- 
 pose a case in which the stockholder would gain by ex- 
 pansion. 
 
 For example : he has an income from bank stock of . . $4,000 
 From salary 1,000 
 
 Total income $5,000 
 
 Now, by expansion, his dividends are increased fifty per 
 cent, as before ; and his income stands : — 
 
 From bank stock $6,000 
 
 From salary 1,000 
 
 $7,000 
 
 Prices have advanced, as before, twenty-five per cent, so 
 that what he could have bought for $5,000, now costs him 
 $6,250 ; but, since his income has increased to $7,000, he is 
 a gainer by $750. 
 
 These two cases present, it is believed, a fair illustration 
 of the effects of an increase of dividends upon bank stocks 
 occasioned by an inflation of the currency. It is seen, that, 
 if a man's income is derived mainly from such sources, he 
 may gain by an increase of his dividends, notwithstanding 
 the rise in price. But few persons are so situated. Nearly 
 
CHAP. XII.J MIXED-CUKRBNCT FALLACIES. 223 
 
 all capitalists have a variety of investments, bank stock 
 being only one of them ; so that, to the great mass of stock- 
 holders even, the gain by increased dividends is more than 
 counterbalanced by the loss from enhanced prices. 
 
 Who gains by fictitious currency? 
 
 But it may be asked, if stockholders do not gain by bank 
 expansions, who does ? There is an increase of dividends : 
 wlio gets the advantage ? 
 
 This inquiry brings us face to face with one of the prime 
 mysteries of currency, and, indeed, of political economy. 
 " Who gains by fictitious currency ? " Before answering 
 this, we will ask, What is gained by a currency not con- 
 sisting of actual value ? We answer, nothing hut price. 
 Prices are changed by it. Values are not created : they 
 remain the same. By the change in the standard or 
 measure from a value to a mixed currency, prices no longer 
 accurately determine values. Prices are increased. Those 
 who hold commodities while prices are advancing, gain by 
 such an advance. Debtors may discharge their obligations 
 with less value. Speculators may make favorable opera- 
 tions. The value of every commodity has been interfered 
 with ; the integrity of every contract to pay value has been 
 impaired. Some are constantly gaining ; others, losing : 
 both parties, it may be, unconscious of the cause of such 
 prosperity or adversity. " Times " are said to be good or 
 bad, as men gain without earning, or lose without a fault. 
 Here we have the answers of the qiiestions, — What is 
 gained by a mixed currency ? Who gains by, it ? 
 
 Such is the " consummation" of mixed currency. " It is 
 a grand system of insidious swindling." So said " Hard- 
 castle " (who was no other than Mr. Page of the Bank of 
 England) forty years ago ; and what that shrewd observer 
 then discovered is apparent now to all who enter into a full 
 examination of the subject.* 
 
 * Richard Cobden repeated this remark of Mr. Page to the author at 
 Manchester, more than twenty years since, with his emphatic approval. 
 
224 EXCHANGE. [BOOK III. 
 
 CHAPTER XIII. 
 
 [V. MBECANTILE CUBEENCY. 
 
 We have thus far examined three different kinds of cur- • 
 reucy. 1st, Money, consisting of the precious metals : this 
 we have found to be admirably adapted to the wants of 
 trade, except that, for large exchanges, it is too cumber- 
 some, requiring much labor and time in use. 2d, Incon- 
 vertible paper, or credit currency, which, we have seen, never 
 has been, and in the nature of things never can be kept at 
 par with coin, and is therefore highly injurious when intro- 
 duced into commerce. 3d, A mixed currency, or partly 
 convertible paper, which, as it is constantly varying in 
 quality and quantity, cannot be relied on as a medium of 
 exchange or a standard of value. 
 
 We now come to the consideration of a mercantile, or 
 substitute currency. 
 
 It is quite apparent that a currency is needed which shall 
 combine all the advantages of the two kinds first mentioned, 
 without the disadvantages which we have seen to be insep- 
 arable from the third. We want the reliability of coin and 
 the convenience of paper. With these perfectly united, 
 there is nothing more to desire. We have no occasion to 
 increase .the currency beyond its natural volume, because 
 that would impair the standard of value. We wish only to 
 have so much currency, and of such a kind, as the laws of 
 trade demand, and, if undisturbed, will always secure. 
 
 Is such a currency practicable ? 
 
 In answering this question, we remark that it would not 
 be an entire novelty, since experiments of this character have 
 been made most successfully upon a large scale, and extend- 
 ing over several centuries. 
 
CHAP. XIII.] MERCANTILE CUREENCT. 225 
 
 THE FIRST SUBSTITUTE CUERENCT ESTABLISHED. 
 
 In the early part of the fourteenth century, the Bank of 
 Genoa, or House of St. George, was established, especially 
 for the management of the public debt. But, in addition, 
 the bank performed all such services as were required by the 
 ' existing wants of trade, at a period when Genoa was com- 
 mercially the centre of Europe. Of course, its operations 
 were on a gigantic scale. Its affairs were conducted with 
 the greatest skill and fidelity, and were continued from its 
 foundation up to the time Genoa was united to the French 
 Empire, " when the bank was abolished, and the rentes, 
 3,400,000 Genoese lire, which they owed their creditors, 
 were transferred to the account-books of France." 
 
 This bank, like the Bank of England, had its stock in- 
 vested in the public debt ; but it received deposits of gold 
 and silver, for which it gave credit to the depositor. These 
 deposits, being easily transferable, were employed largely in 
 commercial transactions. 
 
 The bank also issued bills extensively ; but " these bills and 
 deposits represented coins of full weight and value, and were 
 payable on demand in such coins." The common currency 
 of Genoa, for retail business and minor transactions, was 
 coin. 
 
 Thus the Genoese were furnished with a currency per- 
 fectly adapted to their wants. It had all the reliability 
 of specie, with the convenience of a paper circulation, and 
 conferred immense advantages upon the trade of the city for 
 more than five hundred years.* 
 
 The Bank of Amsterdam was established in 1609 as a 
 bank of deposit, receiving gold and silver coins of all denom- 
 inations and all nationalities, ascertaining their exact value, 
 and passing the amount to the credit of the depositor, or 
 
 * For an interesting account of this bank, see " The Ways and Means of 
 Payment " (p. 311 et seg.), by Stephen Colwell, of Philadelphia. 
 
 16 
 
226 EXCHANGE. [BOOK HI. 
 
 giving him a receipt (recipisse) for the same. These re- 
 ceipts passed from hand to hand, and formed a circulating 
 medium for large monetary transactions. 
 
 The Bank of Hamburg was established in 1619. Like 
 that of Amsterdam, it is a bank of deposit ; and all payments 
 are nlade by checks in the transfer of receipts. It exists at 
 the present day. It never promises more coin than it has 
 in its vaults. It is under the guardianship and guaranty 
 of the city. It has never deranged trade by contraction or 
 expansion. It has always been found reliable. It has con- 
 tributed greatly to the prosperity of the city, and the conve- 
 nience of all connected with Hamburg in trade. At the 
 same time, it has paid a considerable and constant revenue 
 to the city, a small agio or premium being charged on all 
 deposits. 
 
 We have referred to these individual banks, not to give a 
 history of their operations, but to show that the essential 
 principle of a substitute currency has been long recognized, 
 and thoroughly tried in practice. The Bank of Genoa seems 
 to have developed this most fully. Yet none of them would 
 afford a perfect model for the present age. 
 
 To keep gold and silver coin in bank, while they are per- 
 forming all their functions outside, with the perfect accu- 
 racy and vastly augmented force, — this is what a mercantile 
 currency seeks to realize. It is beyond doubt that this can 
 be more effectually done in the present, than in any preced- 
 ing age, since confidence and intelligence are more general 
 and controlling. 
 
 England affords the best illustration of the necessity for 
 such a currency at the present day, when the commerce of 
 the world is perhaps one hundred times greater than when 
 Genoa was its chief mart. The monetary condition of Eng- 
 land is peculiarly appropriate, in this connection, because 
 its present currency is probably the best in quality of all 
 the mixed currencies, and one with which the public gener- 
 ally are well acquainted. Yet, notwithstanding this supe- 
 
CHAP. XIII.] MERCANTILE CURRENCY. 227 
 
 riority, we find the currency, on which depend the trade and 
 commerce of the British Empire, in a state of continual fluc- 
 tuation, a matter of unceasing solicitude : the bank reserve, 
 by which its discounts must be governed, varying from ten 
 millions in 1846, to one and a half millions in 1847 ; 
 twelve and a half millions in 1849, to four millions in 1854 ; 
 .one and a half millions in 1857, to thirteen and a half mil- 
 [lions in 1858 ; with corresponding variations in the rates 
 of interest, as seen in our Diagram No. 10. 
 
 Why all this fluctuation and anxiety ? Why this constant 
 watching of the amount of bullion in bank ? Why this 
 nervous solicitude about the reserve ? 
 
 There is only one reason ; and that is, that the Bank of 
 England has issued from ten to fourteen millions sterling 
 of notes, for which it holds no specie ! That is all the diffi- 
 culty. It has disturbed the laws of value, by issuing that as 
 money which had only the promise of value ; and, conse- 
 quently, has expelled the actual value from the country in 
 which it was needed. 
 
 And what does the Bank of England gain by all this ? 
 Why, the interest upon all the excess of its notes over the 
 bullion in bank ; that is, if its notes are twenty millions, and 
 it holds eight millions of specie, then on twelve millions it 
 obtains interest, which, at say four per cent, as an average, 
 is equal to four hundred and eighty thousand pounds per 
 annum. So, then, it is for this paltry consideration that the 
 currency of Great Britain is kept in constant fluctuation, 
 and the business community in continual anxiety. This 
 gain is equivalent to about fourpence per head for the pop- 
 ulation of the nation. Yet for this the public must, on an 
 average, sufier to the amount of many millions per annum. 
 
 Tlie people of the United States, having a much larger 
 proportion of the credit element in their currency, suffer 
 still more. 
 
 The remedy for all these evils is a very simple one, and 
 perfectly feasible whenever government sees fit to make the 
 
228 EXCHANGE. [BOOK III. 
 
 needful enactments. Not only so, but, from the nature of 
 the case, there need be no violent change. The experiment 
 may be made as cautiously as the most conservative can 
 desire. 
 
 If it be assumed that the banks of the United States have 
 usually twenty per cent of specie, then, if Congress should 
 require an annual addition, to this proportion, of ten per 
 cent, it would require a period of eight years to bring the 
 amount up to the proposed limit. That it would secure one 
 of the grandest results to all the great industrial and com- 
 mercial interests of society ever known, there cannot be the 
 slightest doubt. 
 
 If the principles we have previously laid down, and the 
 practical results which follow, are such as we have stated, 
 then no one nation need to hesitate in making this experi- 
 ment for fear that other nations may not follow their exam- 
 ple ; for the community which has the soundest currency 
 will, other things equal, have the most profitable industry 
 and the most advantageous commerce. 
 
 With such a currency, as there will be no inducement to 
 issue notes further than convenience demands, none of a 
 less denomination than ten dollars will probably be issued. 
 
 The Bank of England issues, we must bear in mind, no 
 notes less than five pounds (twenty-five* dollars). In Scot- 
 land and Ireland, notes are circulated as low as one pound ; 
 and it is found that two-thirds of their circulation consists 
 of these notes. Yet there is no more occasion for one-pound 
 notes in Scotland and Ireland than England. The only re- 
 sult is, that the bankefs make profits on their credit issued 
 in those notes, which the people pay for, but for which they 
 receive no benefit whatever ; while all their industrial and 
 trading interests are rendered more unstable and fluctuating 
 by the more sensitive currency. 
 
 In Massachusetts, where notes are issued as low as one 
 dollar, it has been found from statistical returns that more 
 than twenty per cent of the whole circulation was of notes 
 
CHAP. XIII.] MERCANTILE CURRENCY. 229 
 
 under five dollars. The exclusion of these notes alone 
 would reduce the credit element one-fifth. If all under ten 
 were excluded, the paper circulation would be reduced at 
 least as much more. If such a result would follow, then, 
 taking the whole currency of the United States as it was in 
 1857, when the circulation was largest, and amounted to 
 two hundred and fourteen millions, if we deduct from that 
 amount forty per cent, equal to eighty-five million and six 
 hundred thousand dollars, we shall have near one hundred 
 and twenty-eight millions as the paper currency of the coun- 
 try, and that would represent an equal amount of gold in 
 the banks ; while all the rest of the currency of the nation 
 would be in specie, in the hands of the people. But there 
 need be no legal restriction whatever upon the issue of such 
 a currency, and it matters not how voluminous it may be ; 
 since it will be composed in fact of value money, will 
 obey the laws of value, and, of course, will regulate itself. 
 There would then be no expansions or contractions, except 
 from the legitimate operations of trade ; and the currency 
 of the nation would be perfectly sound. Notes may be safely 
 issued, of any denominations, and to any amount ; still it 
 would be desirable that no small notes should be put out, 
 because it is better that the people should have the coin, so 
 far as practicable and convenient, in their own possession, 
 rather than that it should be needlessly accumiilated in 
 banks, where it would be more exposed to danger in case of 
 a popular outbreak, or a financial cowp Witat. 
 
 That legitimate banking may be made sufficiently profit- 
 able under such a system, we have seen in the case of the 
 joint-stock banks of England. All banks, like them, should 
 be authorized to receive deposits, and allow such an interest 
 upon them as they might choose to pay. If there were no 
 issue of promises as currency, which in the nature of the 
 case it was impossible for them to make good, there would 
 be no danger in allowing them to borrow and loan money 
 on any terms they pleased. To attempt to control the 
 
230 EXCHANGE. [BOOK IH. 
 
 operations of such banks would be as useless and absurd 
 as to attempt to regulate the trade in flour or cotton. 
 
 There would be no occasion to enact that such a currency 
 should be received in payment of dues. It would take care 
 of its own reputation. It would be good as gold, and easier 
 in use ; and it therefore would circulate itself. Of such a 
 currency it might be said, in the language of Mr. Burke, 
 " It is of value in commerce, because in law it is of none." 
 
 The transition from an unreliable currency, like that 
 of the United States and England, to a sound mercantile 
 currency, can be made so gradually as not for a moment to 
 retard or interrupt the course of business. It would only 
 be necessary to require that the proportion of specie to cir- 
 culation shall be gradually increased from time to time, until 
 the final exclusion of credit, as an element of the currency, 
 shall be effected. 
 
 If, in carrying such a measure into practical operation, it 
 should appear that there were banks which could not make 
 good dividends, such institutions would be discontinued of 
 their own choice, as not actually required by the wants 
 •of the business community. Their capital would be paid 
 back without any essential loss to the stockholders. Those 
 who were concerned in their management would of course 
 be obliged to seek other employments, more beneficial to 
 the country, and perhaps equally so to themselves. The 
 amount of disturbance so produced would not exceed that 
 occasioned, many times, by the invention of a new descrip- 
 tion of machinery. 
 
 Much has been said, at different times, of the desirable- 
 ness of free, hanking. Of the propriety and rightfulness 
 of allowing any person who chooses to carry on banking, as 
 freely as farming or any other branch of business, there can 
 be no doubt. But it is not, and can never be, expedient or 
 right to authorize by law the universal manufacture of cur- 
 rency. While banking, as at present, means the issuing of 
 inconvertible paper, the more it is guarded and restricted 
 
CHAP. XIII.] MERCANTILE CURRENCY. 231 
 
 the better. But wlien such paper is forbidden, and only 
 notes equivalent to so much coin are issued, banking may 
 be as free as brokerage. The only thing to be assured 
 would be, that no issues should be made except upon specie 
 in hand. With this restriction, it is plain that no banker 
 would wish to issue a circulation, \inless for his own con- 
 venience in transacting busiiifess. But, in truth, there is 
 not the slightest reason why any banker, making loans, 
 should engage in the manufacture of currency. It no more 
 appertains to liis vocation than to that of the merchant. 
 On the other hand, there is the most manifest impropriety 
 and danger to himself and the public in his doing so. His 
 business leads him, of necessity, to incur great risks ; and 
 this being well known, as soon as failures become frequent, 
 as they will when there is a great pressure for money, the 
 banker will be suspected, and his depositors begin to with- 
 draw their funds, at the very moment when he is least able 
 to spare them. All this is inevitable ; and therefore no one 
 taking such risks, and exposed to such contingencies, should 
 be allowed by law to issue his promises as money. 
 
 Fortunately, while it is thus improper that bankers or 
 banking institutions should be intrusted with this impor- 
 tant function, there is not the slightest necessity for it. 
 Government very properly certifies to the weight and fine- 
 ness of the national coin ; and it is equally incumbent upon 
 the government to certify to the soundness of the paper 
 circulation, which convenience requires instead of the coin 
 itself. It should receive the gold of the people, and give 
 its certificates therefor; and those certificates (of all the 
 denominations required) would form a circulating medium, 
 perfectly reliable, unfluctuating, and well adapted to all the 
 purposes of trade. 
 
 To do this, government need assume no new function ; 
 for it already issues this very kind of certificates for deposits 
 of specie. They are called " gold notes," and circulate as 
 such. When the specie standard is restored, all the notes 
 
232 
 
 EXCHANGE. 
 
 [book III. 
 
 in circulation will be gold notes, government being the 
 trustee for holding the coin. This would not give any new 
 power to the government, or confer any additioual political 
 influence. Being merely a trustee, with no patronage to 
 bestow, no loans to make, no accommodations to grant, 
 there could be no occasion to fear that the currency of the 
 country would be swayed by partisan politics.* 
 
 Table 2. — Characteristics qf the Different Cwrrendes, 
 
 Kind. 
 
 COMPO- 
 
 BITION. 
 
 ClEOULA- 
 
 TION. 
 
 Stability. 
 
 CONVE- 
 NIENCY 
 IN USE. 
 
 Convert- 
 ibility. 
 
 As A Staw- 
 
 DABD OV 
 
 Value. 
 
 Specie 
 
 Precious 
 
 metals 
 
 Universal 
 
 Perfectly 
 reliable 
 
 Cumber- 
 some in 
 
 large 
 amounts 
 
 Needs no 
 conversion 
 
 Correct and 
 invariable 
 
 Credit 
 
 Paper based 
 on credit 
 
 Local and 
 arbitrary 
 
 Liable to be 
 continu- 
 ally aug- 
 mented 
 
 Conve- 
 nient 
 
 Inconverti- 
 ble 
 
 raise 
 
 Mixed 
 
 Paper based 
 
 on coin 
 and credit 
 
 Local and 
 conven- 
 tional 
 
 Constantly 
 Fluctuating 
 
 Conve- 
 nient 
 
 Only par- 
 tially con- 
 vertible 
 
 Defective 
 and vari- 
 able 
 
 Mercantile 
 
 Paper ba^ed 
 
 wholly on 
 
 coin 
 
 Local and 
 conven- 
 tional 
 
 Perfectly 
 reUable 
 
 Conve- 
 nient 
 
 Fully con- 
 vertible 
 
 Correct and 
 invariable 
 
 * Pages 231 and 232 have been altered from the previous editions of this 
 work. The change which has been made consists essentially in this, that, in 
 the previous editions, a certified currency, to be issued by governmental 
 authority, was only suggested as a desirable way of securing a sound cur- 
 rency ; while, in this, it is insisted upon as the true mode of attaining that 
 object, and that the government, instead of hanking institutions, should be 
 responsible for the character and quality of the circulating medium. 
 
 The practice above referred to, recently introduced by the United States 
 Treasury, of issuing gold notes, that is, certificates of deposits of specie, has 
 shown the feasibility of the measure, and made the public familiar with an 
 arrangement which, if carried out, would furnish the country with a sound, 
 governmental, certified currency. 
 
CHAP. XIY.] THE NATIONAL CUBBENCT. 233 
 
 CHAPTER XIV.' 
 
 THE NATIONAL CURRENCY OP THE UNITED STATES. 
 
 Having given an extended analysis of mixed currency as it 
 has heretofore existed in the United States, it seems proper 
 that we should notice the important changes in that cur- 
 rency soon to be consummated. 
 
 In the month of February, 1868, Congress enacted a law 
 establishing a national and uniform system of currency. 
 This has since been put into operation to such an extent 
 as nearly to supersede the State-bank system. We propose 
 now to inquire in what respect it differs from, and in what 
 respect it is like, the latter. 
 
 DIFFERENCES. 
 
 It differs from the old system, in that, — 
 
 (1) Being created by national instead of State author- 
 ity, it is entirely within the control of Congress, which, 
 according to the last section of the National Bank Act, may 
 at any time " alter, amend, or repeal it." 
 
 (2) It differs, in that all the notes issued are guaranteed 
 as to their ultimate redemption by the government of the 
 United States. This provision we presume to be unique, 
 and without any precedent ; for the government is not sim- 
 ply a trustee, holding security for these notes, as in New York 
 and some other States, on the safety-fund principle, where 
 stocks are deposited to secure the circulation, but it abso- 
 lutely guarantees the final payment of all these notes in 
 full. 
 
 Every banking association, on its organization, must 
 deliver to the Treasurer of the United States the bonds of 
 the United States bearing interest, and is then entitled to 
 receive from the Comptroller of the Currency circulating 
 notes of different denominations, in blank, equal in amount 
 
234 EXCHANGE. [BOOK m. 
 
 to ninety per cent of the current market value of the bonds 
 BO transferred, but not exceeding the par Taluq of such 
 bonds. In case the notes issued by the banks are not paid 
 by them according to promise, the Comptroller may sell the 
 bonds left as security, and redeem the notes, making up to 
 the holders of the same any deficiency there may be in the 
 securities. This, it will be seen, does not secure the imme- 
 diate convertibility, but the ultimate redemption, of the cir- 
 culation. 
 
 (3) It differs, again, in that these notes are legal tender 
 in payment of "taxes, excises, public lands, and all other 
 dues to the United States, except for duties," and also are 
 legal tender by the United States in payment of all salaries 
 and other demands owing by the United States, except in- 
 terest upon the public debt ; but they are not a legal tender 
 as between other parties. 
 
 (4) Unlike the State-bank notes, those of the national 
 banks, owing to the provision just mentioned, will doubtless 
 have a nearly uniform value in all parts of the United States, 
 and will therefore be generally acceptable as currency. 
 
 (5) They differ also in this, that the national banks are 
 compelled by law to keep on hand a certain proportion of 
 " lawful money " to their circulation and deposits. In 
 specified cities,* this proportion is fixed at twenty-five per 
 cent; in all other places, at fifteen. 
 
 Under the State systems, there was no legal obligation on 
 the banks to keep any specie whatever, except in a few 
 cases, as in Louisiana and (recently) in Massachusetts, and 
 one or two other States. But this provision in regard to 
 the national banks is practically, to a great extent, only a 
 nominal matter, because the law provides that " bank bal- 
 ances (due from one bank to another) shall be deemed to be 
 
 * These cities are St. Louis, Louisville, Chicago, Detroit, Milwaukie, 
 New Orleans, Cincinnati, Clevelajod, Pittsburgh, Baltimore, Philadelphia, 
 Boston, New York, Albany, Leavenworth, San Francisco, and Washington 
 Ci(y. 
 
CHAP. XIV.] THE NATIONAL CUBEENCT. 235 
 
 lawful money;" and therefore, as these balances may be 
 created fictitiously for the very purpose, the clause obliging 
 the banks to keep a certain proportion of " lawful money " 
 with wliich to redeem their notes is nearly a nullity. How- 
 ever real these bank balances may be, they are not specie, 
 but, as we have before shown, constitute the most danger- 
 ous and esplosive element of a mixed currency. 
 
 This is one of the great defects of the law, and, until it is 
 removed by the repeal of this provision, would alone make 
 the system a dangerous and unreliable one. Let us look 
 for a moment at the manner in which it may operate. 
 
 The Merchants' Bank, Baltimore, has a balance against 
 the Chemical Bank, New York, for twenty thousand dollars. 
 The latter bank has a balance against the Globe Bank, 
 Boston, for twenty thoiisand dollars. The Globe has a 
 balance against the Merchants' Bank, Baltimore, for twenty 
 thousand dollars. Here is sixty thousand dollars in this 
 circle, which is to be reckoned as equal to so much specie, 
 or lawful money. But is it so? So far from giving any 
 strength to the currency, it has the opposite effect. The 
 object of requiring any specie, or lawful money, is, that the 
 currency may be made more reliable ; but, if so, does not 
 this provision, to a large extent, frustrate that object ? So 
 far from giving strength, every banker knows that these 
 balances are a cause of weakness and peril in time of panic. 
 
 It can easily be seen that a very large proportion of the 
 nominal amount of specie or lawful money required may be 
 held in these " balances." 
 
 Lastly, the national differ from the old State banks in 
 this, that the latter had almost their entire capital to loan 
 to the business community, while the new banks will have 
 little or none at all, having loaned their capital at the outset 
 to the government, by the purchase of its bonds. They 
 can, therefore, only loan their credit, in the shape of circu- 
 lation endorsed by the government, together with their 
 deposits. 
 
236 EXCHANGE. [BOOK IH. 
 
 EESEMBLANCES. 
 
 The new currency resembles that of the old State banks, 
 in that it is a mixed currency, and in all essential respects 
 as to its nature and effects, of the same character. 
 
 (a) It will expand and contract from the same causes, 
 and, so far as can be seen, with the same violence and to 
 an equal extent, and consequently will be as fluctuating as 
 the currency it is designed to supersede, except in so far 
 as a larger proportion of specie shall be held for its re- 
 demption. 
 
 (6) It will be an equally delusive and false standard of 
 value, having in itself but a small proportion of value. 
 
 (c) It will raise prices and cause speculation when in 
 the process of expansion, and depress prices and produce 
 bankruptcies when contracting. 
 
 (cf) It will create an unnatural extension of credits at 
 one time, and a corresponding contraction at another, pro- 
 ducing great vibrations in the rate of interest. 
 
 (e) It will derange the natural current of trade from 
 time to time, causing an increase of imports and a decrease 
 of exports, and thus forcing an export of specie to meet an 
 unnatural balance. 
 
 (/) It wUl counteract the influence of both natural and 
 artificial protection, and retard the normal growth of home 
 manufactures. 
 
 Lastly, it will create panics, and cause frequent suspen- 
 sions of all the banks in the country. 
 
 It may be thought that the fact that the government 
 guarantees the national-bank notes will prevent a run upon 
 the banks ; but that will be found an entire mistake. Panics 
 are created because money is wanted to pay notes and dis- 
 charge immediate obligations, not because the people fear 
 that the banks are insolvent ; and, whenever it is out of the 
 
CHAP. XIV.J THE NATIONAL CUERENCY, 237 
 
 power of tlie banks to supply the currency immediately 
 wanted, the panic must take place, with all its sad conse- 
 quences. 
 
 Such are essentially the points of difference and agree- 
 ment between the two systems. The national goTcrnment 
 may change the character of the new currency, and make it 
 approximate a Talue currency. It will have the power to do 
 this ; and, as it is certain that the effects of this currency will 
 inevitably be disastrous, and give rise to grave periodical 
 disturbances in the monetary affairs of the country (not- 
 withstanding its superiority in certain respects over the 
 State-bank system), it seems highly probable that this will 
 eventually be done ; the more so, because a large and grow- 
 ing section of the Union is already averse to any other than 
 a value currency. California and all the gold-bearing States 
 are now, and, if they understand their true interests, always 
 will be, hostile to any system which depreciates the value 
 of their great staple. 
 
 OPERATIONS OP THE NEW SYSTEM. 
 
 The national-bank system being in its infancy, but little 
 can be said of its actual operations. 
 
 "We have, however, the first Eeport of the present Comp- 
 troller of the Currency (Freeman Clarke, Esq.), from which 
 we can learn its condition on the 1st October, 1865 : — 
 
 Loans $485,314,029 
 
 Bonds deposited for circulation 272,634,200 
 
 Other bonds held 155,097,100 
 
 Total securities . . .• $918,045,329 
 
 On this last sum the banks were drawing interest at the 
 rate of from 6 per cent in gold to 7.30 in currency. The 
 average rate of interest cannot be less than 7.30 ; for on the 
 gold interest bonds they get (at 40 per cent premium) 8.40, 
 and they have few securities that pay less than 7.30, to say 
 
238 EXCHANGE. [BOOK III. 
 
 nothing of the exchange charged in making discounts. 
 We call the rate, however, 7.30 on the whole amount. 
 
 $913,045,329 at 7.30 $66,652,309.01 
 
 This amount of income is equivalent to a little over 
 twenty per cent per annum on the entire capital invested. 
 It will thus be seen that the system is at least a " paying 
 one " to the stockholders. It is estimated that the gross 
 earnings of the banks for 1866 will be twenty-five per cent.* 
 
 How it affects the quality of the currency (if it can be 
 said to have any quality when wholly inconvertible) may 
 be seen in the following statement. 
 
 Immediate liabilities of the national banks : — 
 
 For circulation $131,452,158 
 
 Individual deposits 393,634,833 
 
 Public deposits 68,032,720 
 
 Total immediate liabilities $583,119,711 
 
 Total specie 14,966,144 
 
 Excess Oct. 1, 1865 $568,153,567 
 
 Specie to credit equal to 2J cents on the dollar. The 
 banks hold 1193,094,364 in " lawful money " (greenbacks, 
 compound-interest notes, &c.). The excess of immediate 
 liabilities over specie and lawful money is three hundred and 
 seventy-five millions. This excess is some forty millions 
 larger than ever known under the State-bank system. 
 
 These statistics only show the condition of the national 
 banks at the date mentioned (Oct. 1, 1865). Since that 
 time, they have been rapidly increasing in number, capital, 
 circulation, and deposits ; yet the general character of the 
 currency they furnish will not essentially differ from what it 
 now is until the government withdraws its own note circu- 
 lation. Then specie must be had to sustain the circulation 
 and deposits in the same manner, and at least to an equal 
 
 * This, on an average, may be a high estimate. Many banks will, how- 
 ever, do more than this. ' 
 
CHAP. XIV.] THE NATIONAL CTJRRENCT. 239 
 
 extent, as under the old system. When that is done, the 
 character of the new system will he developed, and its 
 operations and effects made manifest. What they wiU be, 
 no one who knows the nature of a mixed currency can have 
 any doubt. 
 
 As a fvirther illustration, we give the operations of an 
 individual bank in Massachusetts, as shown in the Comp- 
 troller's first Report. 
 
 The capital of this bank is 1300,000. As it is a converted 
 one, it has, of its old capital, a " surplus " of 1106,000. 
 It has also f 33,000 of " profits " on hand ; total, |439,000. 
 This is the amount of capital it actually had to loan. Let 
 us see how much it has loaned : — 
 
 Loans (on private securities) $155,000 
 
 Loans on public securities, "United-States bonds" . . 334,000 
 Loans on " other United-States bonds and securities " . 266,000 
 
 Total amount on wHch the bank draws interest . . $755,000 
 
 The immediate liabilities and immediate resources of the 
 bank are, — 
 
 -'■> 
 
 Circulation . . . $275,000 
 Private deposits . 105,000 
 Public deposits . . 212,000 
 Old circulation . . 33,000 
 $625,000 
 
 Specie 755 
 
 Lawful money . . 52,000 
 Total means in hand $52,755 
 
 This is equal to about one mill of specie and ten cents 
 of lawful money to each dollar of immediate liabilities ; 
 but it has about $233,000 of bank balances, and, if these 
 balances are sound, they furnish so much of additional 
 immediate resources to this bank, though they do not 
 change the character of the whole currency, because what 
 one bank has due to it another must owe, leaving the result 
 as if neither existed, except that, as both are liable to 
 be instantly called for, they greatly endanger the whole 
 system. 
 
240 EXCHANGE. [BOOK III. 
 
 Statistics might be multiplied indefinitely ; but enough has 
 been given to indicate the nature of the new currency, and 
 the manner in which the new system is likely to be carried 
 on. Being wholly in the power of Congress, it can be made 
 whatever the people will. 
 
 If the " Resemblances " of the National Bank system to 
 the former State Bank system are so great as we have repre- 
 sented, it is quite certain not to give permanent satisfaction. 
 After the experience of the last forty years, especially of the 
 last seven, the public mind will never rest satisfied, it is 
 believed, until a currency is provided which can never fluc- 
 tuate in quality or quantity /rom any thing inherent in itself. 
 That object can, we think, be best secured by such a certi- 
 fied governmental circulation as has been described on 
 pages 231 and 232. 
 
 The new system, then, is in so far to he regarded with 
 complacency, as that it is more susceptible of reform, and of 
 being restricted by national legislation to the business of legiti- 
 mate banking. 
 
 CHAPTER XV. 
 
 EVIDENCES OF DEBT. 
 
 We have already spoken of two different modes of effecting 
 exchanges; viz., (1) barter, and (2) a universal equivalent, 
 money or currency. We now notice a third mode of doing 
 this ; viz., by evidences op debt. 
 
 These are mainly of three kinds : — 
 
 I. Book accounts. A sells B one hundred barrels flour, 
 and charges him five hundred dollars in account, to be paid, 
 by verbal agreement, in four months. 
 
 This is a very extensive mode of effecting exchanges. 
 Very large transactions are made in this manner. Retail 
 trade, especially, is almost wholly carried on in this way. 
 These accounts are often, particularly in country trade, paid 
 
CHAP. XV.] EVIDENCES OP DEBT. 241 
 
 in commodities. The farmer makes his purchases of the 
 mercliaut, from time to time, and sells him liis produce 
 when ready for market. Botla are entered in account, and 
 tlie final balance is ascertained and adjusted by money or 
 other equivalent. 
 
 (a) Book accounts are, in some respects, an undesirable 
 form of transfer, because they are ex parte, and may be 
 disputed. The purchaser may deny that he bought such a 
 quantity, or at such a price. An account, if disputed, is 
 always a matter to be proved ; and, although the oath of 
 the seller is generally deemed conclusive evidence, there is 
 always opportunity for litigation. 
 
 (h) Another objection to book accounts is, that they are 
 not negotiable. C cannot readily purchase B's account 
 against A ; but, if B had A's note, that could be easily ne- 
 gotiated, or transferred. Accounts cannot, of course, be 
 made available at banks, like notes, or left as security for 
 money borrowed. The capital is locked up for the time 
 being. 
 
 II. The next mode of credit is that of notes. These are 
 made payable for a given sum, and at a given date. They 
 are generally payable to the order of the payee, and, when 
 negotiated, are indorsed by the latter. This transfers the 
 ownership to a third person ; but the indorser is held to pay 
 the note, if the promisor fails to do so. 
 
 III. A third form is by bills of exchange, or' orders from 
 A to B to pay C a given sum at a fixed time. These differ 
 from notes, in that they involve three parties, — the drawer, 
 the acceptor, and the payee. They have a form usually 
 somewhat like the following : — 
 
 $1000. New York, Jan. 1, 1866. 
 
 Four months from date, pay to the order of J. Brentwood & Co. 
 one thousand dollars, value received, and place to account. 
 
 (Signed) Henderson, Williams, & Co. 
 
 To Messrs. Benkbt Bbothebs & Co., Boston. 
 
 1$ 
 
242 EXCHANGE. [BOOK IH. 
 
 Here are three parties, — the drawer, the acceptor, and 
 the iiidorser or payee. 
 
 This is first called a draft. When presented to the per- 
 son on whom it is drawn, and by him accepted (which is 
 done by writing the word " accepted " on the face, and sign- 
 ing the name), it is an acceptance. When indorsed by the 
 person in whose favor it is drawn, it becomes a complete bill 
 of exchange. 
 
 This species of transaction will arise mainly between per- 
 sons residing in different places, and in this manner : A, in 
 Boston, orders of B, in New Orleans, one thousand bales of 
 cotton, which B sends, with a bill of the same, and then 
 draws on A for the amount. 
 
 The commerce of the world is carried on principally by 
 this agency. The transportation of money is thus dispensed 
 with, except to settle the final balance of trade. 
 
 BILLS OP EXCHANGE. 
 
 Bills of exchange may be divided into two kinds, — do- 
 mestic and foreign. 
 
 Domestic bills are those drawn and payable within the 
 same country, as between different cities and different 
 States. The manner in which these bills save the use of 
 money, in domestic trade, is illustrated as follows : — 
 
 A, in Boston, sells to B, in New York, goods to amount 
 of one thousand dollars. 
 
 C, in New York, sells to D, in Boston, leather to amount 
 of one thousand dollars. 
 
 Instead of sending the money, B, in New York, goes to C, 
 in New York, and gets his draft on D, and remits it to A, 
 in Boston, who receives the money of D ; and the transac- 
 tions are all closed without a dollar in money having been 
 transferred from one city to another. 
 
 This is the course of all direct trade between any two 
 places. Not, it must be understood, that, in the case sup- 
 
CHAP. XV.J EVIDENCES OF DEBT. 243 
 
 posed, B actually goes to C ; but the merchants in Boston 
 are owing millions to merchants in New York, while per- 
 sons of the latter place are owing, it may be, an equal 
 amount in Boston. 
 
 Bills are drawn on Boston for all due to New York, and 
 on New York for all due to Boston. These bills are, when 
 completed, if not before, generally passed into the banks, 
 who pay out the money for them, deducting the interest 
 (and exchange, if there is any). Then, if a merchant in 
 eitlier city wishes to remit, he goes directly to the bank, 
 which will draw on some bank in New York or Boston, as 
 the case may be, for such sum as he may want. The banks 
 negotiate or collect the whole, and sell or dispose of their 
 own checks or drafts for the amount. 
 
 This is a labor-saving arrangement of immense impor- 
 tance, greatly reducing the otherwise inevitable demand for 
 a large amount of money to be kept in transitu between the 
 different marts of trade. 
 
 INDIRECT EXCHANGE. 
 
 But all exchange is not direct between two places. 
 
 A, for example, in St. Louis, ships one hundred thousand 
 dollars' ■jvorth of lead to New York. He wishes to pay sun- 
 dry persons in Boston, Providence, Lowell, and Lynn. He 
 draws on his correspondent in New York for all these, in 
 favor of the persons to whom he is indebted ; and the drafts 
 are negotiated by the receivers, through bank in the several 
 cities, and finally all sent to New York for collection. All 
 domestic trade thus becomes a great web of exchanges, which 
 adjust themselves by means of these bills ; and thus, to their 
 entire aggregate amount, obviate the necessity of transmit- 
 ting money. 
 
 FOREIGN EXCHANGE. 
 
 This consists of orders ; that is, bills of exchange, drawn 
 upon each other by the merchants and bankers of different 
 
244 EXCHANGE. [BOOK ni. 
 
 countries. They differ little in form from domestic bills, 
 but are usually drawn in sets of three ; called, respectiToly, 
 the first, second, and third of exchange, in something like 
 the following form : — 
 
 £1000. Boston, June 28, 1859. 
 
 At sixty days' sight of this first of exchange (second and third 
 unpaid), pay to the order of A. Brown & Co. one thousand pounds 
 sterling, value receiyed, which place to account. 
 
 Betdonb Bkotheks & Co. 
 George Peabody & Co., 
 London. 
 
 The party to whom the bill is payable takes these, and 
 forwards the first to London, where it is accepted and 
 paid. But an accident might occur by which the bill would 
 be destroyed or lost while on its way to London ; and, in 
 that case, the owner would forward the seeond, which would 
 be paid. The third bill is also held, for the same precau- 
 tionary reasons. 
 
 These bills arise in a great variety of ways. Persons 
 wishing to purchase merchandise or other articles abroad 
 go directly to bankers in New York, Boston, &c., and buy 
 a bill of the required amount. So with persons wishing 
 to travel abroad. But the principal amount, of course, is 
 drawn in payment for importations of foreign merchandise. 
 In general, the trade between England and this country is 
 carried on by bills drawn on this side the water, upon .cotton 
 and other produce shipped abroad, mostly to Liverpool. 
 
 To illustrate the ramifications of this kind of intercourse, 
 we will suppose that A, in Boston, buys merchandise of B, 
 in Liverpool ; C, in Boston, sells goods to D, in New Or- 
 leans ; B, in Boston, buys cotton of P, in New Orleans, and 
 ships the same to G-, in Liverpool. ' Each transaction, we 
 will suppose, amounts to five thousand dollars. 
 
 How are all these settled without the transfer of money ? 
 A gets the draft of E upon G, and sends it to B, in Liver- 
 
CHAP. XV.] EVIDENCES OP DEBT. 245 
 
 pool ; B gets the draft of upon D, and remits it to P, at 
 New Orleans, who receives the amount of D.* 
 
 Thus four debts of five thousand dollars, in all twenty 
 thousand dollars, have been paid, and no money has been 
 transferred from one place to another. 
 
 Observe, now, the saving of time and interest : — 
 
 To have transported $5000 from Boston to Liverpool 
 
 would have ordinarily required 14 days. 
 
 The same amount from Liverpool to Boston .... 14 days. 
 
 The transport from Boston to New Orleans 6 days. 
 
 The same from New Orleans to Boston 6 days. 
 
 Total 40 days. 
 
 Saving of interest on fSOOO for forty days, at six per 
 cent, is 133.33. Prom this view of the matter, we see what 
 an immense saving is made in the use of money; the ex- 
 penses of transporting it, and the interest on the same, upon 
 the thousands of millions of dollars required in the trade 
 of the world. 
 
 In 1857, the United States imported $362,000,000 
 
 And exported cotton, breadstuffs, &c., $293,000,000 ; 
 
 gold, $69,000,000 360,000,000 
 
 Leaving a nominal balance of . . . $2,000,000 
 
 Another thing in regard to exchange may be noticed ; viz., 
 England received that year of us (the United States) fifty- , 
 four millions more than we bought of her. The same year 
 we bought of 
 
 Brazil more than sold to her $16,000,000 
 
 China 4,000,000 
 
 Spain, Cuba, &c 29,000,000 
 
 France 8,000,000 
 
 $57,000,000 
 
 * These transactions go through banking houses, as in the case of domes- 
 tic exchanges. 
 
246 EXCHANGE. [BOOK III. 
 
 These balances were mainly adjusted by drafts on Eng- 
 land, by -which our balances against England were dis- 
 charged. 
 
 Erom facts like these, we can readily believe that at least 
 nine-tenths of all the trade of the world is carried on by bills 
 of exchange. Such is the estimate made in England and 
 this country, and there is reason to believe that it is approx- 
 imately correct. 
 
 THE NATUEAL EATE OP EXCHANGE. 
 
 By the rate of exchange is meant merely the price or cost 
 of transporting money from one point to another ; say, from 
 Cincinnati to New York. If the time, freight, insurance, 
 and other charges are equal to one per cent, then that is the 
 natural rate of exchange. We have shown that only a small 
 amount of coin, in the course of trade, is likely to be trans- 
 ported from one place to another. As there is a mutual 
 trade, as Cincinnati buys of New York and New York of 
 Cincinnati, it is only necessary to buy bills of exchange be- 
 tween these places. But on these bills there vnll be a pre- 
 mium or discount, as the case may be. If New York has 
 purchased more largely in the mutual trade, there will be 
 an excess of demand in that city for bills on Cincinnati. 
 Reverse the supposition, and there will be an excess of de- 
 mand in Cincinnati for bills on New York. The consequence, 
 'in either case, will be a rate of exchange equal to the trans- 
 portation of specie, as above indicated. The rate of ex- 
 change will fluctuate from time to time (other things equal) 
 precisely according to the transactions between the two 
 cities. It becomes, then, in point of fact, the barometer of 
 trade ; indicating, with perfect accuracy, the state of trade 
 between any two points, at home or abroad. With a sound 
 currency, the rate of exchange may always be relied upon, 
 and is always watched with great interest by every intelli- 
 gent merchant and banker. 
 
CHAP. XV.] EVIDENCES OP DEBT. 247 
 
 If this be so, we see that perfect freedom of exchange is 
 of great importance, and that no extraneous influence 
 should be brought to disturb this barometer, to which all 
 ought to look with entire confidence. 
 
 If, for example, there existed a national bank, having the 
 right to inflate the currency at pleasure, and with branches 
 so distributed over the country that it could bring its whole 
 power to bear upon any given point whenever it chose, it is 
 easy to see that such an institution might control the ex- 
 changes, and thus do a great injury to the community; not 
 only by charging excessive premiums, but by disturbing the 
 normal indications of the exchange market. This, it has 
 been charged, the United-States Bank, whose charter ex- 
 pired in 1836, actually did ; at any rate, it certainly had the 
 power and the motive to do it. 
 
 The Bank of England has never been permitted to deal 
 in exchange. 
 
 THE EATE OP BRITISH EXCHANGE. 
 
 It is well known, that the ordinary rate of exchange be- 
 tween this country and England is from nine to ten and a 
 half per cent against the United States ; but the explanation 
 of this is not generally understood. The transportation of 
 specie between the two countries, all charges and time in- 
 cluded, costs only about one and one-quarter per cent. Why, 
 then, this difference ? 
 
 When the American government was first formed, the old 
 Spanish milled dollar was in use ; and $4.44 were equal to 
 the British gold coin called a sovereign, or pound sterling. 
 And Congress enacted that 14.44 should be the rate at 
 which the pound sterling must be computed at our custom- 
 houses. 
 
 Since that time, important changes have taken place ; the 
 relative value of gold and silver have changed. The latter 
 has advanced, or the former declined. The American dol- 
 
248 EXCHANGE. [BOOK IH. 
 
 lar, too, has been altered, so that it has a less quantity of 
 silver ; and our gold coins, also, proportionately. It there- 
 fore now takes $4.86.6, in American coin, to be equal to a 
 pound sterling. Thus the — 
 
 Actual value of the pound sterling is $4.86,6 
 
 Legal valuation 4.44,4 
 
 Difference 42,2 
 
 which, it will be seen, is equal to very nearly nine and one- 
 half per cent ; so that, when exchange is quoted at nine 
 and one-half per cent, it is really at actual par. 
 
 Now, if this is the actual par value of the two currencies, 
 it will happen, that, whenever the market rate of exchange 
 rises so far above nine and one-half per cent as to be suffi- 
 cient to pay the expenses of sending specie and a trifle 
 more, then the specie vrill go forward. 
 
 What these expenses are will be seen by a statement of 
 an actual transaction between Boston and London, Feb- 
 ruary, 1865.- 
 
 Gold purchased $50,000 
 
 Insurance, one-half per cent $250.00 
 
 Freight to Liverpool, three-eighths per cent . 187.50 
 
 Carriage, Liverpool to London 5.00 
 
 Selling, commission, one-eighth per cent . 62.50 
 
 Fourteen days' fime lost, at six per cent . . 83.33 
 
 $588.33 
 
 These expenses are equal to about one and one-sixth per 
 cent. 
 
 There is always some risk that the specie sent forward 
 may not hold out full weight ; that is, that, owing to abra- 
 sion in use, it might fall short a trifle : so that, probably, 
 instead of one and one-sixth, the exporter of gold might as 
 well have bought a bill of exchange, at one and one-quarter 
 per cent above 9J, the actual par. 
 
CHAP. XV.] EVIDENCES OP DEBT, 249 
 
 Then, if the difference in the par value of the two curren- 
 cies is equal to 9.5 
 
 And the expenses of remitting gold equal to 1.25 
 
 Eeal par value of exchange, total 10.75 
 
 it -will follow that gold will not ordinarily be exported until 
 the market rate of exchange is about ten and one-half to ten 
 and three-quarters per cent. 
 
 The same general principle applies to French exchange, 
 which usually stands at about five per cent against this coun- 
 try. It is only the difference between the value of the coins 
 of the respective countries, as computed here. 
 
 Although Congress, some time since, made a change 
 in the law in regard to the computation of the British 
 pound, — fixing it at $4.84, — yet such has been the in- 
 superable strength of old custom and inveterate habit, 
 that the quotations of exchange still continue to be based 
 on $4.44. 
 
 While this, of course, is not a matter of great 'impor- 
 tance, we think the Boards of Trade in the Atlantic cities 
 would do well to use their influence against the absurd 
 practice. 
 
 A change so desirable and expedient cannot be long 
 delayed. 
 
 ABE BILLS OP EXCHANGE CUERENCY ? 
 
 It has often been maintained that bills of exchange are 
 currency, as truly as bank-notes. Let us inquire. 
 
 1st, The popular definition of currency is, that which 
 passes current from hand to hand in all transactions between 
 buyer and seller, in large or small amounts ; and, also, in 
 payment of all obligations. It is evident that this is not 
 true of bills of exchange, which may be taken as the exam- 
 ple of all negotiable paper. It is, indeed, said, that in some 
 countries, as in Great Britain, they are so used, in a limited 
 
250 EXCHANGE. [BOOK IH. 
 
 degree ; but even such use does not bring them within the 
 definition. 
 
 2d, The wider definition which we gave of currency, viz. 
 that instrumentality by which a general exchange of values 
 is effected and payments are made, does not embrace bills 
 of exchange, which have themselves to be discharged with 
 currency. The fact, that, when found in equal amount on 
 opposite sides, they may be used to cancel each other, 
 makes them no more currency than is the credit side of a 
 book-account, which balances the debit. Bills of exchange 
 dispense with the necessity of transporting currency in a 
 certain number of commercial transactions : they are not, 
 therefore, themselves currency. They allow debts between 
 different States or nations to be discharged in the local 
 currencies ; but each bill is itself discharged in full by the 
 use of currency, no less. 
 
 3d, Currency, if it be equal to money, can be at once ex- 
 changed for specie, at the place where issued ; but cash can- 
 not be .obtained on demand for bills of exchange, as they 
 are generally on time. Here, then, is another wide differ- 
 ence between currency and individual promises. They are, 
 in fact, bought and sold for money, like the merchandise on 
 which they are drawn. 
 
 4th, Currency is that in which all persons promise to pay 
 their cash obligations. Is that true of bills of exchange? 
 Quite the reverse. 
 
 5th, If a bill of exchange be dishonored, that is, not paid 
 according to promise, the currency of the country is not 
 thereby diminished. Is it so with currency ? On the con- 
 trary, if a bank fails, so much currency as it has in circula- 
 tion is at once abstracted from the community. 
 
 But how is it with bills of exchange and notes ? 
 
 Suppose the indebtedness of a country were one hundred 
 millions, and its currency ten millions. 
 
 Then, if fifty millions of the bills of exchange and notes 
 of hand fail to be paid, there still remains the ten millions 
 
CHAP. XV.] EVIDENCES OP DEBT. 251 
 
 of currency with which to pay the balance ; and currency is 
 twice as plentiful, relatively to indebtedness, as before. 
 
 Suppose, on the other hand, that one-half the currency 
 fails, while the whole amount of bills of exchange, &c., 
 remain to be paid ; or, to go further, suppose the entire 
 currency to fail : then how can the private bills be paid at 
 all? 
 
 So far from being currency, then, they are the very oppo- 
 site in their nature, and can be discharged only by the use 
 of currency. 
 
 The more bills of exchange, the less, relatively, is the cur- 
 rency : the fewer bills of exchange, the more plenty, rela- 
 tively, is money. 
 
 flow, then, can bills of exchange and promissory notes 
 be synonymous with currency ? 
 
 6th, Do bills of exchange affect the standard of value, and 
 consequently prices ? If plenty, are commodities higher ? 
 if scarce, are they lower ? 
 
 If bills of exchange were passed from hand to hand in 
 exchange for merchandise (which we are sure is not the 
 case to any considerable extent in the United States, if any- 
 where), it would seem that, so far as thus used, they would 
 affect prices ; but this could only be temporarily, because, in 
 a short time, the state of the money market would restore 
 the equilibrium. If they do raise the prices, they will in so 
 far prevent exports, and increase imports and consumption ; 
 and thus a demand must arise for specie for export, to settle 
 the balance of trade ; and this will cause a contraction and 
 a fall of prices. 
 
 7th, A scarcity of biUs of exchange, however great, can 
 never, under a sound currency, be the occasion of pressure 
 for money, or a panic ; but a scarcity of currency may do 
 this, and often does. 
 
 Do we not see, then, that there is a wide distinction be- 
 tween currency and all forms of credit ? — that to confound 
 them is to destroy necessary distinctions ? 
 
BOOK IT. 
 DISTEIBUTION. 
 
 CHAPTER I. 
 
 DIVISIONS OF THE SUBJECT. 
 
 The distribution of wealth, like its exchange, arises out of 
 the division of labor. 
 
 We have seen, that production might, in strict theory, 
 proceed without co-operation ; with feeble and painful steps, 
 it is true : but its laws would still be perfect, should all men 
 refuse to associate in their efforts, and singly seek the satis- 
 faction of their desires. In such a case, there would be 
 neither exchange nor distribution. 
 
 We have seen by whom all wealth is produced, have ex 
 amined the instrumentalities employed in its transfer from 
 one individual or people to another, and have contemplated 
 the nature and extent of that great system of trade by 
 which the products of the world are made to minister to its 
 wants. 
 
 We have observed that capital and labor are united in 
 production, — one as the labor of the past, the other as the 
 i labor of the present ; and that the joint product is divided 
 between them. We now come to consider the laws by 
 which an equal and just distribution of the wealth produced 
 shall be secured among the parties. In doing this, we are 
 obliged to discriminate between the different kinds of labor 
 employed and the various forms in wliich capital enters into 
 production. 
 
 [252] 
 
CHAP. I.] DIVISIONS OP THE SUBJECT. 253 
 
 Labor, in the distribution of wealth, falls into three gen- 
 eral classes : — 
 
 1st, Physical or muscular effort. 
 
 2d, Mental effort or enterpi-ise, applied to the union of 
 capital and la'bor. 
 
 3d, Subsidiary labor, or professional services, auxiliary 
 to direct efforts in production. 
 
 The reward of the first is called wages ; that of the 
 second, profits; of the third, salaries, fees, &c., — but 
 another name for wages. 
 
 In these three general forms, labor receives its reward. 
 It is, however, to be observed, that, though the distinction 
 is clear between the wages of direct labor and the compensor 
 tion paid for subsidiary labor, — like professional services, 
 — yet the laws which govern are so similar as to rendej- 
 separate examination unnecessary. Both are controlled by 
 the proportion of supply and demand. 
 
 Capital is loaned in two general forms : — 
 
 1st, When invested with a permanent character and 
 having a fixed place, — as houses, fields, &c., — its compen- 
 sation is called " rent." 
 
 2d, When in a shape, however solid and tangible, which 
 is not intended to be retained, but may be altered to suit 
 the business, or removed for convenience of location, — 
 i.e., where not the identical product, but only an equivalent, 
 is to be returned, — its compensation is called " interest." 
 
 Such, then, are the forms in which capital does its part 
 in production ; and such the forms in which it receives its 
 share in distribution. They are, in their nature, the same, 
 and in scientific treatment might properly be discussed 
 under one title ; but the common names are so deeply fixed 
 in the mind, so intimately associated with political economy, 
 and so interwoven with daily experience, that only confusion 
 could result from speaking of them as one. 
 
 Production, thus far, has been charged with wages (and 
 Tinder this term we include all the rewards of auxiliary 
 
254 DISTRIBUTION. [BOOK IV. 
 
 labor, salaries, fees, Ac), profits, interest, and rent. Be- 
 tween these parties the product is to be divided. This 
 division is made by natural laws, which, if not interfered 
 with by legal enactments or social customs, will secure to 
 each its rightful share. 
 
 But, while this is true, another party enters the field, and 
 makes a peremptory claim to a portion of the wealth which 
 the joint efforts of these has produced. That party is gov- 
 ernment, demanding a revenue for its maintenance, to 
 which, all must and should contribute. This is done in the 
 general form of taxation. 
 
 Distribution is now complete, — wages, profits, interest, 
 rent, and taxation. These we shall examine in their 
 order. 
 
 CHAPTER II. 
 
 WAGES. 
 
 Since labor and capital join together in production, each 
 may rightfully claim, and in the nature of things must 
 receive, a share of whatever is produced. 
 
 The share which labor receives is called " wages ; " and 
 by this general term is meant that compensation which the 
 employer pays to the employed for his personal services. 
 The law of value is the law of wages. Wages confer value, 
 and are measured by it. They depend essentially on the 
 conditions of cost, supply, and demand. Competition comes 
 in to influence their rate, as it does the price of other com- 
 modities. 
 
 Wages vary greatly in different countries, and in different 
 parts of the same country ; they vary, too, in all the em- 
 ployments and occupations of society. These differences, 
 however, are neither accidental nor arbitrary, but depend 
 on certain laws which it is our purpose to point out.* 
 * A part of this chapter appeared In the "Merchant's Magazine" in 1857. 
 
CHAP. 11.] WAGES. 255 
 
 The joint instrumentality of labor and capital being 
 necessary to the production of wealth, it follows that the 
 interests of the two parties are closely connected ; that cap- 
 ital is as dependent on labor as labor is upon capital. 
 
 If this is so, the probabilities of an equitable division 
 will depend on the freedom with which both parties are 
 able to act, and the equality on which they stand when the 
 contract or copartnership is formed. 
 
 Whatever, in social arrangements or civil institutions, 
 destroys the natural freedom and equality of the parties, 
 gives one an advantage over the other ; and the party having 
 the advantage will profit by it. 
 
 Wherever, by class legislation, capital is allowed to tyran- 
 nize over its copartner, or concentrate itself in vast aggre- 
 gations, and thus increase its natural power over labor, 
 which cannot be thus brought into powerful and permanent 
 combination, the latter will be compelled, in one form or 
 another, to take up with less than its just reward. 
 
 But, however unjust or arbitrary lavrs or institutions may 
 be, it is evident there are certain limits beyond which the 
 wages of labor cannot be reduced. 
 
 The cost of labor is identical with the cost of maintain- 
 ing the laborer in such circumstances that he can not only 
 support himself, but rear a family of children sufficiently 
 numerous at least to keep the supply of laborers good. 
 
 Hence he must receive what has been properly denomi- 
 nated necessary wages ; that is, to use in part the definition 
 of Adam Smitli, " such wages as will enable him, not only 
 to obtain the commodities absolutely necessary to the sup- 
 port of life, but whatever else the customs of society render 
 it indecent for persons in his rank in life to be without." 
 
 There being, then, no uniform and established standard 
 of wages, they vary according to the expenses of subsist- 
 ence in different countries, and the condition in which the 
 laboring classes are willing to live. 
 
 The cost of labor, or the current rate of wages that can 
 
256 DISTEIBUTION. [BOOK IV7 
 
 permanently exist, depends on the necessary expenses of 
 living ; and these expenses, in turn, depend upon the condi- 
 tion of the laboring classes. Hence, other things equal, the 
 more educated and morally and intellectually elevated any 
 community of laborers may be, the higher will be their 
 standard of wages. 
 
 Wages are not high in proportion to tfie wealth of a com- 
 munity, but rather to the disposition that exists amongst 
 those possessing wealth to pay it out for labor ; knd this 
 disposition will depend much upon the security and profitar 
 bleness with which capital can be employed in production, 
 and the enterprise and aspirations of the people. 
 
 We make the following divisions of our subject : — 
 
 NOMINAL AND EBAL WA(>BS. 
 
 There is often a considerable difference between the nom- 
 inal and real wages, or between the wages of the employ^ 
 when received in money or when realized in such commodi- 
 ties as his wants require. As this is a question of fact, we 
 refer to pages 177, 178, of this work, as shown in Table V. 
 In that table we find the prices of ten commodities, 
 which the laborer would be likely to use in his ordinary 
 consumption, such as sugar, coffee, molasses, pork, cheese, 
 rice, salt, &c. 
 
 By taking the wages of the laborers at certain periods, 
 and the prices at corresponding periods, we ascertain the 
 desired results. We have added the year 1864 from the 
 best unofiScial sources at hand : — 
 
 1836. 1840. 1843. 1864. 
 
 "Wages* .... $1.25 $1.00 $1.00 $1.50 
 
 Commodities . . . 29.46 20.73 14.82 46.96 
 
 Labor required . . 23^ days 20J days 14f days 34-^ days 
 
 * It is to be regretted that we have no carefully prepared tables of wages 
 in the United States. Such are greatly needed. We have taken the rates 
 mentioned according to our own observation, and believe them essentially 
 correct. 
 
CHAP, in.] 
 
 EISE AND FALL OP WAGES. 
 
 257 
 
 Nominal wages fell from 1836 to 1840 by one-fifth, or 
 twenty per cent ; yet the real wages (as shown by the less 
 number of days required to procure the same commodities) 
 were higher in 1840 than 1836 by more than thirteen per 
 cent. In 1843, when the nominal wages were but one dollar, 
 real wages were about sixty per cent better than in 1836, 
 when the nominal wages were twenty-five per cent higher. 
 In 1864, when nominal wages were at one dollar and fifty 
 cents, real wages were but little more than half what they 
 were in 1843 at one dollar. 
 
 In this connection, it seems appropriate to mention the 
 great difference to the laboring classes between a value and 
 a credit currency. If the latter, as we have endeavored to 
 show, raises prices and causes speculation, and if the price 
 of labor does not rise in proportion to the rise of prices, 
 then it must follow that wages were really less at all times 
 of inflation than when the currency is in a natural con- 
 dition. How great these fluctuations are we have seen in 
 Table V., pages 177, 178, from which, as an illustration in 
 point, we give the following triennial synopsis : — 
 
 Tears . . . 
 
 1834. 
 
 1837. 
 
 1840. 
 
 1843. 
 
 1847. 
 
 1850. 
 
 1853. 
 
 1856. 
 
 1859. 
 
 Prices . . . 
 
 $19.13 
 
 $28.40 
 
 $20.73 
 
 $14.82 
 
 $20.82 
 
 $16.20 
 
 $22.47 
 
 $25.02 
 
 $22.11 
 
 Every one acquainted with the rate of wages will realize 
 at once that they have not corresponded to their fluctua- 
 tions in prices, and that the laboring and salaried classes 
 must have suffered great injustice in consequence. 
 
 CHAPTER in. 
 
 PEOPOETIONATE EISE AND PALL OP WAGES. 
 
 Although wages rise and fall with the general rise and fall 
 of commodities, they do not in equal proportion. The fact 
 is one of common observation ; but the reason of this dif- 
 
 17 
 
258 DISTRIBUTION. [BOOK IV. 
 
 ference we do not recollect to have seen stated by any 
 writer. For nearly all products there is both an actual and 
 speculative, or a present and prospective, demand : for 
 labor there is only an actual, present demand. When busi- 
 ness begins to be particularly prosperous, -there is a general 
 demand for all kinds of merchandise, and prices gradually 
 begin to improve. This at once occasions a speculative 
 demand ; for to buy will be to realize an advance : the larger 
 the purchases, the greater the amount of profits. Every ope- 
 ration pays. The rise continues until every article bought 
 and sold as merchandise goes up to the highest point. 
 
 But no one speculates in wages. No one can, if he 
 would, buy a hundred thousand dollars' worth of labor, and 
 hold it for an advance, as he can of flour, sugar, or tea. 
 Of course, labor has no advantage from this kind of demand, 
 but must rely entirely on that which is immediate and 
 actual. Therefore it is that a general rise of prices, so far 
 as occasioned by speculation, must always operate against 
 the laborer, or the person employed on salary or wages. 
 
 But wages not only never rise so much as commodities, 
 but do not rise so soon. The reason is, that the rise of 
 commodities is greatly accelerated by speculation ; while 
 labor, as before stated, is not affected by that kind of de- 
 mand. Hence it does not begin to rise until speculation 
 has engendered a spirit of extravagance and increased con- 
 sumption; then wages make an advance about half as 
 great, on an average, as that of merchandise in general. 
 
 And, again, wages fall sooner than merchandise, because 
 the latter may be held for high prices, if need be. The fall 
 of merchandise is broken by the disposition and ability of 
 the owner to hold on, and, as far as possible, prevent loss ; 
 but the laborer cannot do this, — he must sell his com- 
 modity at once for the most it will bring. 
 
 It is for those obvious reasons that wages, in times of 
 depression, must fall, not only sooner, but lower, than prop- 
 erty in general. (See Appendix B.) 
 
CHAP. III.] RISE AND PALL OP WAGES. 259 
 
 A real rise or fall in wages is a matter difficult to ascer- 
 tain with certainty. Fluctuations, since the introduction 
 of mixed currency, have been frequent and violent, not in 
 the rate of wages only, but of those commodities upon 
 which the laborer subsists, and in which his real wages must 
 be estimated. To determine whether actual value wages 
 have advanced or not since the commencement of the 
 present century, for example, we must have the nominal 
 rates, say, in 1810, also in 1860. We must then take the 
 prices of commodities at the two periods ; and, by compari- 
 son, we may arrive at a general conclusion. We should 
 undoubtedly be satisfied that there has been a decided 
 increase in the average value of wages. In our investigar 
 tion, we should find that some articles were higher and some 
 lower in price in 1860 than fifty years before. For example, 
 while one dollar per day for labor was probably as high 
 wages in 1810 as one dollar and a half in 1860, corn was 
 worth the same at each end of the half-century ; but cotton 
 cloth, which was worth forty cents a yard in 1810, could be 
 bought in 1860 for ten cents. In all manufactured articles, 
 the difference is against the earlier labor ; so that it is true 
 the laborer of to-day enjoys many comforts to which his pre- 
 decessors could not aspire. The wants of the laborer have 
 immensely increased. It would be impossible to give an 
 inventory of them ; but, could we compare the consumption 
 of those classes in 1810 with their consumption in 1860, we 
 should find the advance surprising. The amount expended 
 for pleasure-travel, for example, by this class is immense, 
 while fifty years ago it was hardly appreciable. So of 
 the luxury of newspapers, magazines, &c. Some part 
 of the expenditures of the poorer classes are for articles 
 (like photographs) which were absolutely unknown a gen- 
 eration since. 
 
 Workmen may be less satisfied with their compensation 
 now than fifty years ago ; but it is really far greater. We 
 do not say they have no cause for complaint, yet they are 
 
260 DISTRIBUTION. [BOOK IV. 
 
 vastly better off than those who went before them. Wages, 
 when realized in commodities, have increased. The general 
 product has been enlarged by the introduction of labor- 
 saving machinery, and therefore their absolute share is 
 greater. Whether their relative share, as compared with 
 that of the capitalist or employer, is greater, we shall find 
 place elsewhere to discuss.* 
 
 The laborer suffers nothing, but gains much, in the pro- 
 gress of civilization, if he is not despoiled by an unsound 
 currency. That is his greatest oppressor, because his real 
 wages — what he obtains in commodities for his labor — is 
 determined to a considerable extent by the character of the 
 circulating mediiim of the country. If the value of that, or 
 its purchasing power, is less than it professes to be, lie can- 
 not fail to be injured by it. 
 
 DIFFERENCE OP WAGES FROM DIFFERENCE OP EMPLOYMENTS. 
 
 Occupations which manifestly involve a great amount of 
 personal danger command higher wages than those regarded 
 as perfectly safe. The risk of life must be taken into ac- 
 count. The man who works at powder-making gets a 
 higher price than the man who works upon a farm; the 
 man employed in blasting rocks, than the man who shovels 
 gravel. So it ought to be, and so to some extent it is, in 
 regard to mining and other dangerous employments ; though, 
 from the smallness of the difference, it is often quite mani- 
 fest that human life is placed at a low valuation. 
 
 Any occupation which public opinion brands as odious 
 and revolting will usually be found to pay a large compensa- 
 tion, for the reason that honorable or conscientious men 
 will not engage in it. 
 
 * The very low rate of " com wages " received by the English laborer 
 in times past may be seen from the statement of Mr. Malthus (Pol. Econ., 
 p. 228, Lend. ed. 1836), that wages had advanced, and wheat fallen, so much 
 " that, from 1720 to 1750, a whole peck of wheat could be had for a day's 
 labor." 
 
CHAP, m.] DIPPEBENCB IN WAGES. 261 
 
 UNHEALTHY TEADES. 
 
 Those occupations which, although not immediately dan- 
 gerous, are nevertheless unhealthy and abridge human life, 
 ought to command more than ordinary wages. 
 
 K a man is liable to be made sick, and consequently ex- 
 posed to loss of time and expense for medical attendance, 
 he should be compensated for that liability. If he shortens 
 life in a particular employment, that should be a matter of 
 consideration in determining the rate of wages. 
 
 It is not for us to inquire here whether a man may right- 
 fully engage in that which he knows will abridge Mfe ; but 
 that multitudes do so is beyond a doubt. 
 
 Kegarded in a merely economical point of view, it is 
 obvious, that, on this account, some laborers should receive 
 much higher compensation than they do at present. To 
 determine what that increased pay ought to be, we should 
 be obliged to ascertain the value or expectation of life in 
 the different occupations. 
 
 The expectation of life should be a matter of considera- 
 tion with every one choosing his business, and should have 
 importance in determining the rate of wages. That this is 
 not adequately the case now is quite evident, because wages 
 paid for labor in unwholesome employments do not corre- 
 spond with the consequent abridgment of human life ; so 
 that the laborer not only loses a good part of his life, but 
 also a share of the wages he ought to receive while he 
 does live. 
 
 Agriculture is evidently the normal employment of man, 
 that in which he lives longest and enjoys the greatest 
 health. Every other calling is unwholesome to the exact 
 extent in which it departs in its condition from the agricul- 
 tural ; and the rate of wages should be adjusted to a scale 
 constructed on this principle. 
 
262 DISTRIBUTION. [BOOK IT. 
 
 THE EDUCATION OP THE LABOEEB. 
 
 Other things equal, the man who has received merely a 
 common-school education will obtain higher wages in any 
 employment than one who is entirely illiterate. He has 
 some mental discipline, will therefore be more intelligent 
 and capable, will better understand and recollect the direc- 
 tions of his employers, better comprehend the nature of 
 his duties. If need be, he can keep an account of what he 
 does. He has in some measure learned to think ; he wiU 
 have a higher sense of self-respect, and be more reliable. 
 
 The difference in favor of a workman who is so far fur- 
 nished with intelligence that he can do his own share of 
 thinking, instead of relying entirely upon his employer for 
 every exercise of judgment and forecast, is very great to 
 the employer. If the latter is compelled to supply all the 
 head-work, he must be in constant attendance, and exercise 
 the utmost vigilance. Five stolid workmen will cost him as 
 much time as ten intelligent ones, and a great deal more 
 care, vexation, and loss. Hence intelligent labor is worth 
 more, and will bring more. 
 
 THE FRUGALITY OP THE LABORER. 
 
 Another important consideration in connection with this 
 part of our subject is, that the educated laborer will be 
 more likely to appreciate his true interests, and save a part 
 of his earnings. Every doUar he saves and accumulates in 
 the shape of property, of whatever kind, will render him 
 more independent ; and the more independent he is, the more 
 likely he will be to get fair wages. He becomes, to a certain 
 extent, a capitalist, and can measure strength with capital 
 on better terms. 
 
 The man who has nothing upon which to subsist to-day 
 must work to-day, at whatever price, or starve ; while he 
 
CHAP. III.] WAGES OP FEMALES. 263 
 
 ■who can get on for a fortnight without employment may 
 choose whether he will work for less than a fair price 
 to-day or not. 
 
 This is a matter of great importance to the laborer ; for 
 the natural advantage the capitalist has over him is, that 
 the latter can wait a little, while the former must work 
 NOW. The laborer or employ^ of whatever kind (for all are 
 subject to the same law) should strive earnestly to make 
 himself as independent in his position as possible. Hence, 
 self-denial and economy, when exercised by those who live 
 on wages or salaries, are amply repaid by better terms of 
 service. There is a homely adage, " that a man is poorer 
 for being poor," which laborers, of all others, should bear 
 in mind. 
 
 DISTINCTION OP SEX. 
 
 Women receive less wages than men. This is doubtless 
 true in all the so-called civilized countries. The difference 
 may be stated at about fifty per cent to their disadvantage ; 
 that is, where the man receives one dollar, the woman re- 
 ceives fifty cents.* And this, too, not only where the 
 services of the two sexes differ, but where they are iden- 
 tical, as in school-teaching, type-setting, &c. Why this 
 disparity ? 
 
 Political economists, so far as we know, have not troubled 
 themselves much about it. Philanthropists have taken cog- 
 nizance of the fact, and have sought to apply a remedy, but 
 generally, we may say uniformly, with little success. We 
 shall not go at length into the subject, only endeavor to 
 state the causes from which we suppose the diiference arises. 
 These may suggest the remedy. 
 
 The first consideration to be noticed is the fact that the 
 
 * The average monthly wages of male teachers in the public schools 
 
 of Massachusetts, 1857-8, was $49.87 
 
 The average monthly wages of female teachers in the public 
 
 schools of Massachusetts, 1857-8 $19.63 
 
264 DISTRIBUTION. [BOOK IT. 
 
 two sexes exist in remarkably equal numbers throughout 
 the world. There are as many women as men. 
 
 The second, that, while almost all occupations and em- 
 ployments are accessible to the male sex, but comparatively 
 few are, by the opinions and customs of society, regarded 
 as proper for women. One, therefore, has the whole field 
 of life in which to act ; the other is limited to a part. 
 
 On the principle, then, of supply and demand, the number 
 of females being as great as that of males, while their em- 
 ployments are so much fewer, they must of necessity worji 
 for less reward. The supply is greater than the effective 
 demand. 
 
 A third fact is, that the part of labor assigned to women 
 is of a more dispensable character. A great part of the 
 labor of women is connected with the comforts, conve- 
 niences, arid luxuries of life : hence it can and will be 
 dispensed with, unless it can be had cheap. The staple 
 productions — corn, cattle, iron, cotton, and the like — must 
 be had, at whatever price or cost of labor ; but not so with 
 the thousand-and-one little articles of beauty, taste, and 
 fashion which female industry creates in every household. 
 For example : suppose a farmer employs two men to carry 
 on his agricultural labors, and usually the same number of 
 females in the work of the house. Now, if he should be so 
 pushed for means as to be obliged to dispense with one of 
 his employes, which would it naturally be, one of his hired 
 men or hired maids ? Doubtless one of the latter ; because, 
 by doing so, he would only lose some of the conveniences 
 and comforts of life, without, perhaps, much sacrifice of 
 property ; while, in the other case, he would lose part of his 
 crop. 
 
 There seems to be a prevalent feeling at the present day 
 that the wages of woman ought to be increased ; that her 
 position ought to be less dependent. But those who are 
 satisfied with the existing customs and opinions of society, 
 by which the sphere of woman is restricted to its present 
 
CHAP, m.] WAGES OP FEMALES. 265 
 
 limits, oiiglit to be equally -well satisfied with the compensa- 
 tion allotted her ; for it is just such as must follow. 
 
 No attempt to enhance her wages by appeals to human 
 sympathies or beneTolent organizations need be attempted ; 
 for there is a law that overrides all these, — the law of 
 supply and demand ; a law founded in nature, inexorable 
 and immutable. An increase of her wages can only result 
 from an increase of her employments, — of employments, 
 too, of an equally indispensable character as those of the 
 other sex. 
 
 That a change of this sort is fortunately in progress in 
 most civilized countries, and especially in the United States, 
 is apparent. The introduction of machinery is doing much 
 to equalize the wages of the two sexes. Water and steam 
 are now made to accomplish that which could once only be 
 done by human strength, leaving the residue of labor, which 
 is, to a great extent, the exercise of intelligence, care, and 
 attention, to be performed by persons of either sex. Hence, 
 there is now a great demand for the labor of females where 
 there was once none at all. There is Less demand for 
 muscle, and more for mind : this brings woman nearer an 
 equality with man. 
 
 In the department of education, too, the sphere of 
 women's labor is vastly extended within the last forty 
 years ; and, from existing indications, the present century 
 will not close before a considerablfe part of the business of 
 the medical profession will be in their hands. Women are 
 also employed extensively in public ofl&ces and trading es- 
 tablishments. 1 
 
 All this is the natural result of our civilization, and 
 especially of a free common-school education. In a great 
 part of the United States, the same advantages are furnished 
 to both sexes. The consequences are, that as the females 
 are more docile, have a quicker apprehension, and are more 
 studious generally, they acquire a better education in our 
 lower schools and seminaries than the other sex. 
 
266 DISTEIBUTION. [BOOK IV. 
 
 A NEW CLASSIFICATION OF WAGES. 
 
 There have now been presented most of the considera- 
 tions we have room to offer in regard to the subject before 
 us, and in somewhat the usual manner of arrangement. 
 We propose, in conclusion, to give what may be a new, but 
 as we think, a more natural and scientific classification 
 of wages. 
 
 Properly considered, wages are paid for three different 
 kinds of power ; viz., — 
 
 1st, Physical power, or mere muscular effort with the 
 spade, shovel, hoe, and the like ; the kind of labor least ele- 
 vated above that of the horse or ox. This power is most 
 plenty, comes by nature, costs the least, and is therefore 
 cheapest. It would be so regarded theoretically : it is so prac- 
 tically. This has ever been, and will be, the lowest priced. 
 
 2d, Mental power. Those faculties of mind that give 
 ability to manage complicated affairs, the general operations 
 of agricultui'e, manufactures, commerce, — all services, in 
 fact, that require the exercise of judgment, discretion, re- 
 flection, calculation. Such power is more rare than physical 
 force. It will therefore command a higher price, especially 
 in a progressive state of society. To this class may be 
 referred all persons of natural ingenuity, inventors, authors, 
 and men of genius. Such often receive great rewards. In 
 this class may be placed the greater proportion of those pro- 
 fessional services which are subsidiary to production, and 
 indispensable to its fullest development. 
 
 To prepare men for the exercise of their intellectual 
 powers, a considerable amount of education and training is 
 necessary. Hence such powers are not only more rare, 
 but more expensive, than brute force, and therefore right- 
 fully command higher compensation. 
 
 Sd, Moral power. As man advances in civilization; as 
 
CHAP. III.J ANOTHER CLASSIFICATION OP WAGES. 267 
 
 wealth, its great concomitant, increases; and social com- 
 binations are multiplied, — it becomes more and more 
 necessary that important trusts should deTolve on individ- 
 uals occupying particular stations. With all. the checks 
 and securities that can be devised, the greatest reliance 
 must ever be placed on the character of the person to whom 
 the trust is committed. Oftentimes the honor and interests 
 of vast bodies of men must be committed to a single hand. 
 
 Hence arises a necessity for something more and higher 
 than physical and mental faculties or qualities combined, — 
 something that shall furnish a guaranty, irrespective of all 
 contrivances, that these high trusts shall be faithfully dis- 
 charged. That guaranty is found in the moral power of 
 the individual, — the power which gives such a control over 
 appetites, passions, and propensities as affords assurance 
 that under no circumstances of trial or temptation will he 
 ever depart from the strictest line of duty. This confidence 
 can be inspired only by the conviction that the individual to 
 be trusted has firm, abiding principle ; that he wiU be hon- 
 orable and true, not merely because it is for his immediate 
 interest to do so, but because such are his sentiments and 
 convictions that he cannot be otherwise ; that no cliange of 
 circumstances will ever induce him to deviate from the path 
 of rectitude. 
 
 When men are found possessing this high moral power 
 over themselves and the accidents of their position, they 
 will, of course, be called to places of responsibility and 
 trust. 
 
 Now, as such men are more rare than those having only 
 physical power, or physical and mental power combined, 
 they will command higher rewards, — the highest paid for 
 any class of services. 
 
 The merchant must often intrust all his fortune to a 
 single confidential clerk. He must put himself in the 
 power of that clerk to injure, it may be to ruin, if he will. 
 Hence, should he find- a man to whom of all others he is 
 
268 DISTRIBUTION. [BOOK IV. 
 
 willing to commit this power, he will be disposed — he can 
 afford — to give him large wages. The incorporated com- 
 pany, with its capital of millions, must put into the hands 
 of its officers, sometimes of a single man, its whole wealth. 
 And, after all the bonds and guaranties that can be devised, 
 reliance must be mainly placed upon the moral character of 
 the man. 
 
 In affairs of state, in the highest public trusts, how 
 much must always depend on personal honor and integrity! 
 What other assurance can the people have, that their ser- 
 vant may not, under great temptation, prove recreant to 
 duty, and injure and disgrace himself and his country? 
 Looking at all rewards in the light of political economy, it 
 is here that we find the highest plane of human effort. 
 • It may be objected to this new classification of labor, that 
 we confound economic with moral science, and depart from 
 our appropriate sphere. We reply, that men, if truly 
 moral, ai^e so not because it is profitable, not because it 
 will enlarge the value of their services, but because it is 
 right, because they love integrity for its own sake. This 
 must be their motive, or their morality has no reliable foun- 
 dation. Yet from this cause it occurs that their services 
 are more desirable, and they will receive greater remunera- 
 tion, — will be paid for honesty as truly as for intelligence, 
 activity, and strength. So a man must preserve his health, 
 if he would receive wages for even the lowest form of labor; 
 but that will not be his motive. The love of life and the 
 pleasures of health will form the grand consideration in his 
 mind why he should abstain from all that will impair his 
 physical energies ; yet, as a consequence, he secures the 
 ability to command wages, and is paid for his abstinence 
 and discretion. 
 
 We cannot, therefore, acknowledge- the validity of the 
 objection to that which seems to us the most natural and 
 scientific classification of wages.' 
 
CHAP. IV.J LABOR COMBINATIONS. 269 
 
 CHAPTER ly. 
 
 LABOR COMBINATIONS. 
 
 In connection with tlie subject of wages, it seems neces- 
 sary to inquire somewhat in regard to the rights of the 
 laborer, since upon these his compensation must to some 
 extent depend. 
 
 Under a government acknowledging the rights of all men, 
 the laborer must, of course, have the same rights as his 
 feUow-citizens, neither more nor less. He asks no favor, 
 and grants none. He demands the same justice, the same 
 freedom, accorded to others. He should be able, so far as 
 law is concerned, to work when and for whom he chooses, 
 and for such consideration as he can get in the great com- 
 petition of industry. The law cannot say how much he 
 shall accept for wages, how many hours shall constitute a 
 day's work, nor how much the employer shall give him. 
 Each is left perfectly free, and the competition is simply 
 between labor and capital. 
 
 But the laborer is not under obligation to act as an in- 
 sulated individual, any more than the capitalist. If the 
 latter is permitted, and even authorized and encouraged, 
 to combine with his fellows in order to enhance the power 
 and profits of capital, it is equally the right of the laborer 
 to do the same, and equally the duty of the legislator to 
 give him any facilities for doing this he may justly demand. 
 
 If capital is incorporated, labor should have the same 
 privilege. If favors in any case are awarded to one party, 
 they should certainly he furnished to the other. 
 
 Laborers, then, may combine, if they deem it best to act 
 in concert in regard to their interests. 
 
 As a matter of fact, they do form associations for mutual 
 benefit. In England, these "friendly societies," as they 
 
270 DISTRIBUTION. [BOOK lY. 
 
 are called, are mimerous, and often exert a very happy 
 influence. They are formed for a great variety of specified 
 objects. One class, for example, provide, — 
 
 1st, For assisting members when they are obliged to 
 travel in search of employment. 
 
 2d, For granting temporary relief to members in dis- 
 tressed circumstances. 
 
 3d, For the relief and maintenance of members in case 
 of blindness, lameness, or bodily hurt through accident. 
 
 4th, For the purchase of necessaries to be supplied to 
 the members. 
 
 5th, For the purpose of assuring the members against 
 loss by disease or death of cattle employed in trade or 
 agriculture. 
 
 6th, For the purpose of accumulating at interest, for the 
 use of the member, the surplus fund remaining after pro- 
 viding for his assurance. 
 
 Some societies provide for a variety of other contingen- 
 cies, — sickness, old age, and death. These associations 
 are so numerous and important in Great Britain that the 
 government has appointed a registrar (John Tidd Pratt, 
 Esq.) for their general supervision, and his reports are 
 annually made to Parliament. All associations like these, 
 if properly managed, have a tendency, not only to relieve 
 the misfortunes of the laboring classes, but to enhance their 
 wages by making them more independent. 
 
 Societies are also formed for the diffusion of intelligence 
 amongst these classes, and for their moral and social eleva- 
 tion, — like temperance associations, lyceums, mechanics' 
 institutes, &c. These, too, have the effect to influence 
 favorably the rate of wages, since they tend to bring labor- 
 ers more upon a level with the more favored classes, to 
 increase their intelligence, and especially to divert them 
 from low and degrading occupations and amusements. 
 
 Associations of this kind will, in the progress of events, 
 undoubtedly contribute more and more towards an equal 
 
CHAP. IV.] LABOR COMBINATIONS. 271 
 
 distribution of the wealth which labor produces in conjunc- 
 tion with capital, provided they are formed for proper p\ir- 
 poses, and conducted in an orderly manner. 
 
 trades' unions. 
 
 One of the forms in which these associations make their 
 appearance is that of trades' unions. 'The principal object 
 of these, generally, is the increase of wages. The differ- 
 ent trades often combine for this purpose, and endeavor 
 to fix the rate at which they will work. This, it would 
 seem, they have an undoubted right to do : whether it be 
 good policy is another question. 
 
 Men may mutually agree, for example, that they will work 
 only ten hours per day, and will have two dollars per day 
 as wages. All who voluntarily join such an agreement are 
 in honor bound to keep it ; and, if the association binds 
 itself to support those who are turned out of employment, 
 they have also the undoubted right so to do. 
 
 But, while all this is conceded, it does not follow, that, if a 
 member violates the rules of the society, his associates may 
 inflict any punishment upon him for doing so, except such 
 as the law of the land authorizes. A trade's union is not 
 an imperiwm in imperio. It has all the rights which each 
 individual member has, and no more. Hence any attempt 
 to inflict punishment upon such delinquent is as much an 
 infringement of his rights, and of the laws of the country, 
 as if it were done J3y an individual. 
 
 Again : nor has a trade's union any right whatever, 
 moral or legal, to interfere in any manner with those of their 
 craft who do not choose to enter into their association. If 
 such persons prefer to work at a less rate of wages than that 
 established in the tariff" of the union rather than not work 
 at all, they have the most unquestionable right to do so ; 
 and any attempt to prevent them by brute force is an in- 
 fringement of personal rights which government is bound to 
 resist to the utmost. Such an act is merely the act of a 
 
272 DISTEIBUTION. [BOOK IV. 
 
 mob, and has no justification. Nay, more : under a free gov- 
 ernment, where tliese very men who have thus combined 
 are citizens, witli the right of suffrage, and, in common with 
 others, elect tliose who enact the laws under which they 
 live, any outrage of this kind is an overt act of moral trea- 
 son against republican institutions. It is a virtual declara- 
 tion that these institutions have failed, and must fail, to give 
 adequate protection, and therefore these aggrieved parties 
 are obliged to resort to violence ; in other words, to over- 
 ride the government, the Constitution, and the laws. 
 
 STRIKES. 
 
 The foregoing argument covers the whole ground of right 
 or wrong in regard to strikes. 
 
 Members of a trade's union, believing that their wages 
 are inadequate or less than their employers can well afford, 
 by mutual agreement strike for higher wages. If not grant- 
 ed, they turn out. To produce effect, and aid in obtaining 
 what they demand, they parade the streets with banners 
 and music. Very well, so far ; for other associations do the 
 same, whenever they see fit. If these demonstrations do 
 not interfere with the general avocations and pursuits of the 
 public, there can be no reasonable complaint. The economy 
 and utility of such demonstrations is another matter ; but 
 the right to make them need not be disputed. 
 
 But when, in addition to this, a procession, instead of 
 peaceably passing through the streets, proceeds to compel 
 by force every person engaged in a particular trade to quit 
 his employment, the case is entirely altered. The proces- 
 sion has become a lawless mob, and is to be dealt with 
 like any other body of men disturbing the public peace. 
 
 All demonstrations of violence, of this kind, are in utter 
 antagonism, not only to the institutions of society in gen- 
 eral, but to the real and permanent interests of the party 
 which makes them. They do harm, and only harm, in the 
 long-run, both economically and morally, and degrade, in- 
 
CHAP. IV.J LABOR COMBINATIONS. 273 
 
 stead of elevating, the laboring classes, who really have 
 much to hope from their associations of various kinds, if 
 they be peacefully and properly conducted. There is no 
 one thing by which the interests of the laborer can be more 
 effectually promoted than by associations for good and use- 
 ful purposes, managed in a sensible and becoming manner ; 
 and, on economical as well as moral and social considera- 
 tions, they would then be worthy the approbation and pat- 
 ronage of the capitalist, whose interests would be promoted 
 thereby : but it should ever be remembered that individu- 
 ality is to be interfered with as little as possible, since the 
 more there is of individual responsibility, socially and politi- 
 cally, the better; the less men are called upon to resign 
 their freedom of action and personal reliance and choice in 
 the various duties and emergencies of life, the more advan- 
 tageous to their welfare and happiness. ' 
 
 But strikes cannot permanently raise the rate of wages. 
 Combinations of workmen, taking advantage of the peculiar 
 state of trade when commodities are in great demand, may, 
 for the moment, extort, from the necessities of their em- 
 ployers, an addition to their compensation ; but they gain no 
 substantial advantage. When trade becomes dull, they are 
 certain to be placed again in the power of the employer. 
 Especially is it injurious to the interests of the workmen, 
 where by strikes they have forced out of employment large 
 numbers, whom they are obliged to support out of previous 
 accumulations. In such cases, they consume their own 
 little savings, injure the interests of those who have em- 
 ployed them, and render them less able tckpay wages in the 
 future. 
 
 Freedom, protection, and justice are what labor needs, 
 and must have, or its condition will be depressed, and its 
 productiveness diminished. With freedom, the laborer can 
 work for whom he will : with the ballot, he can insure to 
 himself and his interests protection and justice. 
 
 18 
 
274 DISTRIBUTION. [BOOK IV. 
 
 CO-OPERATIVE ASSOCIATIONS. 
 
 There is yet another mode in which those who depend 
 upon wages may secure very great advantages to themselves ; 
 viz., by co-operative associations, formed for trading or in- 
 dustrial purposes. These are already somewhat extensively 
 introduced into tlie United States ; and, so far as are known, 
 have been attended with a good degree of success. Mr. 
 Fawcett (now M.P.), in his " Manual of Political Econo- 
 my," has given a very full and interesting account of the 
 operation of certain co-operative societies in Europe, from 
 which we extract the following : — 
 
 " The co-operative movement in England was first commenced 
 at Rochdale.* About 1844, a few working-men in that town sus- 
 pected, and no doubt justly so, that they were paying a high price 
 for tea, sugar, and other such articles, when they, at the same time, 
 believed they were not free from adulteration. They therefore said, 
 ' Why should we not club together sufficient amongst ourselves to 
 purchase a chest of tea and a hogshead of sugar from some whole- 
 sale shop in Manchester ? ' This they did ; and each one of their 
 number was supplied with tea and sugar from this common stock, 
 paying ready money for it, and giving the same price for it they had 
 been charged at the shops. When all the tea and sugar had thus 
 been sold, they agreed to divide the money thus realized amongst 
 themselves, in proportion to the capital each had subscribed. They 
 found, to their surprise, that a large profit had been realized. The 
 great advantage of the plan became self-evident ; for not only were 
 they provided with a lucrative investment for their savings, but 
 they obtained unadulterated tea and sugar at the same prices they 
 had been previously obliged to pay for the same articles when their 
 quality was deteriramted by all kinds of adulteration. A fresh stock 
 of tea and sugar was, of course, purchased. Other laborers were 
 quickly attracted to join the plan, and subscribe their savings ; soon 
 the society was sufficiently extended to justify them in taking a 
 room, which they used as a store, and the success of the plan fully 
 kept pace with its enlargement. 
 
 » The residence of John Bright, M.P., and where his femily carry on a 
 large mauu&cturing business. A. w. 
 
CHAP. IV.J LABOR COMBINATIONS. 275 
 
 " In 1856, this society, now famous as tlie Eochdale Pioneers, pos- 
 sessed a capital of about £12,800. The business was not long 
 restricted to articles of grocery : bread, meat, and clothing were aU 
 sold on the same plan. Their capital so rapidly increased, that they 
 were soon enabled to erect expensive flour-mUls ; and a supply of 
 pure bread, as well as unadulterated tea, was thus insured. Dur- 
 ing the last few years, this Pioneers' society has attracted frequent 
 public attention ; for it has gradually grown into a vast commercial 
 institution, embracing a great variety of trades. At the present 
 time (1863), its capital is £32,000, the amount of business done is 
 £170,000, and the profits realized twenty per cent. The general 
 management of this society, and the mode in which the profits are 
 distributed, are both excellently arranged. A ready-money system 
 is so scrupulously adhered to, that even a large shareholder cannot 
 make the smallest purchase on credit. The managers of the busi- 
 ness are chosen by the general body of shareholders ; and, in almost 
 every case, an excellent selection has been made. The accounts are 
 made up quarterly, and placed before the general meeting. Lon- 
 don accountants have audited these accounts ; and they express a 
 unanimous opinion that no business in the country is better con- 
 ducted. With regard to distribution of the profits, a sufficient sum 
 is at first allotted to pay a dividend of five per cent on the capital ; 
 the remaining profits are divided on the following plan: Every 
 person, when he purchases goods, receives one or more tin tickets, 
 on which is recorded the amount of his purchases. At the end of 
 every quarter, each person brings these tin tickets, which form the 
 record of his aggregate purchases ; and the remaining profits are 
 distributed in proportion to the aggregate amount which each indi- 
 vidual has expended at the store. Thirteen pence in the pound 
 (equal to about five and a half per cent on the amount purchased) 
 is the average amount which, in this manner, is received as a draw- 
 back." 
 
 Professor Pawcett then proceeds to give the causes of 
 this remarkable finaiicial success : — 
 
 " The ready-money system, invariably adopted by these societies, 
 has probably promoted their prosperity more than any other cir- 
 cumstance. All bad debts are thus avoided ; and, where credit is not 
 given, a certain amount of business can be transacted with much 
 less capital than would be required if large sums were locked up in 
 
276 DISTRIBUTION. [bOOK IV. 
 
 book-debts. Under a ready-money system, the same capital may be 
 turned over perhaps twenty times a year ; and, if one per cent only 
 is realized upon such transaction, the capital will sum an aggregate 
 profit of twenty per cent in the course of the year. When goods 
 are sold for ready money, they can be bought for ready money from 
 wholesale dealers. This is always a guaranty that the purchases 
 wUl be made on the most favorable terms. Again : the sharehold- 
 ers of the society form a nucleus of customers ; and therefore, di- 
 rectly business is commenced, a certain amount of trade is insured. 
 If an individual commences business, he must attract customers 
 either by advertising or costly shop-fronts ; he is compelled to con- 
 duct his business in crowded thoroughfares, where rents are ex- 
 tremely high : but a co-operative society is saved all these expenses. 
 Its shareholders are its customers ; it therefore need not advertise ; 
 it does not require a showy building ; for its position is rather in the 
 centre of the homes of the laboring population. These and oSier 
 advantages sufficiently account for the large profits which have 
 been realized, not only by the Rochdale co-operative store, but by a 
 great number of similar societies, situated in almost every other part 
 of the country." 
 
 The author here enumerates a long list of different places 
 in which these stores are established, as Manchester, Hud- 
 dersfield, Dover, Blackburn, &c. He then proceeds to 
 state some of the advantages of these institutions : — 
 
 " The advantages which the working classes derive from a co- 
 operative store are apparent. In the first place, it provides them with 
 a most eligible investment for their savings. This is important, 
 .because the absence of good opportunities for investing small sav- 
 ings operates powerfully to increase the improvidence of the poor." 
 
 Again, he says : — 
 
 " The co-operative principle, when applied to trade and manu- 
 factures, enables the laborer to support his industry with his own 
 capital, and, in this manner, to rise from the mere status of a hired 
 laborer. . . . There can be no doubt that these societies promote a 
 most healthy social intercourse between workmen ; for, at frequent 
 meetings, the shareholders consult each other upon matters of busi- 
 ness. They have to show their discrimination in selecting the propei 
 persons to be managers ; and, in fact, the experience of the Eoch- 
 
CHAP. IV.J LABOR COMBINATIONS. 277 
 
 dale store proves that a co-operative society can succeed in carry- 
 ing out many a social improvement, which would not otherwise be 
 introduced. Thus, two and a half per cent of the profits realized 
 at Rochdale support an excellent reading-room and library, which 
 the shareholders, as well as their wives and families, are permitted 
 to use gratuitously ; the society organizes excursions, and often per- 
 forms some united work of charity : not long since, its members 
 presented a magnificent drinking-fountain to their fellow-townsmen. 
 A co-operative store may, moreover, become a particularly power- 
 ful agent in benefiting the working classes, because it can be con- 
 ducted on the smallest possible scale. The experiment can be made 
 without involving any expense : any half-dozen working-men may 
 try the plan, as it was tried in 1844 at Eochdale, by clubbing to- 
 gether sufiicient to purchase a chest of tea from a wholesale grocer. 
 If their first efibrt is successful, they may gradually develop their 
 plan, untU, at length, it becomes a great and important trading es- 
 tablishment." 
 
 The same writer gives the following account of an indus- 
 trial co-operative association : — 
 
 " A small society of co-operative masons was established in 1848, 
 in Paris. This society was reproached for holding certain political 
 opinions, and the government attempted to discourage it by refus- 
 ing to loan any capital. This intended hostility secured its future 
 success ; for the societies which were assisted by the government, 
 in almost every instance, proved to be failures. The co-operative 
 masons endured many vicissitudes ; and, in the year 1852, they de- 
 termined to re-organize their society. It then consisted of only sev- 
 enteen members, and borrowed no capital. They resolved to create 
 a capital, by depositing in a common chest one-tenth of their daily 
 earnings. At the end of the first year, a capital of fourteen pounds 
 and ten shillings was' in this manner created. At the end of 1854, 
 the capital had iucreased to six hundred and eighty pounds ; and, 
 in 1860, consisted of one hundred and seven members, and the cap- 
 ital possessed by them was fourteen thousand and five hundred 
 pounds. The H6tel Fould, the H6tel Rouher, the HStel Fres- 
 cati, &c., &c., were erected by this industrial association. At 
 the present time, these co-operative masons are building an hotel 
 for M. Girardin, on the Boulevard of the King of Rome, and an 
 hotel at Montrouge, for M. Pacotte. No laborers, except the share- 
 
278 DISTRIBUTION. [BOOK IV. 
 
 holders, are employed by the society. The laborers are paid the 
 ordinary wages, current in the trade, and the net profits real- 
 ized are proportioned in the following manner : two-fifths of these 
 profits form a fund, from which the annual dividend is paid ; and 
 the remaining three-fifths are appropriated to provide an extra bo- 
 nus on labor. The bonus each laborer thus receives is proportioned 
 to the amount of labor he has performed throughout the year. No 
 arrangements that could be devised would more powerfully promote 
 the efliciency of labor. This is the secret of the remarkable suc- 
 cess achieved by this society." 
 
 The advantages of these associations is further stated, as 
 follows : — 
 
 " In the first place, it may be observed that the laborers receive 
 the whole profits which result from their industry ; for they supply 
 the capital which is required. Another most important efiect seems 
 likely to result from these associations ; for they appear to hold out 
 a fair prospect of correcting a very disadvantageous tendency, which 
 is associated with the present rapid accumulation of wealth. For 
 we have previously remarked that each year the production of 
 wealth is conducted on a greater scale : manufactories are enlarged, 
 farms are extended in area, and in every branch of industry there 
 are those that seem, from the very vastness of their capital, to mo- 
 nopolize the additional profit, and thus compel the smaller producer 
 to succumb. Hence, each year it becomes more difficult for the 
 laborer to engage in any industry on his own account. . . . Hence, 
 the industry of the country must be conducted by two distinct class- 
 es ; namely, employers who supply the capital, and workmen who 
 provide labor ; unless those who labor agree to form themselves 
 into associations, and subscribe amongst themselves sufficient capi- 
 tal to carry on production upon a large scale. It must be quite 
 evident, that co-operative trading establishments, when successful, 
 as it were intensify many advantages which laborers derive from 
 co-operative stores. But we have separately described these two 
 classes of institutions, because we think that the success of the for- 
 mer may be imperilled by many circumstances which do not afiect 
 the latter. In fact, we have already stated, that, in the case of a 
 co-operative store, success may almost be guaranteed. . . . But the 
 case is very different with regard to a co-operative society carrying 
 on some branch of industry for profit." 
 
CHAP, v.] PROFITS, 279 
 
 This the writer shows to be more hazardous. He gives, 
 in connection with this, a statement of a very successful 
 agricultural co-operative enterprise, commenced some thirty 
 years since, in which the results were in the highest degree 
 satisfactory. 
 
 The description here given, by Professor Fawcett, of co- 
 operative societies abroad, furnishes satisfactory evidence of 
 their feasibility, and the great advantages the laboring class- 
 es may derive from them. If true to their interests, they 
 will direct their attention to the formation of such associa- 
 tions in this country. By so doing, they will violate no 
 legal enactment, in no way disturb the public peace, or in- 
 terfere with the laws of trade, ^hey will simply avail them- 
 selves of their just rights, for the use of the power which 
 legitimately belongs to them. 
 
 CHAPTER V. 
 
 PEOPITS. 
 
 Bt the term " profits," we mean that share of wealth which, 
 in the general distribution, falls to those who effect an ad- 
 vantageous union between labor and capital. 
 
 All wealth, being the product of labor and capital, would 
 be divided between them, were it not necessary that still 
 another agent should take part in production ; viz., an 
 employer, manager, undertaker* (entrepreneur), projector, 
 contractor, business man, merchant, manufacturer, farmer, 
 or whatever else he may be called, whose services are indis- 
 pensable. 
 
 Capital cannot move itself; labor cannot command capi- 
 
 * " It is to be regretted," says J. Stuart Mill, " that this word, in this sense, 
 is not familiar to the English ear. French political economists enjoy a great 
 advantage in being able to speak of Us profits de I'entrqirenmr." 
 
280 DISTRIBUTION. [BOOK IT. 
 
 tal, and therefore has little power : hence the necessity for 
 an employer, or business man, to effect a union, and put both 
 in successful operation. Capital without labor is an infant ; 
 labor without capital, a cripple. 
 
 The parties, then, to production are, (1) the laborer ; (2) 
 the capitalist ; (3) the employer, or manager. Each has a 
 distinct province, and a separate interest ; and each must 
 receive his reward, or share of the general product. 
 
 This is, undoubtedly, the natural division of the subject. 
 To confound the capitalist with the employer, as often is 
 done, throws the whole matter into confusion. There is no 
 occasion whatever for this. The man who owns the capital, 
 and receives his compensation for its use in the shape of 
 rent, or interest ; the laborer, who applies muscular or men- 
 tal power to the production of value ; and the man who, as 
 employer or manager, relieves the first from the anxiety and 
 risks of trade, and furnishes the second with the means by 
 which alone he can work to advantage, — are separate per- 
 sons, with distinct interests. 
 
 The capitalist, as such, has no share in the profits of busi- 
 ness. He does nothing but loan his wealth, which, by the 
 value of its services, brings him an income, in the shape of 
 rent for real, or interest for personal estate.* If he is care- 
 ful in regard to the securities he takes or the credit he 
 gives, it is of no immediate consequence to him whether 
 trade is dull or brisk, whether profits are high or low ; but, 
 of course, it is true that the capitalist has a general interest 
 in the profits of business, to this extent, — that unless prof- 
 its, in the long-run and on the average, are such that the 
 business man can afford to pay the usual rate of interest, 
 the compensation of the capitalist, or his share in the general 
 distribution, must be reduced. He must rent or loan his 
 capital on such terms as those who employ it can afford, 
 
 * The term "personal estate," in distinction from real estate (land, build- 
 ings, and the like), is generally used in the United States to describe every 
 kind of moTable property, and all evidences of debt. 
 
CHAP, v.] PROFITS. 281 
 
 over and above all the charges and hazard of business, be- 
 sides making a satisfactory profit. On the other hand, to 
 the employer, in whatever department of business, the ques- 
 tion of profits is vital. His success depends upon the 
 amount he can secure, after meeting all his necessary ex- 
 penditures for labor, rent, interest, taxes, insurance, bad 
 debts, &c. 
 
 It often happens that the employer (manufacturer, mer- 
 chant, &c.) is the owner, in whole or in part, of the capital 
 used. This in no wise alters the case ; for then he receives 
 income both for his capital and his labor, or efforts. He 
 saves all the interest he would otherwise pay to the capi- 
 talist ; he pays interest to himself. He may own the build- 
 ings he occupies ; and in so far he is a capitalist, paying 
 rent to himself. 
 
 It is, then, by this triple alliance of enterprise, capital, and 
 labor that all production is effected ; and between them, in 
 the final result, it should be shared. The economical ques- 
 tion is. How shall an equitable division be attained ? 
 
 We have previously said, in relation to capital and labor, 
 that there must be a just proportion of each to the most eflB- 
 cient production, — sufficient labor for the capital, and capital 
 for the labor : so there must be sufficient enterprise, busi- 
 ness talent, and tact to use both ; and the several parties 
 must be left to act voluntarily, under the instincts of human 
 nature and the laws of value. Indeed, the great difference 
 in the wealth of nations is made by the busiaess class : mind 
 is more effective than muscle. Each party, too, must be 
 protected in his just rights, and be insured against the en- 
 croachments of the other. No advantage should be given 
 by legal enactments to either. The capitalist should be free 
 to loan his money to whom he will, and at whatever rate he 
 can get ; the employ^, to work for whom he pleases, and at 
 such compensation as he can obtain by the competition of 
 employers. If the laws allow capitalists, by concentrating 
 their wealth, to increase its power, laborers should have an 
 
282 
 
 DISTRIBUTION. 
 
 [book IV. 
 
 equal right to combine their efforts ; and employers should 
 be free to secure the services of either, on the best terms 
 they can. 
 
 With this, perfect equality, each will certainly obtain the 
 share that belongs to him. Laws in regard to this, as aU 
 other property relations, are not needed to direct human in- 
 dustry, but to control human passion ; to prevent one party 
 from trespassing upon the rights of the other. 
 
 All these parties are equally necessary. In one respect, 
 labor has the advantage, since it can accomplish a little 
 without capital, while capital can produce nothing without 
 labor. On the other hand, capital can rest, without extinc- 
 tion ; while labor, if not employed, will soon perish by star- 
 vation. 
 
 It has been common to speak of the profits of capital, in- 
 stead of the profits of business. This is a mistake which 
 confounds necessary distinctions. The profits of trade, or 
 business, are to be reckoned upon the amount transacted, not 
 upon the capital employed. The difference between the two 
 modes is often very great. 
 
 We give the following table as an illustration of what we 
 mean : — 
 
 An Illustration of the Difference of Profits as computed on the Capital employed or 
 the Business tramacted^ 
 
 Capital 
 employed. 
 
 SalCB. 
 
 Rate of Profits 
 on Sales. 
 
 Gross 
 ■ Profits. 
 
 Expenses, 
 including 
 Interest. 
 
 ITet Profits. 
 
 Net Profits, 
 if reckoned 
 on Capital. 
 
 Net Profits, 
 
 if reckoiipd 
 
 on Business 
 
 done. 
 
 $100,000 
 20,000 
 10,000 
 50,000 
 
 $600,000 
 
 160,000 
 
 30,000 
 
 350,000 
 
 15 per cent 
 10 „ „ 
 30 „ „ 
 
 $75,000 
 
 16,000 
 
 9,000 
 
 17,500 
 
 $25,000 
 
 7,600 
 2,000 
 7,500 
 
 $50,000 
 
 7,600 
 
 7,000 
 
 10,000 
 
 50 per cent 
 374 „ „ 
 70 „ „ 
 20 „ „ 
 
 10 per cent 
 
 11" " 
 
 ■^i II II 
 
 The actual transactions of business present an endless 
 variety, of which the above may be taken as samples. 
 
 The object aimed at by the business man is to get as 
 large a net profit to himself as possible, irrespective of the 
 
CHAP, v.] PROFITS. 283 
 
 per centum of profit on the capital employed. On his capi- 
 tal, if borrowed, he pays the interest ; if he owns it, he com- 
 putes the interest as a part of his expenses, reckoning the 
 latter as the income on his capital. 
 
 RATE OF PROFITS. 
 
 There is a constant tendency, in the progress of society, 
 to a decline in the rate of profits ; i.e., as has just been said, 
 of profits upon business done. 
 
 1st, Prom the acceleration of exchanges, or the rapidity 
 with which capital is used ; in consequence of which, the 
 same absolute remuneration can be obtained with less 
 charge on each transaction. 
 
 2d, From the increasing number of those who, by educa- 
 tion and training, are qualified for independent business. 
 
 3d, From increasing facilities for intercourse by steam, 
 on land and sea, and the consequent diffusion of intelligence 
 in regard to prices and markets. 
 
 The rate of profit can never be arbitrarily fixed where 
 there is free competition, any more than the wages of labor ; 
 yet in a given country, or mart of trade, there may be an 
 actual average rate which all individuals strive to attain ; 
 say, for example, ten per cent. As a matter of fact, such 
 individual obtains all he can. He does this, especially in 
 places of large trade, by charging as much advance on every 
 article as he finds it wiU bear. If his rate is too high, he 
 will find his custom fall off; or, if he has customers, they 
 will be of a hazardous class, by whose delinquencies he will 
 lose more than he can gain by their patronage. Then, 
 again, it is practically true, that scarce any two commodities 
 pay the same profit ; some, it may be, only two, some ten, 
 some twenty per cent. And, further, while in the same 
 street one man sells his goods at ten per cent, another is 
 selling at seven and a half per cent, and is making a larger 
 amount of net profits at that. Why is this ? 
 
 First, The latter buys more slirewdly. Secondly, he car- 
 
284 DISTRIBUTION. [BOOK IV. 
 
 ries on his business more by Ms own efforts, and with less 
 expense ; and, lastly, sells, as he will be likely to do, to re- 
 liable men, who most certainly discover where they can pur- 
 chase to the greatest advantage. 
 
 RAPIDITY OP EXCHANGE. 
 
 The necessary rate of profit depends greatly on the rapid- 
 ity of sales, as compared with the capital employed and the 
 expense of conducting business. 
 
 This may be shown in the following illustration : — 
 
 A, with a capital of $10,000, which he turns every six months, 
 charges twenty per cent profit. 
 
 B, with same amount, turns his capital once in three months, at 
 fifteen per cent. 
 
 C, with same amount, turns his capital every thirty days, at 
 seven and one-half per cent 
 
 Result: — A sells $20,000 at 20 per-cent $4,000 
 
 Interest on capital $600 
 
 Eent 600 
 
 Labor and other expenses 800 n qqa 
 
 A's net profit $2,000 
 
 B seUs $40,000 at 15 per cent $6,000 
 
 Interest on capital $600 
 
 Eent 600 
 
 Labor, &c 1,200 ^ 40O 
 
 B's net profit '. $3,600 
 
 C sells $120,000 at 7^ per cent $9,000 
 
 Interest on capital $600 
 
 Rent . 600 
 
 Labor, &c 2,500 g ^qq 
 
 C's net profit $5,300 
 
 Large sales, with small profits, or a rapid turning of capi- 
 tal, is the natural tendency of trade, as population and 
 wealth increase, and especially as credits are diminished. 
 
CHAP, v.] PROFITS. 285 
 
 Those who sell for cash have immensely the advantage of 
 those who give long credits, pa^rticularly under a mixed 
 currency, which so largely increases the hazards of trade. 
 
 In those communities in which the people are generally 
 poor, and their wants great and pressing, as in newly settled 
 countries, credits are naturally much extended, and, of 
 course, the rate of profits proportionally increased. This 
 is known to be the case over a large part of our Western 
 States. The people can afford to pay large profits, if by so 
 doing they can get the use of capital, because capital pro- 
 duces so large a return ; as, for example, one thousand dol- 
 lars invested in the spring in ploughing the prairie, and 
 getting in a crop of wheat, will, not unlikely, give a net profit, 
 within six months, of one hundred per cent. But when 
 such communities accumulate capital, and are able to pay 
 as they purchase, they come to buy at greatly reduced rates, 
 and profits fall to the minimum. This is the general law in 
 all countries, though most clearly seen in new settlements. 
 The average rate of profits in a country is determined by 
 the same law as wages. Profits are merely wages received 
 ly the employer. This idea should be kept constantly in 
 mind. The wages of the laborer depend upon supply and 
 demand : why not the wages of those who employ him ? 
 The employer is as truly a laborer as the man who toils with 
 the spade, only on a higher plane. 
 
 If there are more laborers than are wanted, wages fall ; 
 if fewer, they advance : just so with employers, or business 
 Tindertakers. If there are too many competing for profits, 
 the rate will fall until the excess is driven back into the 
 ranks of labor. As there are, however, comparatively few, in 
 proportion to the whole number of persons capable of labor, 
 who have the requisite capacity and training required for 
 transacting business successfully, and fewer still who can 
 command the necessary means or capital, it will follow that 
 the rewards of the employer will be larger than those of the 
 persons employed. But we must not forget that this differ- 
 
286 DISTRIBUTION. [BOOK IV. 
 
 ence is less than at first appears, because our observation 
 shows us, that, of all who undertake to trade or manufacture, 
 a large majority become bankrupts ; and, consequently, the 
 average difference between the employer and the employed 
 is greatly reduced. ' 
 
 There is, undoubtedly, a constant tendency to an equali- 
 zation and reduction of profits from continual improvements 
 in the means of locomotion, and the increasing intelligence 
 of the people. The opening of railroads has wrought a 
 great revolution in this particular. These not only greatly 
 reduce the cost of transportation, but the average rate of 
 profits. For example, a given town is one hundred miles 
 fromthe mart of trade, by which it is supplied. There are 
 only common roads, and those of bad construction. Eight 
 or ten days are required to pass teams to and from the city. 
 Under such circumstances, the people generally will be likely 
 to know but little of the market value of commodities. As 
 they must very rarely visit the places where merchandise is 
 obtained, and, consequently, are ignorant of the worth of 
 the articles they are obliged to purchase, and quite unable 
 to supply themselves directly, they are charged large profits 
 on what they buy. Let a railroad be put in operation, so 
 that the time distance is reduced from eight or ten days to 
 four or five hours, the price of all commodities in market 
 wall be known, and those who supply them must do so at 
 a small advance ; while yet, it may be, the dealers will 
 make as large aggregate profits from increased sales. 
 
 EFFECTS ON PROFITS OF A TEMPORARY RISE OF WAGES. 
 
 The effect of a temporary rise of wages upon profits may 
 be illustrated as follows : — 
 
 A manufacturer of kerseymeres is able to produce an arti- 
 cle for one dollar per yard, for which he can get one dollar 
 and twenty cents in the usual state of trade. A sudden 
 rise of wages advances the cost to one dollar and ten cents. 
 The resxilt, under ordinary circumstances, will be that the 
 
CHAP, v.] PROFITS. 287 
 
 manufacturer •will not be able to obtain at once an advance 
 equal to the enhanced cost. He will be fortunate if he can 
 get one dollar and twenty-five cents for his goods, leaving 
 him but fifteen cents profit. But, if the rise in wages holds 
 on until the market has been cleared of the stock of goods 
 on hand, the price will then be easily brought up to one 
 dollar and thirty or one dollar and thirty-five cents. 
 
 But a rise of wages, especially if occasioned by an expan- 
 sion of the currency, is sure to be followed by a correspond- 
 ing decline when contraction takes place. The manufac- 
 turer will then gain the advantage he lost by the rise of 
 wages. His goods will not fall at once as much as the fall 
 in wages. This is the practical experience of business men ; 
 and they can safely calculate to gain as much on the one 
 hand as they lost on the other. Wages, we have previously 
 shown on page 258, fall faster than commodities. It is from 
 the operation of this law that the entrepreneur gains in the 
 fall as much, ordinarily, as he lost in the rise of wages. 
 
 DIVIDENDS. 
 
 A large share of the income received by owners of capital, 
 at the present day, comes in the form of dividends on stock, 
 held in corporations and joint-stock companies, formed for 
 almost every conceivable purpose. The introduction of rail- 
 roads has caused immense investments, the income from . 
 which is received in dividends. How are these to be 
 classed ? They cannot be regarded as synonymous with in- 
 terest, or rent : they must be considered as profits. They 
 are received for the profits of business done by proxy. The 
 capitalist may not have the slightest agency in the affairs of 
 the company from which he gets an income ; still he is a 
 partner, though a limited and silent one, and receives his 
 share of the profits or loss. 
 
 It may be objected, that bank dividends must surely be 
 classed with interest, since they are made up wholly of in- 
 terest received for the loan of capital. This is not strictly 
 
288 DISTRIBUTION. [BOOK IV. 
 
 correct. No inconsiderable share of profit to the banks of 
 the United States is derived from the premiums charged for 
 exchange. American banks are exchange-brokers. Be- 
 sides, nearly one-half of all the iacome of mixed-currency 
 banks is derived from the manufacture of currency, not the 
 loaning of money or capital. Although the dividends of 
 banks, of this kind, approach nearer to interest than those 
 of ordinary busuiess corporations, still they are most prop- 
 erly classed with profits. 
 
 Through associations, capital is largely coimected with the 
 industrial operations of the country, and shares directly ia 
 their prosperity or adversity. This result is in so far a 
 favorable one, as it imites the interest of capital with the 
 industry of the country. 
 
 CHAPTER VI. 
 
 INTEREST. 
 
 What is paid for the use of money, or any other form ot 
 loanable capital, is called " interest." Hence the term "usu- 
 ry." It is all the reward that capital receives, not embraced 
 , in the term " rent." It ordinarily insuresthe return made 
 for the employment of money, because loans are commonly 
 made in that form ; but the idea of interest is general to all 
 articles having value, but not bringing rent. 
 
 Interest has its justification in the right of property. If 
 a man can claim the ownership of any kind of wealth, he is 
 the owner of all it fairly produces. Past labor has all the 
 sacredness of present labor, and as justly claims its reward. 
 An associate in production, it is entitled to a share in the 
 product. Whoever by labor produces wealth, and by self- 
 denial preserves it, should be allowed all the benefit that 
 wealth can render in future production. This is the only 
 
CHAP. VI.] INTEREST. 289 
 
 condition upon -wTiich the largest accumtdation of wealth can 
 be secured ; it presents the only motive that can withstand 
 the impulse to -immediate gratification. The desire to gain 
 and the desire to spend are both in human nature, and are 
 conflicting passions. What one takes, the other must relin- 
 quish. If, therefore, the desire to spend is unchecked, all 
 wealth and physical well-being disappear in riot and waste- 
 fulness. There is the further consideration, that, since to 
 loan capital is to incur risk, that risk should be compen- 
 sated. It has been a favorite idea with many visionary 
 writers, that interest can be entirely done away with. 
 Proudhon and others have speculated and theorized much 
 on this subject ; but nothing can be more idle. We can no 
 more get rid of interest than value : both are in the laws of 
 nature. Yet this has been, in the view of many, the philos- 
 opher's stone, that was to transmute all baser metals into 
 gold. It is akin to the idea that credit can be made to take 
 the place of value, and is sustained by the same sort of rea- 
 soning as that " property is a crime ; a monopoly that must 
 be destroyed." 
 
 We will notice briefly a few of the main principles that 
 govern the rate of interest the world over. 
 
 1st, Interest, in its- general rate, will be determined by 
 the productiveness of labor in the community where it is 
 employed. . It is evident the reward of capital cannot be 
 larger than the total profits of business, because it would no 
 longer be used ; nor can it be equal to these profits, for 
 no one would be disposed to employ it and pay out his whole 
 profits for its use. Interest must, therefore, be less than 
 the aggregate amount of the returns of production ; and 
 finding, as it does, a competitor in the power of present 
 labor, capital will be obliged to submit to an equitable di- 
 vision. 
 
 If, then, the productiveness of labor is very great, if the 
 industry of the community yields easily and richly, capital 
 will naturally obtain a large reward ; while, if Nature be nig- 
 
 19 
 
290 DISTRIBUTION. [BOOK TV. 
 
 gardly in her gifts, each of the parties must be content with 
 a pittance. 
 
 2d, Interest will be governed by the law- of supply and 
 demand This is so evident as not to require argument or 
 proof, hardly illustration. Old countries abound in accu- 
 mulations of capital. Interest is there found cheap. In aU 
 new countries, there is a youthfulness of capital ; there has 
 not been time to develop the powers of production; and hence 
 interest is high. The United States of America afford a 
 most striking example in point. There is a vast amount of 
 uncultivated but fertile land, while the amount of capital 
 with which to cultivate it is comparatively small. So of its 
 manufacturing capacities. Hence there is a high general 
 rate of interest. This is governed by the supply and demand, 
 i.e. by the laws of value alone, and should never^, be inter- 
 fered with by legal enactments. 
 
 This is a lesson mankind have been slow to learn ; yet the 
 most commercial nation in the world (Great Britain) has 
 abolished all usury laws. The experiment was at first made 
 with great caution, limiting the exemption to a particular 
 kind of paper, and the time in which it should operate to a 
 few months ; but it was found so perfectly satisfactory to 
 the community, that, after a fair trial, the abolition of the 
 usury laws was made final and complete. 
 
 But, upon a question so much in dispute, it may be desira- 
 ble to give the principal reasons why the matter of interest 
 should not be interfered with by law. 
 
 (a) When it is made a penal offence to take over a cer- 
 tain per cent interest (say six), if money is worth more, as 
 it often will be, it must be obtained by some indirect pro- 
 cess. Most persons do not like to directly violate a law, 
 however foolish or unjust they may deem it to be ; conse- 
 quently, they will attempt to evade it. There is no difl&culty 
 in this. A note may be sold to a broker for what it wiU 
 bring ; and the broker buys it with funds furnished by the 
 capitalist, who stands behind the curtain while tlie borrower 
 
CHAP. TI.] INTEREST. 291 
 
 pays the broker for getting the money he might otherwise 
 have obtained directly of the capitalist himself. The law 
 has not prevented the usury, only increased the rate. The 
 broker feels no responsibility ; for he is only an agent be- 
 tween the parties. Tlie capitalist has no scruples ; for he is 
 not known in the transaction. Instead of this, the borrower 
 and lender should be brought face to face, in an open mar- 
 ket, where each could be protected by law in the transac- 
 tion ; and then a fair, unrestricted competition would assure 
 the lowest rate of interest, obtained most economically. 
 
 But for usury laws, the current rate of interest would be 
 as well known as the price of stocks or corn or wool, and 
 would, like them, be determined by the laws of trade ; and 
 men would act as intelligently and as freely as in the pur- 
 chase of merchandise. Freedom is as essential in the 
 disposal of money as in the intercourse of nations. To 
 hamper it with laws regulating the rate iat which it shall be 
 loaned, is as absurd, and as repugnant to the laws of wealth, 
 as to fix the price of wheat or cotton. 
 
 (J) Usury laws create an injurious distinction between 
 different kinds of mercantile paper, and thus occasion em- 
 barrassment and loss to borrowers. 
 
 For example, the law says in Massachusetts that only six 
 per cent interest shall be taken by the banks.* But money 
 may be worth twelve per cent ; and there are ten applica- 
 tions for it, at that rate, to one that can be supphed. What 
 is the result ? Why, the bank will make no loans except 
 upon such paper as it can charge for exchange. Exchange 
 is legal, whether it is real or fictitious. A and B apply for 
 discount at a bank in Boston. A offers notes of the most 
 undoubted character, payable in Boston ; B ofiers notes or 
 drafts payable in New York, and he gets accommodated. 
 His drafts have sixty days to run ; he is charged one per 
 cent exchange, and thus pays twelve per cent interest. A, 
 having only notes on which no such exchange can be legally 
 
 * This law was abolished in 1867. 
 
292 DISTEIBUTION. [bOOK IT. 
 
 charged, must " go into the street," and employ a broker to 
 sell the notes for him at the best rates he can. 
 
 This state of things occasions great annoyance and loss 
 to borrowers ; yet it must continue so long as usury laws 
 exist. 
 
 (c) Usury laws are the principal cause of compulsory 
 deposits, or deposits made to secure large discounts. These 
 are, as we have shown, exceedingly burdensome to the busi- 
 ness community, and most dangerous to the currency. If 
 the rate of interest, as at the Bank of England, was left 
 entirely to the state of the money market, these deposits, 
 now peculiar to American banking, would disappear. If 
 every man could borrow money at what it was worth, there 
 would be no motive to bribe moneyed institutions indirectly. 
 
 3d, Interest wiU be influenced largely by the safety or 
 hazard of capital. This will depend, — 
 
 (a) Upon the moral character of the people, whether 
 essentially honest or dishonest, whether honorable or dis- 
 honorable, whether industrious, frugal, and temperate, or 
 otherwise. 
 
 (h) Upon the general thrift of the community ; for how- 
 ever well disposed to pay, if decay and decline are general, 
 the hazards of capital must be greatly increased. It must 
 share iu the general losses of business. 
 
 (c) Upon the justice and efficiency of the laws by which 
 the rights of property are secured, and the obligation of 
 contracts enforced. This, as can readily be seen, is one of 
 the most important considerations in regard to the safety 
 of loans ; and, of course, the rate of compensation in the 
 shape of interest. 
 
 4th, Again, the uniformity of the rate of interest, and its 
 general average, will depend mainly upon the soundness of 
 the currency. If it consists wholly of value, — that is, if the 
 credit element constitutes no part of the circulating medi- 
 um or standard of value, — the rate of interest will be as uni- 
 form and as low as the laws of trade admit. The rate can 
 
CHAP. TI.] INTEREST. 293 
 
 never be absolutely fixed at one point ; yet, where no credit 
 is used as currency, the credits of the country will be so 
 . based upon values that the vacillations will be very mode- 
 rate. They were very slight in Europe until within the 
 last thirty years. 
 
 We have already shown, when speaking of a mixed cur- 
 rency,* how frequent and excessive are the fluctuations in 
 the rate of interest in the United States. In no other civil- 
 ized country have they been so great, for the sufficient rea- 
 son that no other country has a mixed currency so deficient 
 in the element of value. 
 
 We have shown, at the place referred to, that these varia- 
 tions have been from three and one-half to thirty-six per 
 cent. Now, no commodity, in time of peace, has varied to 
 an equal extent. The reason is, that commodities are not 
 wanted to pay notes ; but, to meet pecuniary engagements, 
 money is, and must be had. 
 
 Under a currency in which credit is the principal element, 
 the fluctuations in interest are in proportion to the extent 
 of that element ; because, as we have shown, a mixed cur- 
 rency, whenever there is any panic or distress for money, 
 withdraws from circulation with a rapidity proportionate to 
 its weakness, or want of value. Hence the frightful revul- 
 sions we have- witnessed. And we may doubtless expect 
 that these will increase in force and frequency in the future, 
 since the mixed-currency system, once almost exclusively 
 confined to England, France, and the United States, is being 
 extended throughout the commercial world. The risks of 
 •credit will therefore be greater, and the average rate of inter- 
 est wiU, so far as risk is concerned, be enhanced. 
 
 But, in regard to a legal rate of interest, it may be asked, 
 whether a limit should not be established by law, in all cases 
 where the parties have not themselves agreed upon one. 
 Certainly, it would seem desirable and proper, that, in the 
 absence of all agreement or contract, the law should say 
 * See Diagram No. 6, p. 197. 
 
294 DISTRIBUTION. [BOOK IT. 
 
 that a given rate should be awarded. This would not be 
 regulating the rate of interest, but establishing justice be- 
 tween the different parties in those cases where, from any 
 cause, no fixed rate of interest had been agreed upon. This 
 legal rate would properly be the general average rate ob- 
 tained for the use of money. 
 
 CHAPTER Vn. 
 
 BENT. 
 
 Rent is paid for the use of land and Its appendages, 
 which together are called " real estate." The question of 
 the rent of land is of much less practical importance in the 
 United States than in Europe, since it is here generally held 
 in fee simple by those who cultivate it. Yet, as an economic 
 question, it deserves consideration. And there is an espe- 
 cial inducement, since we certainly have in this country the 
 best opportunity to investigate, in their simple primitive form, 
 all the phenomena connected with it. Constantly entering 
 upon new lands, we have exhibited for our observation the 
 working-out of problems which long puzzled the philosophers 
 of the old world. 
 
 1st, Rent implies ownership, since no one would pay for 
 the use of that to which all had an equal title. This may 
 be called the first condition. 
 
 2d, It implies society, so that more than one person shall 
 desire the use of the same land or appendages. If exchange, 
 as M. Bastiat says, " is civilization," rent is society. This 
 is the second condition. 
 
 From our definition, it will appear that rent is paid (a) for 
 land, (J) for whatever is added to its value or desirableness. 
 We cannot separate the two considerations, nor would it 
 be of practical utility if we could ; as, from what we have 
 
CHAP. VII.] BENT. ' 295 
 
 already endeavored to show, value is not derived from the 
 gifts of nature, but the labor of man : " land, water, steam, 
 electricity, and the like, confer no value." 
 
 Land may be said to be the foundation of rent ; and, since 
 the rightfulness of appropriating it has been disputed, it may 
 be proper to remark that we deem it a sufficient answer, that 
 appropriation is indispensable to the production and accu- 
 mulation of wealth, to the progress of civilization, and the 
 welfare of the human race : therefore it is right. 
 
 Man, in his original or savage state, is a hunter. He 
 needs no appropriation of land ; for he roams at large through 
 the forest. He accumulates little or nothing ; and it is of 
 small importance where he builds his temporary cabin. His 
 means of living are precarious ; he is often exposed to star- 
 vation, has nothing permanent, pays no rent, and population 
 but slowly increases. 
 
 Nor in the second or nomadic condition, when man be- 
 comes a shepherd, does rent make its appearance. His busi- 
 ness is no longer mere destruction, but preservation and 
 use. This elevates his condition ; the employment has a 
 far more ennobling effect upon character ; higher faculties 
 and better feelings are developed. But still he lives in a 
 tent, and removes from place to place to find pasturage for 
 his flocks. In the natural progress of events, he becomes an 
 agriculturist. His chief business now is to till the ground. 
 How can he do this without preparation of the soil from 
 which he is to draw his sustenance ? And why should he 
 do this, if another may at will dispossess him of his labors ? 
 The land must be divided, appropriated, and held by some 
 tenure that can be relied upon ; and, when this takes place, 
 rent makes its appearance, and increases in intensity as man 
 becomes more and more advanced in social condition ; for 
 with agriculture come the mechanic arts, manufactures, 
 commerce, villages, towns, cities, — civilization. 
 
 We now come to the elements which enter into the rental 
 of land. 
 
296 
 
 DISTRIBUTION. 
 
 [book IV. 
 
 THE FIRST ELEMENT OP RENT. 
 
 Location. — This grows out of the social condition of man, 
 to which we have alluded. If men lived as isolate beings, 
 and there were land enough for all, and the whole equally 
 fertile, there would be no rent ; but, once gathered into vil- 
 lages and communities, rent would make its appearance, 
 although there were as much land as all desired, and each part 
 equally productive. 
 
 This point we shall endeavor to make plain by an illus- 
 tration.* A colony of thirteen families settles along the 
 shore, where all the land is unclaimed, and immigrants have 
 only to choose where and how much they will occupy. We 
 will suppose the land all equally fertile, agreeable, and ac- 
 cessible. In point of fact, there shall be no natural differ- 
 ence between one lot of one hundred and sixty acres (what 
 each family desires) and another ; absolutely no choice aris- 
 ing from any thing appertaining to the land. They accord- 
 ingly lay out thirteen lots half a mile square. This allot- 
 ment and location upon the shore we represent as follows : — 
 
 2 3 
 
 i 
 
 6 
 
 6 
 
 7* 
 
 8 
 
 9 
 
 10 
 
 11 
 
 12 
 
 13 
 
 In this arrangement, it will be seen, the lots commencing 
 on the left are numbered 1 to 13. No. 7 is, of course, 
 the middle lot. 
 
 Now, all being equally eligible, the land equally accessi- 
 ble and good, and there being as many lots as settlers, and 
 each as large as any one desires, will there be any value 
 to them? Yes: because all will prefer No. 7, for they 
 perceive that it is most desirable, inasmuch as it is cen- 
 tral; and, if public buildings are erected for the accom- 
 modation of all (schoolhouse, church, &c.), they must be 
 
 * This illustration was given by the author in the " Merchant's Maga- 
 zine," in 1860, vol. xlii. p. 306. 
 
CHAP. VII.J BENT. . 297 
 
 placed on that lot. If a landing-place is made, or a ware- 
 house put up, for the commerce of the settlement, it must 
 be on No. 7 ; for the obvious reason that it is the point at 
 which the whole population can most readily assemble, and 
 it thus forms the natural centre of business. 
 
 All this is so apparent, that each man prefers No. 7 ; 
 but only one can have it. What follows ? It must be 
 sold to the man who will give the most for it. Some one 
 will give one hundred bushels of wheat, or its equivalent, — 
 six bushels rent per annum. All this does actually happen 
 in every case of new settlement ; not, indeed, in a manner 
 always so distinct and striking as in the case we have sup- 
 posed, but in principle as certain and absolute. 
 
 If this is so, we have established the fact, that, though all 
 land were equally fertile, and there were enough for all, and 
 all equally desirable in every other particular, yet that rent 
 would arise from the social wants of man, which make mere 
 location a circumstance affecting its value, and create a 
 rental independent of' all other considerations. 
 
 THE SECOND ELEMENT OP BENT. 
 
 Difference of Fertility. — We will suppose four different 
 tiers of land, of unequal fertility. The first will yield forty 
 bushels of corn ; the second, with the same labor, thirty ; 
 the third, twenty ; the fourth, ten. 
 
 Now, while there was enough land of the first to produce 
 all the corn wanted, nobody would give any rent for the first 
 tier on account of its fertility ; but when, by the increase of 
 population, it became necessary to cultivate No. 2, which 
 would only yield thirty, No. 1 would command a rental of 
 ten bushels, because a man might as well give ten bushels 
 rent for No. 1 as to cultivate No. 2 without rent. 
 
 When, again, necessity compelled the cultivation of No. 
 3, No. 2 would pay a rent of ten bushels, and No. 1 of 
 twenty bushels. And further, when tier No. 4 must be 
 
298 DISTRIBUTION. [BOOK IV. 
 
 brought under culture to produce the quantity of corn 
 needed for consu.niption, then, as it would with equal labor 
 produce but ten bushels, No. 1 would yield a rent of thirty, 
 No. 2 of twenty, and No. 3 of ten ; while the last, or No. 4, 
 would afford no rent.* 
 
 THE THIRD ELEMENT OF RENT. 
 
 We will further suppose, that, from the increase of popu- 
 lation, more corn is wanted than can be raised ; and, con- 
 sequently, importations are made at an increased price, — 
 equal, say, to fifty per cent. Now if, for the sake of con- 
 venience, we take the price of corn to have been originally 
 one dollar a bushel, and to have advanced to one dollar and 
 fifty cents, it will come to pass that tier or quality No. 1 
 wiU have a rent of |45 ; No. 2, of |30 ; No. 3, of |20 ; and 
 No. 4, which now for the first time produces rent, of $5. 
 
 This represents the condition of Great Britain, which, 
 besides raising all the wheat her highly cultivated fields can 
 profitably produce, imports some eighty millions of bushels 
 annually. This causes a large increase of prices ; conse- 
 quently, of money rent. 
 
 FOURTH ELEMENT OF RENT. 
 
 Application of Capital to Land. — This is done in varioiis 
 ways, — by the use of fertilizing materials, drainage, deep 
 ploughing, &c. For every such appliance, wisely made, a 
 rent is received, supposed to be equiyalent to the expendi- 
 ture incurred. 
 
 And here it may be found that the same expenditure, 
 applied to the different qualities of land, produces unequal 
 results. Five dollars, expended per annum on No. 1, may 
 return but a profit or additional rent of eight dollars ; while 
 
 * Mr. Ricaido, we believe, first brought out this , principle clearly in his 
 "Political Economy," London, 1819. 
 
CHAP. VII.] RENT. 299 
 
 the same amount, applied to No. 2, will give seven dollars ; 
 or to No. 3, will give six dollars, &c. 
 
 This will cause a variation in the relative rentals of the 
 different qualities or tiers of land we have supposed. 
 
 Improvements, more or less permanent, are investments 
 of capital in real estate, changing the income from the form 
 of interest to that of rent. They are made to an immense 
 extent in the older countries of Europe. Their profitable- 
 ness depends, like that of all other investments, upon the 
 wisdom with which they are made : but men are more dis- 
 posed to invest capital in real estate, other things equal, 
 than in any thing else, for the reasons that it has the great- 
 est security ; that it gives a certain degree of social impor- 
 tance to the holders in all countries, and, in some, confers 
 political rights and privileges. * 
 
 LAND APPENDAGES. 
 
 We have, thus far, noticed only the rent of land, without 
 reference to what may be placed upon it for other purposes 
 than direct production. 
 
 We now come to speak of real estate, consisting of dwell- 
 ings, stores, warehouses, and the like. 
 
 When buildings are placed upon farms, they form a part 
 of the preparations which are indispensable to agriculture ; 
 and, if erected with suitable reference to economy, will add 
 to the value of land as much as shall be equal to their fair 
 annual rent. Farming cannot be carried on without build- 
 ings ; therefore, so far as buildings are absolutely neces- 
 sary, they will command a rent as certainly as the land 
 itself. This must be true ; and yet all know that " improve- 
 ments," as they are called, in the shape of buildings, seldom 
 increase the value of farms in proportion to their. cost. For 
 example, if the land alone is worth three thousand dollars, 
 and buildings are put up costing two thousand dollars, 
 the whole will not, ordinarily, sell for five thousand dol- 
 
300 DISTRIBUTION. [BOOK IT. 
 
 lars. Facts of this sort are observed everywhere. Farms 
 may, as a general rule, be bought, especially in all the older 
 States, at much less than their cost, after making all due 
 allowances for depreciation of buildings, &c. We observe, 
 first, that buildings are not generally put upon farms for the 
 purpose of selling or letting them. They are almost invar 
 riably erected by the owners of the land, in order to create 
 for themselves a home. To make that home pleasant and 
 desirable, a dwelling is erected according to the tastes of 
 the owner and his family, rather than the direct profit of the 
 farm. There is a natural and becoming competition among 
 agriculturists to have pleasant, and, as far as may be, elegant 
 residences. Hence, they build upon a more expensive scale 
 than the business of agriculture will fully justify ; and though 
 they may be able to keep on, and even thrive, with their 
 establishments, these are, nevertheless, a heavy charge upon 
 their industry. Whenever, therefore, such farming proper- 
 ties must be sold, the purchaser will rarely, if ever, give 
 more than a fraction of the original cost of the buildings. 
 If, as is generally the case, he must make the money off his 
 land to pay for the estate, he cannot afford the cost of build- 
 ings erected to gratify the taste of somebody else. He gets 
 the extra improvements gratis, really paying only for the 
 useful and necessary. 
 
 And, in the competition of cultivation in a community 
 like the United States, it is to be remembered that its agri- 
 culture is a unit ; that the products of the accessible and 
 fertile prairies of the West are brought into the same mar- 
 kets as those of the hard and sterile hills of New England. 
 And it is also to be taken into account, that a farm in Illi- 
 nois, for example, with a productive power of five thousand 
 bushels of corn, will probably not have upon it buildings 
 worth more than one thousand dollars ; while on many 
 Eastern farms, of a productive power of but two thousand 
 bushels, the buildings may have cost three thousand dollars. 
 Now, as these farms are, in fact, competing in the same gen- 
 
CHAP. VII.] RENT. 301 
 
 eral markets, it is clear that the extra expenditures upon 
 Eastern farms can pay but little, if any, rental, though they 
 may be very pleasant to the occupant. 
 
 It is on the same principle that the amount expended in 
 clearings, building walls around farms, and the like, do not, 
 in the aggregate, return much rent or income, compared 
 with their cost. They become, in the progress of years, to 
 a considerable extent, like the gifts of nature, gratuitous. 
 This is true of all coxmtries, at aU times. 
 
 In cities, where the value of real estate consists princi- 
 pally of buildings, and improvements made upon the land, 
 we find that the land itself feels the operation of the first 
 cause of rent or value, viz. location, far more intensely 
 than anywhere else. An acre of land, once of the value of 
 fifty dollars for agriculture, becomes worth five hundred 
 thousand dollars for city purposes. Such, and even more 
 extraordinary, instances may be found, showing to what ex- 
 tent the principle of location may be carried. The estimated 
 wealth of cities consists, to a considerable extent, of the 
 appreciation in the value of land which the increasing den- 
 sity of population and the concentration of business enter- 
 prise has occasioned. 
 
 Investments in commercial cities depend, of course, for 
 success, upon commercial prosperity. Changes likewise 
 take place in the business centres of every great city. 
 There is much of mere whim and fashion in this ; but, 
 whether the commerce and trade of the city moves " up 
 town " or " down town," rents move with it. 
 
 City property, in all thrifty communities, is sure, on the 
 whole, to advance in value with the lapse of time ; and hence 
 it is always a favorite investment. Yet so great is the com- 
 petition, so large the amount of capital in cities, that the net 
 average rental is probably not greater than the ordinary rate 
 of interest. Rents are based on permanent property that 
 requires much care ; interest, upon securities that may prove 
 worthless, but which demand but little attention. 
 
302 DISTRIBUTION. [BOOK IT. 
 
 The absence of all restrictions upon the ownership and 
 transfer of landed property and real estate, of all entails and 
 mortmain holdings, makes thfe question of rent one of small 
 practical importance. Where owning is the rule, and hiring 
 the exception, as is the case with us, rents regulate them- 
 selves ; or, in other words, are governed entirely by the 
 operation of the laws of value. They advance or recede 
 with trade and population. 
 
 CHAPTER VIII. 
 
 WAGES, RENT, INTEREST, AND PROFITS, AS EELATITELT AFFECT- 
 ED BY CURKENCY INFLATION. 
 
 It is an important fact, not to be overlooked in our exami- 
 nation of incomes derived from wages, rent, interest, and 
 profits, that all of these are not only greatly affected by the 
 condition and character of the existing currency, but also in 
 very unequal degrees. We have already spoken of the in- 
 fluence of an inflated currency upon wages and interest ; but 
 we are now to show its unequal operation upon all these 
 different kinds of revenue. 
 
 The enormous inflation of currency during the rebellion 
 has given a most favorable, because a most striking, illustra- 
 tration of the degree in which different interests may be 
 affected by any inflation. 
 
 Take, for example, the years 1864 and 1865. Wages 
 were, on an average, fifty per cent above their usual rate. 
 Where a skilful workman had previously obtained two 
 dollars a day, he now got three : where the common laborer 
 got one dollar, he now got one dollar and a half. Prom 
 extensive inquiry and personal observation, we are satisfied 
 that the rise of wages, take the country through, was equal 
 to fifty per cent : such we have found the uniform testimony 
 of employers. 
 
CHAP. VIII.] WAGES, RENT, ETC. 303 
 
 Rents, during the civil war, except in some large cities, 
 advanced but little, on an average, throughout the country: 
 it is much to be doiibted if they advanced more than ten, 
 certainly not more than twenty, per cent. 
 
 The rate of interest advanced generally from 6 per cent 
 to 7.30 ; but this was mainly from the action of the govern- 
 ment, which negotiated large loans at that rate, and con- 
 sequently fixed that as a general standard. Yet, of the 
 immense amount loaned on mortgage, it is doubtful if a 
 tenth part of it has been raised beyond what it was pre- 
 vious to the war. But we may safely assxime that the rise 
 of interest has been from 6 to 7.30 per cent, or about twenty 
 per cent. 
 
 Profits may be safely estimated, during 1865, at a hun- 
 dred per cent higher than ordinary ; that is, where they 
 were ten per cent on the business transacted, they were in- 
 creased to twenty per cent. This we suppose a very low 
 estimate. To recapitulate : — 
 
 Interest and rent, the remuneration of the capitalist, 
 
 advanced 20 per cent. 
 
 Wages, the remuneration of the laborer, advanced . 50 per cent. 
 
 Profits, the remuneration of the business man, ad- 
 vanced 100 per cent. 
 
 What is the result of this ? Who wins, in consequence of 
 this rise of wages, interest, rents, and profits, occasioned by 
 the inflation of the currency ? Prices rise, as we have seen, 
 to an unprecedented height ; say, one hundred and twenty 
 per cent. Then we will suppose that — 
 
 A, the capitalist, has an income from interest and rent . $4,000 
 Gains twenty per cent by rise of rate 800 
 
 Whole income in currency $4,800 
 
 If he expends this amount in general commodities, at the 
 advanced prices we have stated (one hundred and twenty 
 per cent), he can only purchase with his |4,800 the same 
 
304 DISTRIBUTION. [BOOK IT. 
 
 commodities he could have obtained before the general rise 
 for 12,181.81. 
 
 From original income $4,000.00 
 
 Deduct 2,181.81 
 
 Loss by change of prices .• • • $1,818.19 
 
 equal to a loss of 45.4 per cent, notwithstanding the nomi- 
 nal rise of twenty per cent in his income. 
 
 And now as to the laborer. His wages were three hun- 
 dred dollars : they are now four hundred and fifty dollars. 
 This last sum is laid out in commodities, and brings him 
 $204.54 worth, as reckoned at the prices before the rise. 
 So, from 1300 deduct 1204.54, and his loss (in commodities) 
 is found to be $95.46, or nearly one-third (31.82 per cent) 
 of his sound-currency wages, or what they were before the 
 expansion. 
 
 But how with regard to the third party, V entrepreneur, — 
 the merchant, manufacturer, &c. His income, at first, was 
 $10,000 : it is now $20,000. If laid out in commodities, 
 the $20,000 would purchase, at the advanced prices, but 
 $9,090.90 worth ; which sum deducted from $10,000, his 
 original profits, will give a loss of $919.10. 
 
 It is not to be presumed, however, that the whole of the 
 income of the business man is expended in commodities, 
 but a large share added to the capital. Suppose, before the 
 rise of profits and prices, his expenses were five thousand 
 dollars, and he purchases the same commodities now. He 
 will then expend eleven thousand dollars, leaving him nine 
 thousand dollars to add to his capital ; while, before the 
 general rise, he added only five thousand dollars. So that 
 he is making a net gain of eighty per cent upon his income. 
 
 Recapitulation, on the foregoing suppositions : — 
 
 The capitalist makes a loss of 45.4 per cent. 
 
 The laborer makes a loss of 31.8 per cent.. 
 
 The business man makes a gain of 80 per cent. 
 
CHAP. Tin.] WAGES, BENT, ETC. 305 
 
 Or, to state the result in another form : — 
 
 The capitalist gets but 54.4 on the dollar of his just due. 
 
 The laborer gets but 68.2 on the dollar of his wages. 
 
 The business man gets 180 cents where before he got $1.00. 
 
 This statement, which we think will be found correct in 
 principle, and approximately so in the application we have 
 given it, shows the position of each party in reference to the 
 change in the standard of value occasioned by the war ex- 
 pansion of tlie currency. The two first classes lose, — the 
 capitalist most heavily, but the laborer, perhaps, most dis- 
 tressingly ; because, as a general fact, the latter must ex- 
 pend all his income, and, under such circumstances, can 
 get only about two-thirds of the commodities to eat, drink, 
 and wear which he could obtain with his wages under a 
 sound currency. But one of the classes mentioned is get- 
 ting rich ; viz., that engaged in trade, manufactures, and 
 general business. Nor will this class, perhaps, in the end, 
 be so greatly benefited as might be at first supposed ; for 
 it must sustain the entire loss which will take place upon 
 all the merchandise of the country, as the currency comes 
 down to a specie standard. One class we have omitted ;■ 
 viz., speculators. To them, an expansion like that we have 
 e_xperienced affords a golden and most plentiful harvest ; and 
 they are not slow to enter the field of labor and fruition. 
 To them an expansion is always a good ; for it necessarily 
 causes a rise of prices, and of course an opportunity for 
 speculative operations. Expansion warms them into life 
 and activity : contraction, to a sound standard of value, sus- 
 pends their aiiimation. 
 
 Upon certain facts, in regard to this matter, all will doubt- 
 less be agreed : — 
 
 (a) That those who live on fixed incomes from rent, In- 
 terest, or salary, were never so straitened as during the 
 
 war inflation. 
 
 20 
 
306 DISTRIBUTION, [BOOK IV. 
 
 (5) That laborers got less commodities for their services 
 than before the expansion. 
 
 (c) That merchants, manufacturers, and business men 
 generally, made extraordinary profits. 
 
 (d) That speculators flourished beyond all precedent. 
 But the importance of all these facts and considerations 
 
 consists in this, — that all we find to be t^ue, theoretically 
 and practically, during the great expansion occasioned by 
 the war, has always been true, in degree, during every expan- 
 sion of the currency, though never before so palpable, be- 
 cause never before so excessive. 
 
 We have assumed that the capitalist and laborer expend 
 their entire incomes ; but so far as a part is saved, in so far 
 they will avoid the loss they would otherwise suffer in pur- 
 chasing commodities. 
 
 CHAPTER IX. 
 
 TAXATION. — PRINCIPLES OP TAXATION. 
 
 Since government, or social organization, is among the wants 
 of man, as truly as food or clothing, we must recognize 
 it in the science of political economy, and provide for it. 
 Government implies functionaries and expenditures. How 
 shall these be maintained ? Evidently by the contributions 
 of all, for all are interested in its existence. 
 
 It may, therefore, rightfully claim a share of all that labor 
 and capital have created. 
 
 The aggregate of all sums collected by government is 
 called its Revenue ; the system by which it is collected 
 is called Taxation. 
 
 Although the single object of taxation is to obtain a given 
 amount of wealth (generally in the form of money), yet the 
 modes by which that object may be secured are various. 
 
CHAP. IX.J TAXATION. 307 
 
 In ancient times, taxation was often imposed by the arbi- 
 trary fiat of the ruler, with little or no reference to equity, 
 or its effect on the prosperity and happiness of the people ; 
 but, in modern civilization, it has come to be regarded as 
 altogether the most difficult and delicate task government is 
 called upon to perform. 
 
 The question of taxation, in its various bearings, is now 
 made the siibject of examination and discussion in all 
 legislative bodies ; and taxes are imposed, in all constitu- 
 tional governments, not at the caprice' of the ruler, but by 
 the representatives of the people. 
 
 Until Ayithin a few years, the people of the United States 
 have been so fortunately exempt from heavy taxation, that 
 it has been felt to be a matter of small consequence what 
 the expenditures of the government amounted to, and still 
 less whether they were wise and necessary. That day has 
 gone by, probably not soon to return. 
 
 If, then, the property of the citizen must be taken to meet 
 the exigencies of government, it becomes highly important 
 that those from whom it is taken should feel that it is equi- 
 tably done. Nothing in relation to all the acts of govern- 
 ment is more to be desired than that its mode of raising a 
 revenue should be so wisely and economically arranged, so 
 manifestly just and equal, and so well understood by all, 
 that no opposition to its demands shall arise from a sense 
 of oppression. 
 
 Desirable as this would be under any form of govern- 
 ment, it is manifestly quite indispensable in a country where 
 there is no force superior to the public will, and where it is 
 certain no taxes can be collected but such as are believed to 
 be both necessary and just. 
 
 In the distribution of wealth, as has been before stated, 
 government makes a peremptory claim to so much as its 
 necessities, real or supposed, may require. 
 
 This claim is not only peremptory, but prior to every 
 other claim. The laborer must contribute a part of his 
 
308 DISTRIBUTION. [BOOK lY. 
 
 ■wages ; the business man, of his profits ; and the capitalist, 
 of his interest, or rent. 
 
 Every man knows, or should know, that when he creates 
 any kind of wealth, a share of it belongs to government. 
 He, in fact, creates a fund out of which government is to be 
 supported. For example, should a man pre-empt a section 
 of land on the western prairies, and by his labor make it of 
 the value of ten thousand dollars, government has a lien 
 upon it equal to all the taxation it may choose to impose. 
 The value of the farfti is just so much less than it would 
 otherwise be, by the burdens which it is known the govern- 
 ment will lay upon it. For example, if th'G owner could sell 
 it, free of all taxation, instead of ten thousand dollars, he 
 could get, say, eleven thousand dollars for it. If we sup- 
 pose that the annual tax imposed on the farm will be equal 
 to the income on one thousand dollars, then the farm is 
 worth one thousand dollars less on this account. 
 
 If the seller buys another farm, or any other property, 
 with his ten thousand dollars, he gets it at just the same 
 reduction as he sold his own farm ; and, for the same rear 
 son, all property, whether personal or real,' whether land or 
 merchandise, is exchanged under these conditions ; and 
 therefore all parties creating wealth are placed on a 
 level. 
 
 The paramount question, in regard to taxation, is. On 
 what principles shall it be founded ? Adam Smith, in his 
 "Wealth of Nations," written almost a century ago, laid 
 down four maxims, or principles, which have been so gen- 
 erally concurred in from that day to this, that, as J. Stuart 
 Mill says, " they have become classic." 
 
 I. " The subjects of every state ought to contribute to the sup- 
 port of the government, as nearly as possible, in proportion to their 
 respective abilities ; that is, in proportion to the revenue they enjoy 
 under the protection of the state. In the observation or neglect 
 of this maxim consists what is called the equality or inequality of 
 taxation." 
 
CHAP. IX.] TAXATION. 309 
 
 In examining this proposition, our first inquiry is, What 
 is meant by " subjects " ? We answer. Every inhabitant, 
 old or young, male or female. Women ? Certainly : if 
 they have a revenue or income, they are as justly bouud to 
 contribute to the government as men, and in the same pro- 
 portion. Many women have large wealth : why should it 
 go untaxed ? Children ? There are some such who are 
 millionaires: why should they be exempt? 
 
 Idiots, lunatics, cripples ? Yes, if they have " revenues." 
 Many such persons have large estates, which should contrib- 
 ute to the public treasury. 
 
 It is not the ability to hear or see or walk that is taxed, 
 but the income, or " revenue." 
 
 We next notice the condition mentioned, " as nearly as 
 possible." 
 
 This implies that it may not be practicable to secure per- 
 fect equality ; indeed, we know it is not, but such should 
 be the aim of government. 
 
 n. " The tax which, each individual is bound to pay ought to be 
 certain, and not arbitrary. The time of payment, the manner of 
 payment, the quantity to be paid, ought to be clear and plain to the 
 contributor, and every other person." 
 
 (a) " Certain, and not arbitrary." By this. Dr. Smith 
 evidently meant that the taxes should be j-ssessed by com- 
 petent authority, and upon fixed and well-known principles. 
 In many countries, taxes have been, and in some are still, 
 farmed out in gross to a publican, or tax-gatherer, who, 
 under the authority of government, imposes such sums as 
 he pleases to exact. 
 
 (6) The time of payment should be " clear and plain." 
 The citizen should know when he pays ; be conscious of the 
 fact that he is paying the government a certain sum at the 
 time he actually does it. Otherwise, he will be liable to 
 great impositions, in one form or another. 
 
 (c) " The manner and the quantity plain." This for 
 
310 DISTRIBUTION. [bOOK IV. 
 
 the same reasons as just stated. He certainly ought to 
 know how he pays, and how much. 
 
 ((f) Should be known " to the contributor, and everybody 
 else." In the method of taxation, the people are joint part- 
 ners : what one does not pay, another must. If A pays less 
 than he should, B and C must pay more ; hence the right 
 of every man to know, not only what he pays, but what his 
 neighbor does. Otherwise, how can he judge whether he is 
 overtaxed or not ? 
 
 It is on this account that the publication of tax-lists is a 
 duty on the part of the taxing power. Then, if any prop- 
 erty is omitted by accident or design, it will probably be 
 found out ; for, being a copartner, each man is interested 
 in the taxes of every other, and has a right to know what 
 they are, and will or ought to give notice of any omission 
 or incorrect valuation. 
 
 III. " Every tax should be levied at the time, or in the manner, 
 which is most likely to be convenient to the contributor to pay it." 
 
 As, for example, when the harvest has been secured, and 
 is ready for market ; when the fisherman returns with his 
 " fare," &c. This, though not a very important considera- 
 eration, will readily be admitted as proper. 
 
 IV. " Every ta:^ ought to be so contrived as to take out and 
 keep out of the jiockets of the people as little as possible, over and 
 above what it brings into the treasury of the state." 
 
 Although the soundness of this principle would seem in- 
 disputable, and will doubtless be theoretically admitted by 
 all, yet Dr. Smith proceeds to enumerate several modes 
 in which the opposite result may be brought about. 
 
 First, By levying the tax in such a manner that a great 
 many officers will be required for its collection, who will 
 consume a great part of the produce of the tax. This will 
 depend in great measure on the machinery employed in col- 
 lecting the public imposts. 
 
CHAP. IX.J TAXATION. 311 
 
 Second, By diverting a portion of the labor of a conrnnu- 
 nity from a more to a less profitable employment. For 
 example, so heavy a tax might be laid on carriages as to 
 reduce their use or consumption to such an extent that the 
 manufacturer might be compelled to go into some other busi- 
 ness less productive. This has often been done by unwise 
 legislation. 
 
 Tliird, By attaching such heavy duties as to occasion 
 smuggling, and thus create a multitude of officers to guard 
 the revenue. 
 
 Tliis result has often been brought about in European 
 countries, and is now beginning to be seriously felt in 
 the United States, under the heavy duties at present im- 
 posed. 
 
 Fourth, By subjecting the people to frequent and inquisi- 
 torial visits, and interruptions in the pursuit of business and 
 in their domestic affairs, thus causing annoyance and dissat- 
 isfaction. 
 
 We now add still another principle, which, though not 
 among those laid down by Dr. Smith, has been adopted 
 in every country having any considerable taxation : — 
 
 V. The heaviest taxes should be imposed on those commodities, 
 the consumption of which is especially prejudicial to the interests 
 of the people. 
 
 Having stated the maxims or principles which should 
 govern the imposition of taxes, we now come to consider 
 the different forms of taxation which have been adopted, 
 and, to a great extent, are still in use, by the different gov- 
 ernments of the world, in order to ascertain in how far they 
 conform to principles universally admitted as correct. 
 
 POEMS OF AMERICAN TAXATION. 
 
 Preliminary to an examination of the different modes of 
 taxation, it may be proper to say, that there are, in the 
 United States, two general systems ; viz., by national and 
 
312 DISTEIBUTION, [BOOK IV. 
 
 by State authority. The national government imposes taxes 
 in every form, direct and indirect, except upon the poll. 
 The State governments generally rely upon direct taxation ; 
 and the poll-tax is one of the forms adopted. 
 
 Under State authority, counties, cities, towns, and school- 
 districts impose taxes ; so, also, parishes and religious cor- 
 porations : but the latter, generally, only on voluntary mem- 
 bership. 
 
 Taxes may first be divided into two kinds, — direct and 
 indirect. A direct tax is demanded of the person who it is 
 intended shall pay it. Indirect taxes are demanded from 
 one person, in the expectation that he will indemnify him- 
 self at the expense of others. Such are customs and excise. 
 
 In our further examination of the subject, we shall refer 
 to the national taxation of the United States, and the State 
 taxation of Massachusetts ; selecting the latter State only for 
 being the most convenient, and as representing that of the 
 individual States generally with considerable exactness. 
 
 CHAPTER X. 
 
 NATIONAL TAXATION. — I. CUSTOMS. 
 
 These are taxes upon importations, and collected through the 
 custom-houses. Government establishes a tariff; that is, a 
 list of duties upon such articles as it deems best : these are 
 paid by tlie importer before he can gain possession of his 
 goods. 
 
 Duties are generally of two kinds, — specific and ad-valo- 
 rem. Specific duties are imposed by the pound, yard, gallon, 
 &c. Ad-valorem duties, as the term imports, are charged 
 upon the value of the goods, as twenty per cent upon an in- 
 voice of silks, hardware, sugar, &c. 
 
 In some of the American tariffs, the specific principle has 
 predominated ; in others, the ad-valorem. There has always 
 
CHiP. X.] NATIONAL TAXATION. 313 
 
 been a struggle when the tariff was to be changed ; those 
 favoring specific duties, for protection, being in favor of spe- 
 djic, tliose of the opposite views contending for ad-valorem 
 duties. 
 
 There are difficulties attending both. If specific duties 
 are laid, they operate with great inequality. For example, 
 suppose a duty of twenty-five cents per pound upon tea.. 
 This would be equal to a taxation of one hundred per cent 
 on that which cost, originally, twenty-five cents, which the 
 poor man must pay ; while the rich, who would purchase 
 tea that cost seventy-five cents, would pay but thirty-three 
 per cent, or one-third as much per cent as the former. 
 
 This was the character, to a large extent, of British taxa- 
 tion. The tax on tea was, for a long time, two shillings and 
 sixpence per pound (over sixty cents), paM alike by the 
 hand-loom weaver and the wealthy nobleman. 
 
 When laid upon cloth, for example, a specific duty fre- 
 quently operates in a most oppressive manner. By the 
 American tarifif of 1828, a duty of so many cents was laid 
 upon the square yard of coarse woollens. In applying tho 
 principle, it was found that negro cloths, as they were 
 called, paid more than two hundred and fifty per cent. 
 This gave rise to great dissatisfaction, and was the ostensi- 
 ble cause of the nullification movement. 
 
 In regard to ad-valorem duties, the practical difficulty has 
 been, when the rates were very high, to prevent fraudulent 
 invoices: For example, the importer must present his 
 original invoice at the custom-house, and make oath to its 
 correctness. If dishonest, he may, by connivance with the 
 shipper, furnish false papers, showing the cost to be much 
 less than it really was. 
 
 Precautionary measures have been adopted. Appraisers 
 have been appointed to determine the actual value ; but, 
 with all possible care on the part of the goveAment, there 
 is danger of deception, and consequent loss to the revenue, 
 as well as injustice to tlie honest importer. 
 
314 DISTRIBUTION. [BOOK IT. 
 
 Of all modes of raising a revenue, that by customs is 
 confessedly the most effective, and the most readily accom- 
 plished ; and its great importance, as one of the chief sources 
 of national revenue, demands that we give it a careful con- 
 sideration. 
 
 The first principle we laid down was " that all should 
 contribute, as nearly as possible, in proportion to their re- 
 spective abilities." 
 
 As all duties are laid upon articles of general consump- 
 tion, it will at once be seen that such taxation cannot have 
 an eqiial bearing, because men are thus taxed in proportion 
 to what they consume, not in proportion to their wealth. 
 The poor man, with a large family, may pay more than a 
 millionnaire. A case is personally known to us of one of the 
 latter class, who actually paid less on dutiable articles than 
 a printer, with a family, who received but fifteen dollars a 
 week. Men are taxed in this way according to the mouths 
 they have to feed, and the bodies they have to clothe. 
 
 In the second place, we inquire, Is " the time and manner 
 plain to the person who pays " this indirect tax ? The 
 former who purchases a carriage, — is he aware that he is 
 paying a government tax by so doing ? If so, does he know 
 how much he is paying ? Does he understand that all the 
 materials, except the wood, have paid duties to government ; 
 that the linings, trimmings, and ornaments, the paints and 
 varnish, and the tools with which it was made, have all been 
 taxed ; and that he is to pay the sum total of the whole ? 
 Even if so, can he or any one else easily compute the amount 
 of taxation which enters into the carriage ? So of all com- 
 modities which have passed through the custom-house : peo- 
 ple seldom realize when or how much they are taxed. Then 
 the second princij^le we have laid down is violated. 
 
 But we shall not have a full view of the operation of du- 
 ties on forei^ merchandise, unless we take into considerar 
 tion the fact that they raise the price of the home product, 
 if there is one, to an equal degree with the foreign article, 
 
CHAP. X.] NATIONAL TAXATION. 315 
 
 and, in that way, largely increase the burdens of the people, 
 without adding to the public revenue. We will take the 
 article of sugar as an illustration. In 1858, there was 
 imported sugar to the amount of $23,000,0.00, and there 
 was grown within the country $25,000,000 ; total, $48,- 
 000,000. On the imported, a duty was paid of twenty-four 
 per cent, equal to $5,520,000. The home product was 
 raised in price, of course, twenty-four per cent. To ascer- 
 tain the amount tlius paid, we take a sum, to which if 
 twenty-four pei- cent be added, the total will be $25,000,000. 
 We find that to be $20,161,291. Deduct this last from 
 $25,000,000, we have $4,838,709 as the difference, which 
 is the sum the people had to pay on the home product. 
 Then it stands thus : — 
 
 Duties paid, as above $5,520,000 
 
 Enhanced cost of home sugar 4,838,709 
 
 Total $10,858,709 
 
 To this we must add twenty-five per cent, as the 
 
 profits of the wholesale and retail dealers . . . 2,589,677 
 
 Whole amount paid $12,948,386 
 
 Of this government gets 5,520,000 
 
 Loss to consumers $7,428,386 
 
 Hence it appears, that the government gets in the present 
 case but about forty-three per cent of what the people have 
 paid. We have estimated that the merchant charges a profit 
 upon what he pays as duties, just as much as upon any 
 other part of the cost of his commodities. We have put the 
 profits of the merchants at twenty-five per cent. This, we are 
 aware, is a low estimate ; but we are governed by the con- 
 sideration, that there would be no importer's profit on the 
 amount produced at home, and also that sugar is a " lead- 
 ing article," in the language of trade, upon which less aggre- 
 gate profits are made. 
 
 It is apparent, from this illustration, that the real taxation 
 of a people will depend very much upon the proportion of 
 duties which, designedly or not, are positively protective. 
 
316 DISTRIBUTION. [BOOK IV. 
 
 If, in the case presented, instead of a duty upon sugar, the 
 same impost had been laid upon tea and coffee, wlaich arti- 
 cles were free in 1858, and of -which together we imported 
 in 1858 about the same amount as of sugar, while we pro- 
 duced no tea and coffee ourselves, the case would stand as 
 follows : — 
 
 Tea and coffee imported $23,000,000 
 
 Duties, twenty-four per cent $5,520,000 
 
 Importers' profits, fifteen per cent 828,000 
 
 $6,348,000 
 Jobbers' profits, ten per cent 634,800 
 
 $6,982,800 
 Retailers' profits, twenty per cent 1,396,560 
 
 Total, paid by the people $8,379,360 
 
 Of this amount, the government received $5,520,000 
 Merchants' profits, paid by the people . 2,859,360 
 
 $8,379,360 
 
 The saving to the people in this case would stand thus : — 
 
 Paid by the sugar taxation, as shown before . . . $12,948,386 
 Paid by tax on tea and sugar 8,379,360 
 
 Saved to the people, in one year $4,569,026 
 
 Such is the wide difference between duties imposed for 
 revenue and those laid for the advantage of home produc- 
 tions. Some cases of protection would exceed this ; others 
 would come far short : but the principle is shown by this 
 illustration. 
 
 CUSTOMS AN EXPENSIVE MODE OP TAXATION. 
 
 But, setting aside all consideration of the additional bur- 
 den of taxation occasioned by protections as just illustrated, 
 we find this system is entirely at variance with our fourth 
 maxim, which was " that no more should he taken or kept 
 
CHAP. X.] NATIONAL TAXATION. 317 
 
 out of the pockets of the people than absolutely necessary." 
 This will be seen by the following illustration : — 
 
 Supposing the custom-house duties collected to 
 
 amount, as in 1864, in round numbers, to . . $100,000,000 
 Expenses of collecting, in all 10,000,000 
 
 Total amount receiyed by the treasury . . $90,000,000 
 
 We estimate the expense of collecting at ten per cent ; but 
 including all salaries and charges, and interest upon inyest- 
 ments made by goTernment, the expense is, doubtless, some- 
 what greater ; but, to prevent dispute, we assume that the 
 net amount is ninety million dollars. To get this sum, how 
 much is paid by the people ? 
 
 We will suppose that the importer's profit is fifteen per 
 cent, the jobber's ten, and the retailer's twenty per cent. 
 The matter then will stand thus : — 
 
 Original duties paid $100,000,000 
 
 Importers' profits, fifteen per cent 15,000,000 
 
 $115,000,000 
 Jobbers' profits, ten per cent 11,500,000 
 
 $126,500,000 
 Eetailers' profits, twenty per cent 25,300,000 
 
 Total, paid by the people $151,800,000 
 
 Deduct gross amount paid into the treasury . . . 100,000,000 
 Taken out of the pockets of the people, and not paid 
 
 in the public treasury $51,800,000 
 
 or more than fifty per cent extra taxation. 
 
 In regard to the general correctness of these estimates, 
 no well-informed person can have any doubt. Hon. George 
 Opdyke, a distinguished merchant, late Mayor of New York, 
 in a small but excellent work on " Political Economy," pub- 
 lished in 1851 (page 200), computes the importers' profits 
 at fifteen, the jobbers' at ten, and the retailers' at twenty-five. 
 He had the best of means for knowing the amount of the 
 
318 DISTRIBUTION. [BOOK IT. 
 
 importers' profits. The retailers' were a matter of estimate 
 with him. We have supposed that they might he somewhat 
 too high, and have therefore placed tliem at twenty per cent. 
 This, considering that it is to be applied to all retail sales, 
 not only in cities and towns, but in the most remote dis- 
 tricts of the country, is undoubtedly within actual limits. 
 As long ago as 1849, we made such investigations as satis- 
 fied us of the correctness of the estimates we now give, and 
 published tables at that time, illustrating the principle laid 
 down. 
 
 In regard to customs duties, then, we cannot but conclude, 
 that, while they are a convenient and prolific source of 
 revenue, they are very unequal and expensive, and little in 
 accordance with the principles of justice and equality. 
 
 BOUNTIES. 
 
 At this point, it may be most proper to speak of the effect 
 of bounties. If a home product is to be encouraged by gov- 
 ernment, it is desirable that it should be done as economi- 
 cally as possible ; or in such a manner as to impose the 
 least taxation and loss upon the public, while it shall be as 
 effective as possible in securing the object. 
 
 Let us take the sugar crop of 1858, just referred to, as an 
 illustration. It amounted to $25,000,000. To protect this 
 to the amount of twenty-four per cent, the people paid, as 
 we have shown, $12,948,386, of which the government 
 realized but $5,500,000. Here was a clear loss to the con- 
 sumers of $7,428,386. 
 
 Suppose, • now, that instead of this protective duty of 
 twenty-four per cent, a bounty of equal amount (twenty- 
 four per cent) had been paid by the government. The mat- 
 ter would then stand thus : twenty-four per cent on |20,- 
 161,291 is $4,838,709, which the people would pay to the 
 sugar growers, instead of $7,427,386 they were obliged to 
 pay through protection ; a saving of $2,588,677, equal to 
 
CHAP. X.] NATIONAL TAXATION. 819 
 
 thirty-five per cent of the amount paid under tlie protective 
 system. 
 
 This principle applies, in all cases, where an article is 
 actually protected, and shows that bounties are by far the 
 most economical form of governmental assistance. Boun- 
 ties, as a means of protection, have been but little resorted 
 to by governments. The reason is obvious. The evident 
 injustice of giving to one class of men a premium upon their 
 productions, in order that they may be encouraged in a 
 branch of industry that cannot live without contributions 
 from the public treasury, is so apparent, and evidently unrea- 
 sonable and unwise, that the people of no country would 
 long tolerate it. It is, therefore, vastly more feasible to 
 give protection by duties on the foreign article, although 
 much more wasteful and onerous. 
 
 EXCISE. 
 
 Excise are the opposite of custom-house duties, being laid 
 wholly upon articles of domestic production, and paid first 
 by the producer ; and, after the articles have passed through 
 the hands of the merchants, with their profits added, the 
 sum total is paid by the consumers. 
 
 This mode of taxation is obnoxious to the same objections 
 that may be made to customs. Excise is unequal, because 
 it falls on rich and poor alike ; not in proportion to their 
 wealth, but what they consume. The merchants' profits are 
 not quite so large on these as on custom duties, because 
 home products do not ordinarily pass tlirough as many hands 
 as foreign merchandise. The expense of collection, though 
 only perhaps about one-fourth part as great, is still a heavy 
 charge upon the revenue ; but the most popular objection to 
 excise is the espionage which it necessarily requires. It is, 
 notwithstanding, a very productive source of revenue, and 
 must be resorted to by governments heavily indebted. Do- 
 mestic manufacturers are not injured by excise duties, unless 
 
320 DISTRIBUTION. [BOOK IV, 
 
 they so increase the cost of their commodities as to expose 
 them to foreign competition. Profits upon such duties are 
 charged upon commodities as a part of the general expense 
 of their production. 
 
 TAXES ON DISADVANTAGEOUS CONSUMPTION. 
 
 The principle has everywhere been acted upon by govern- 
 ments, that heavy taxes are to be laid on commodities " the 
 consumption of which is especially prejudicial to the inter- 
 ests of the people." This is in accordance with our fifth 
 maxim. 
 
 There are two strong and sensible arguments in favor of 
 this kind of taxation. One is, that, if it should cause a fall 
 ing-off in the consumption of the articles so taxed, no detri- 
 ment would come to individuals or the public ; but, on the 
 other hand, their moral and social condition would be pro- 
 moted, and the power of production increased. 
 
 The other consideration is, that all those who choose to 
 abstain, as they can do without injury, from the specially 
 taxed articles, will avoid the payment of the tax altogether : 
 such taxes are voluntarily assumed by those who pay them. 
 
 This kind of taxation is found to be far more productive, 
 in proportion, than any other ; and consumption is less 
 affected by heavy imposts. According to Professor Levi, 
 the working classes of Great Britain pay over ten millions 
 sterling annually, in taxes upon tobacco and intoxicating 
 drinks. The whole amount raised upon these two articles 
 in 1858 was as follows : — 
 
 British and foreign spirits and wine £18,500,000 
 
 Tobacco 5,500,000 
 
 £24,000,000 
 
 or about one hundred and twenty millions of dollars, equal 
 to four dollars to each inhabitant ; or, allowing five persons 
 to a family, twenty dollars to each family. More than a 
 third part of the whole British revenue is raised by the taxes 
 
CHAP. X."| NATIONAL TAXATION. 321 
 
 upon these articles alone ; a remarkable fact, especially 
 worthy the attention of the American government at the 
 present time. 
 
 STAMPS. 
 
 There is still another mode of supplying the treasury ; 
 viz., by the sale of stamps. This is an important branch of 
 the public revenue in all highly taxed communities. Stamps 
 are required upon all letters, newspapers, and other matter 
 carried through the mails ; upon all bills of merchandise 
 and bills of lading ; upon legal instruments of every name 
 and nature ; upon patent medicines, &c. 
 
 This is cheap and efficient, and as desirable as any form 
 of indirect taxation. Of course it bears unequally upon 
 different classes, and is more or less vexatious, particu- 
 larly when first introduced ; but habit will, after a while, 
 reconcile the people to it, and it is as little likely to be 
 resisted or evaded as any other form of exaction. It is also 
 collected with very little expense, as no functionaries are 
 necessary. It should therefore be carried out, as far as 
 practicable. The British government raises a large sum in 
 this way: eight millions sterling are received for stamps. 
 The United-States treasury received, for the year ending 
 June 30, 1865, the sum of 111,162,392. 
 
 LICENSES. 
 
 These are granted by both national and State authority, 
 for a great variety of purposes. It is a more economical 
 and convenient mode of raising a revenue than by excise 
 on manufactures, &c., requiring only annual renewal. There 
 is also less opportunity for fraud and evasion. It is there- 
 fore a very desirable form of taxation ; and the United-States, 
 government has already availed itself of this mode of raising 
 revenue, to the extent of 112,613,478 for the financial year 
 1865 ; and this sum may doubtless be greatly increased iu 
 
 the future. 
 
 21 
 
822 DISTRIBUTION. [BOOK IV. 
 
 CHAPTER XI. 
 
 NATIONAL TAXATION (^continued'). — INCOME TAX. 
 
 It is unnecessary to say that this tax is in perfect accord- 
 ance with the first maxim laid down by Adam Smith, tliat 
 " every man should be taxed according to the revenue he 
 derives under the state," and also consistent with every 
 other principle we have stated. It is " clear and plain " to 
 the contributor, and every other person. The income-tax 
 payer knows when and how much he pays ; and it can be 
 collected as conveniently and economically as any other. 
 
 This kind of tax was established in England in 1798, 
 during the wars with Napoleon, but was abolished soon 
 after the close of that struggle. About 1842, however, the 
 government, finding its revenues fall short of the expendi- 
 tures, restored the tax ; and it has been continued to the 
 present time. 
 
 This tax was unknown, we believe, in the United States, 
 until the civil war, when it was laid by Congress, and has 
 been continued thus far. Total amount collected for the 
 year ending June 30, 1865, was $20,740,451.33 ; while the 
 whole internal revenue, for the same time, was |211,129,- 
 529.17 ; so that the income tax produced nearly ten per 
 cent of the amount. 
 
 Of all modes of taxation, this is the most just and equitar 
 ble. Every man can afford to pay according to his income, 
 and ought to do so. There is no other perfect standard of 
 taxation ; none other which does not inflict more or less 
 hardship and injustice. 
 
 The tax comes upon the annual private revenue of each 
 year, out of which the government should receive its share 
 for the annual revenue of the state. If the private revenue 
 is increased, so should be the contribution to the public rev- 
 
CHAP. XI.] NATIONAL TAXATION. 323 
 
 enxie : if the former is diminished, the latter should be also. 
 This is fair and just. Were it to supersede all other forms 
 of taxation, perfect eqiiality would be established ; property 
 and labor would bear each its just share of the public bur- 
 dens. To do this, it would be necessary to ascertain the 
 income of every man ; of every laborer, whether his wages 
 amounted to one hundred or one thousand dollars a year ; 
 of every professional man ; of every operative, male or female ; 
 every capitalist, banker, merchant, and mechanic. Upon the 
 gross income, thus ascertained, the general tax should be 
 levied, pro rata. In this way, it is clear, equality, as far as 
 that is practicable, would be established ; and each member 
 of the community would be made to bear his just proportion, 
 and, of course, would be obliged to save, in his expenditures, 
 to that amount. 
 
 The objection to this form of taxation is the difficulty of 
 ascertaining what a person's income actually is. In the 
 first place, it is said that many do not know their affairs 
 so as to be able to state their true income. There is doubt- 
 less much of trtith in this ; but the very fact that such a tax 
 is certain to be enforced every year will, in a short time, 
 remove this difficulty to a considerable extent, because men 
 will be compelled so to keep their accounts as to know what 
 they gain or lose. The operation of the law in this respect, 
 therefore, is favorable 'to private interest ; since the more 
 intelligent every man is in regard to his affiiirs, the better 
 for him. Such, we believe, has been the operation of the 
 income tax in England. 
 
 Secondly, It is said that some men will be dishonest in 
 their disclosures and statements, and therefore a correct 
 result cannot be reached. 
 
 That many men are dishonest there can be no doubt ; but, 
 when the law taxing incomes is regularly enforced from 
 year to year, the difficulty of concealment, on the part of the 
 tax-payer, is constantly increasing. His neighbors and com- 
 petitors in business have an eye upon him, if they believe 
 
824 " DISTRIBUTION. [BOOK IT. 
 
 he is making false statements ; and he cannot long escape 
 detection. Besides, as a man may be put under oath (and, 
 by the -way, ought always to be), the crime of perjury must 
 be committed with every misrepresentation of his aifairs. 
 The immense difference between the reported incomes of 
 the United States in 1864 and those of 1863, even after 
 allowing for the general rise of prices, serves to give an 
 idea of the advance that will naturally be made in the appli- 
 cation of the income tax. 
 
 The third objection made is, that men do not always like 
 to have their incomes known. But why should they not ? 
 We have already said, that, in the matter of taxation, all 
 are copartners, having a probata interest. What one does 
 not pay, others must. All, therefore, may rightfully demand 
 such information as shall furnish the means of assessing a 
 correct tax. 
 
 Besides this, an income tax well enforced will be the 
 means of difiusing a large amount of information most im- 
 portant in regard to the credits which business men are 
 required to give. The position and ability of every man 
 will be better understood. This is not an unimportant con- 
 sideration. It is difficult to see any reason for objecting to 
 a disclosure of income for taxation, which does not equally 
 apply to the disclosure of property for the same purpose. 
 
 Estimated Income. — But it may be said that the income- 
 tax principle would not work well in some communities, 
 because a considerable share of its wealth produces no in- 
 come, and therefore would go untaxed ; that this is espe- 
 cially so in the new States, where vast quantities of land are 
 held which yield no rent or income whatever. 
 
 But this is a mistaken view of the matter. If these lands 
 are appreciating from year to year, — and, as a general fact, 
 owing to the increase of population, they are, — the income 
 from them is as real as any other ; but it is a deferred in- 
 come, which is sure to come in the end. All such property, 
 whether in city lots or farms, should, if an income tax only 
 
CHAP. XI.] NATIONAL TAXATION. 325 
 
 were levied, be estimated yearly, according to its increasing 
 value, and be assessed upon that principle. 
 
 We do not advocate the adoption of the income tax as a 
 substitute for all other modes of taxation : our purpose is 
 to show, that, so far as practicable, it is the most just and 
 economical mode of raising a revenue. 
 
 TAXATION UPON EXPORTS. 
 
 Whenever a people produce more of any commodity than 
 is required for their own consumption, the surplus must 
 find a foreign market, or the production will not be ex- 
 tended beyond the home demand. Any thing, therefore, 
 which has a tendency to prevent the sale of domestic pro- 
 ducts in a foreign market must discourage home industry. 
 Such being the case, what must be, in general, the effect of 
 duties laid upon exports ? Evidently to reduce the amount 
 exported, and benefit the foreign producer of the articles 
 thus taxed. Take the article wheat as an illustration. It 
 can be produced in almost every country, and is an article 
 of export from many. Such afe the facilities afforded by 
 commerce, that the wheat of one country must enter into 
 competition with the wheat of every other country ; and it 
 may therefore be taken as a fair exponent of commodities 
 in general. 
 
 If the price of wheat in New York is one dollar and fifty 
 cents under a currency at par with specie, it is because it 
 can be shipped to Liverpool or some other foreign port, and, 
 after paying freight and charges, make a remittance equal 
 to one dollar and fifty cents in specie. Under these circum- 
 stances, we will suppose an export duty of twenty-five cents 
 per bushel is laid on wheat. 
 
 Would the New-York dealer now pay one dollar and fifty 
 cents per bushel for the wheat? Certainly not, since he 
 could not export it without paying, in addition, a duty of 
 twenty-five cents per bushel ; and, unless the article should 
 
326 DISTEIBUTION. [BOOK IV. 
 
 rise abroad, he would lose to the amount of the duty paid. 
 Of course, he now offers but one dollar and twenty-five 
 cents instead of one dollar and fifty cents, and the difference 
 is the loss of the producers, who, in consequence of the 
 export duty, are at a disadvantage of twenty-five cents per 
 bushel, as compared with the wheat-growers of every other 
 country. They have nothing left but to accept a reduction 
 of twenty-five cents per bushel, or limit their production in 
 the future to the amount required for home consumption. 
 When they have done this, the price of wheat will corre- 
 spond with the prices of all the other agricultural products 
 of the country, whatever that price may be : for all such 
 products will be affected by an export duty laid on the 
 great staple of agriculture ; every kind of grain and meat, 
 as truly as the wheat on which the duty was laid, though 
 not, perhaps, in the same degree. But, since the foreign 
 market has been to a large extent dependent for its full 
 supply upon American wheat, will not the price advance to 
 • such a point as to bring up the price of the American arti- 
 cle ? If the American wheat must be had, such a price must 
 be offered as will bring it. But, as soon as wheat begins to 
 rise abroad from this cause, a larger supply will be attracted 
 from other wheat-growing countries, in which production 
 will be stimulated to the extent it is depressed in the United 
 States. The price having risen, a limited amount will go 
 from our ports ; but wheat will not rise permanently to such 
 a point abroad as to make it twenty-five cents higher in the 
 United States. The American producer must, in any event, 
 take a part of the loss, and the foreign consumer the bal- 
 ance ; while foreign producers, having an unnaturally high 
 price, will extend their cultivation as far as possible. 
 
 The unquestionable effect of export duties is to lessen 
 production at home, and give encouragement to foreign 
 labor. This is. a general principle, applicable to every com- 
 modity of home growth or production, except such as one 
 nation may have a virtual monopoly/ of; that is, may be able 
 
CHAP. XI.] NATIONAL TAXATION. 327 
 
 to produce in so much greater perfection, oi at so much 
 lower rate of cost, or both, that no other nation can com- 
 pete with it. In that case, the exporting nation might 
 impose a duty, which, while it should create a revenue, 
 would not lessen production materially, if at all. 
 
 TAXATION OP COTTON. 
 
 Many persons are of the opinion, that an export duty, or 
 its equivalent in the form of excise, might be laid upon 
 cotton without any detriment to the general interest of the 
 trade of the country, while it would produce a considerable 
 revenue at the expense of the foreign consumers. 
 
 It is, then, an important economical and financial ques- 
 tion to the people of the United States, whether the peculiar 
 advantages they have over all other cotton -growing coun- 
 tries give them such a monopoly as to enable them to lay 
 an export duty upon it, without any immediate or remote 
 injury to themselves. 
 
 There are several considerations which go to prove that 
 such is the case, some of which we shall notice. 
 
 I. UNIVERSAL DEMAND FOR COTTON.* 
 
 "There are only four articles of any considerable importance 
 used in the manufacture of clothing. These are wool, sUk, flax, 
 and cotton ; two animal and two vegetable productions. The first 
 of these, though quite indispensable in the high latitudes, is only 
 partially available in the lower, and can be used but little in the 
 tropics. Silk, while an article from which beautiful and elegant 
 fabrics can be made, is not adapted to general use, and being, like 
 wool, an animal product, canuot be furnished in sufficient quantity, 
 or at so low a rate as to be made available for the greater part of 
 mankind. Flax being a vegetable production, and its culture 
 adapted to a great variety of soils and climates, might doubtless 
 be produced iu any desired quantity ; but, like silk, it would but 
 partially meet the wants of that large portion of the population of the 
 •elobe where snows and frost prevail a considerable part of the year 
 
 * Extract from the author's speech in Congress, Teb. 18, 1863. 
 
828 DISTEIBUTION. [BOOK IT, 
 
 " After looking at these several commodities, then, we find that 
 an article is needed which shall, as nearly as possible, combine the 
 peculiar properties and advantages of all of them; one that can 
 be cheaply and bountifully produced, and that may most readily be 
 converted into clothing, having, at pleasure, the warmth of wool, or 
 the elegance or lightness of silk or linen. Cotton we find to be 
 just that article, combining in a most wonderful degree the advan- 
 tages of wool, sUk, and flaX. The earth has one thousand million 
 inhabitants, and each and every one of these need cotton. There 
 is no exception. Not, indeed, that human beings cannot possibly 
 exist without it, but their welfare and happiness are promoted by 
 its use." 
 
 II. EESTEICTED CULTURE. 
 
 " "WTiile cotton is one of the greatest necessities of mankind, we 
 find its successful culture confined to a very limited portion of the 
 earth's surface. I say successful culture ; for although it may be 
 raised in India, Egypt, and other countries in similar latitudes, yet 
 the quality is so inferior, the quantity to the acre so limited, and the 
 labor so ineffective, that the countries in question do little more 
 than supply their own wants. 
 
 " It is reserved to the States of the American Union lying in 
 immediate proximity to the Gulf of Mexico to furnish the world 
 with the article in such quantities, and of such quality, as to meet 
 the general demand. The culture of the article began prior to the 
 Eevolution ; but it did not become an article of foreign export till 
 1784, when eight bales were shipped to Liverpool. These were 
 seized by the custom-house oflBcers, on the ground that they coxdd 
 not be of American production." 
 
 III. INCREASE OP PRODUCTION AND ADVANCE OP PRICE. 
 
 " No very great extension of the cultivation of cotton was real- 
 ized until 1792, when Eli Whitney invented the cotton-gin ; but, 
 from that moment, it increased with wonderful rapidity. The value 
 of the export of cotton was, — 
 
 In 1821 120,900,000 
 
 In 1880 29,000,000 
 
 In 1840 63,000,000 
 
 In 1850 71,000,000 
 
 In 1860 191,000,000 
 
CHAP. XI.J NATIONAL TAXATION. 329 
 
 " This amount, it will be observed, is over and above the amount 
 consumed in the United States. The*whole product in 1850 was 
 2,096,706 bales; in 1860, 4,669,770 bales. Mark especially the 
 great increase from 1850 to 1860, of one hundred and thirty per 
 cent! 
 
 " But the more striking and noticeable fact is, that, while the 
 production had increased at this enormous rate, the prices also had 
 advanced twenty-five per cent. According to the financial report 
 of 1861, the average price of cotton from 1840 to 1850 was but 
 8.2 cents per pound ; while, from 1850 to 1860, the average price 
 was 10.5 cents per pound, — a difierence, it will be seen, of a little 
 over twenty-five per cent. 
 
 " The difierence between the value of the entire crop of cotton, 
 including all consumed at home and exported, is still more remark- 
 able. In 1850 it amounted to but $117,619,947 ; while, in 1860, it 
 was $308,865,280, — showing an increase of value of nearly two 
 hundred per cent, owing, of course, to the increase of quantity 
 and the advance of price. 
 
 " Here, then, is the singular fact, unparalleled, perhaps, in the 
 commercial history of the world, that, while the production was 
 increasing at a rate so prodigious, the price was constantly advan- 
 cing. This is contrary to all the ordinary laws of trade. As 
 production increases, prices fall ; but in this case, instead of a 
 decline, we find a great advance of price." 
 
 Do not these facts and considerations show conclusively, 
 that the United States have such advantages over all others 
 in raising cotton that they may to a certain extent dictate 
 the terms of sale ? In just so far as this is true, might an 
 export duty be laid which would fall entirely on the foreign 
 consumer, without any injury to the American cotton-grower. 
 
 Suppose an export duty of five cents per pound. The 
 superiority and desirableness of the American article are 
 so great that it cannot be supposed the demand would be 
 lessened in any appreciable degree. From what we have 
 seen during the Kebellion, need we fear that the de- 
 mand would be perceptibly curtailed? If not, then no 
 damage would come to, the grower ; while a large revenue 
 
330 DISTRIBUTION. [BOOK IT. 
 
 would be secured by the government at the expense of the 
 foreign consumer. 
 
 The whole cotton crop of 1860 was 4,669,770 bales, 
 which, at 500 pounds to a bale, give a total of 2,834,500,000 • 
 pounds, which at five cents duty, or excise, would yield 
 $116,725,000. To determine what rate of duty or excise 
 should be laid must be a matter of experiment. If the 
 rate were found too high, — that is, so high as to reduce 
 consumption, — it should be lowered ; or, if too low, it 
 could be raised. 
 
 The immense extent to which the cultivation of cotton 
 in the United States may and doubtless will be carried is 
 shown by Edward Atkinson, Esq., of Boston, a most reli- 
 able statistician, in his map of the cotton kingdom ; from 
 which it appears that while the whole area within the United 
 States adapted to profitable cotton culture is 666,196 square 
 miles, only 10,888 are in actual use for that purpose, or 
 but 1.684 per cent ; that is, less than two per cent. He 
 remarks, that, " with free labor, the capacity of the South to 
 raise cotton cannot be less than one hundred million bales " 
 against about four and a half millions in 1860 ; so that less 
 than one-twentieth of the capacity of the country has yet 
 been developed. 
 
 The principal point to be considered in regard to cotton, 
 or any other domestic product, is whether an export or 
 excise duty will essentially restrict the consumption of the 
 article, either at home or abroad.* 
 
 * Should the cost of producing cotton be greatly increased by the em- 
 ployment of free, instead of slave labor, the impolicy of an export duty will, on 
 the principle already laid down, be quite obrious. 
 
CHAP. XII.] STATE TAXATION. 331 
 
 CHAPTER XII. , 
 
 STATE TAXATION. 
 
 A GENERAL Taluation of all real and personal property is 
 made by the authority of the State, according to which all 
 State taxes are apportioned to each county, city, or town. 
 The municipal authorities then assess the amount allotted 
 them upon the property and polls of their constituents, 
 together with the amount required for city or town expen- 
 ditures. 
 
 Thus all taxes, whether for State, city, town, or school- 
 district, are direct, and laid wholly on property, except the 
 small amount of poU-taxes. There may be some slight 
 variation in different States from the course we have 
 stated ; but it is quite unessential, and does not materially 
 change the grand result. 
 
 The law makes it the duty of each person to furnish the 
 assessors annually a true invoice of his estate, and to its 
 correctness he may be required to make oath ; and, if any 
 person neglects or refuses to make such inventory, the 
 assessors make one for him, according to their own judg- 
 ment. 
 
 The rate of tax varies from year to year, and is widely 
 different in different towns and cities. Before the Eebellion, 
 the rate in Massachusetts was seldom less than sixty cents, 
 or more than one hundred on a hundred dollars ; but such 
 have been the expenditures caused by the war, that few 
 now have a rate less than one hundred, and some have been 
 as high as three hundred and fifty, cents on the hundred 
 dollars. 
 
 This tax, if the valuation be fairly made, approximates to 
 justice and equality. It is assumed that every man's ability 
 to pay is in proportion to the property he holds ; that his 
 revenue corresponds with his wealth. This may, or may 
 
332 DISTRIBUTION. [bOOK IV. 
 
 not, be trae ; and, as we shall have occasion to show, there 
 are circumstances which disturb, to some extent, the equal 
 operation of tliis tax. 
 
 And here we may notice some of the objections to this 
 compound system of poll and property taxation. Poll-tax 
 payers vote directly upon the public appropriations ; yet they 
 have no personal interest whatever in the amount of expen- 
 ditures. No matter whether a proposal to expend money is 
 wise and necessary, or frivolous and wasteful, the poll-tax 
 payer can vote for it with entire impunity. It is nothing to 
 him whether the sum be one thousand or ten thousand dol- 
 lars. Indeed, the influence of poll-tax payers is often in 
 favor of the most lavish expenditures. A new road, for 
 example, is proposed in town meeting. It may be quite 
 unnecessary, and ought not to be made ; but the poll-tax 
 payers, a large share of whom are laborers, will be immedi- 
 ately benefited by the demand that will be made for labor, 
 and will be very likely to go in favor of it. It needs no 
 argument to show the bad effects of such a state of things, 
 regarded only in an economical point of view. If men may 
 vote away money in the payment of which they have no in- 
 terest, is it likely to be done to the advantage of the public 
 interests ? Is it not certain that there will be unwise and 
 reckless expenditures ? 
 
 This false position of the poll-tax payer has attracted the 
 attention of those who are narrowly watching the effects of 
 equality of suffrage without equality of taxation. The result 
 of popular votes during the civil war, by which immense, 
 and often quite unnecessary, burdens were imposed upon 
 towns, has caused no small anxiety amongst those who have 
 noticed the natural consequences of giving to a class nu- 
 merous and powerful, at the ballot-box, the power to impose 
 taxes upon the public, from which they are themselves 
 exempt. 
 
 On the other hand, the poll-tax payer, while he contrib- 
 utes heavily towards the national expenditures through cus- 
 
CHAP. XII.] STATE TAXATION. 333 
 
 toms and excise, has no direct vote in regard to them. He 
 can vote where his own interest would lead him to vote 
 wrong, but has no power to vote directly where hi^ interest 
 would lead him to vote right. 
 
 The income-tax principle, if universally adopted, while it 
 would doubtless relieve poll-tax payers of their present tax- 
 ation, would, at the same time, bring their interests into 
 harmony with those of property-tax payers, and thus pro- 
 mote the general welfare of the public. 
 
 The poll-tax is one of the oldest and most general of all 
 taxes imposed by State authority. In Massachusetts, " every 
 male inhabitant over twenty years of age is included, except 
 persons who, by reason of infirmity and poverty, are, in the 
 judgment of the assessors, unable to contribute fully to the 
 public charges." 
 
 It hardly need be said, that this form of taxation is not in 
 accordance with the maxims laid down by Adam Smith ; 
 those who pay it not having equal ability, or enjoying " an 
 equal revemie." It is a tax founded on no sound principle 
 whatever ; and, if it were the only tax imposed, would be as 
 unjust as a tax could well be. It forms, however, only a 
 part of a system which must be looked at in all its bear- 
 ings, in order to form a correct judgment of the operation 
 of the particular tax, which by law is a limited one, deter- 
 mined by State legislation. In Massachusetts, the maximum 
 poll-tax is now fixed at " not over two dollars," but may be, 
 as it has been, changed from time to time. It has never, 
 we believe, been higher than at present. 
 
 The property and poll tax being the two modes * by which 
 all revenues are raised by the individual States, we will look 
 
 * States have, in some cases, derived a revenue from_ a tax upon banks. 
 In Massachusetts, it was for many years the greatest source of income ; so 
 great, indeed, as to render any direct State tax unnecessary. Licenses have 
 also been granted, by State authority, in some instances ; but the amount 
 received in any other mode, except by direct taxation, is too small to aifect 
 essentially the public burdens. The establishment of the national-bank sys- 
 tem has out off bank taxation &om the States as a source of revenue. 
 
334 DISTRIBUTION. [BOOK IT. 
 
 for a moment at their operation as between the different 
 classes upon which they are imposed. To do this, we refer 
 to a valuation and tax list before us, and find the following 
 examples. 
 
 B. H. — Buildings and 45 acres of land . . $1,000 
 
 Stock, &c ?!f 11,345. Taxes, 115.47 
 
 PoU, 2.00 
 
 $17.47 
 T. G. — Buildings and 43 acres of land . . $1,500 
 
 Stock 2^ gl 738 Taxes, 119.99 
 
 PoU, 2.00 
 
 $21.99 
 L. G. S. — Buildings and 56 acres of land . $1,200 
 
 Stock 300 11^500. Taxes, $17.25 
 
 PoU, 2.00 
 
 $19.25 
 Average property, $1,528. Average tax, $19.57. 
 
 We here find that these small farmers pay $19.57 each, 
 equal to nme and a half times as much as the poll-tax con- 
 tributors. Does any one suppose that the incomes of the 
 former are nine and a half times as great as the latter ? Let 
 us test the question. 
 
 Suppose each of these farmers derives a net income of ten 
 per cent on his capital, over all outlays and repairs ; and 
 that his labor is worth to him five hundred dollars per an- 
 num. This is a large allowance : — 
 
 Land and stock, as above, at ten per cent $152.80 
 
 His own labor equal to 500.00 
 
 Total income $652.80 
 
 Now we will assume that the exclusive poll-tax payers 
 have an average income of four hundred dollars. We in- 
 clude in this list not only all common laborers, but all 
 skilled workmen, mechanics, and others, whose labor is 
 worth, under a sound currency, $1.50 to $2 per day ; and 
 also all clerks, and other employees, whose salaries are six 
 hundred dollars and under. Then if all these classes aver- 
 
CHAP. 2II.J STATE TAXATION. 335 
 
 age four hundred dollars per year, as no one will dispute, 
 it will appear that the income. of, the poll-tax payers is 
 charged |2, while these small property-holders are charged 
 119.57. 
 
 Here is a great disparity, but there is no exaggeration in 
 the statement. Prom the same valuation and tax list, we 
 take three farmers, having about one hundred and twenty- 
 five acres each, with buildings and stock, and find their 
 farms and stock average |3,757 ; and their average taxes, 
 poll inclusive, amount to 147.03. 
 
 On the same calculation as before, — 
 
 ■'} 
 
 Faxm and stock, $3,757, at ten per cent $375.00 
 
 Valwe of farmer's own labor 625.00 
 
 Farmer's total income $1,000.00 
 
 Then, if the poll tax-payer is charged $2, with an income 
 of $400, what ought the farmer to pay with an income of 
 11,000 ? Answer, $5. 
 
 Instead, then, of $5, the true proportionate amount, the 
 farmers, as before shown, pay $47.03, or more than nine 
 times as much.* There is no escape from these conclu- 
 sions ; and we appeal with confidence to those best qualified 
 to judge, whether the estimate placed upon the incomes of 
 farmers of the descrijition we refer to is not essentially 
 correct. In whatever way we look at the matter, we cannot 
 fail to see great inequality. But the poll-tax is not only 
 unequal as between those upon whom it is assessed, and 
 whose incomes range from $150 to $600, and also unequal 
 as between this class generally, and all property holders, 
 but it is also very disproportionate to the advantages it 
 confers. Let us see what these are. 
 
 1. Entire protection to persons and property. 
 
 2. Right of suffrage, and eligibility to office. 
 
 3. The most ample means of education in common and 
 
 * And the hardship, in this case, is often increased by the fact that the 
 fkrmer is indebted for a large part of his capital, and paying interest upon it. 
 
336 DISTRIBUTION. [BOOK IV. 
 
 high schools, without charge, and a chance for a scholarship, 
 provided by the State, in one of the colleges. 
 
 4. Complete maintenance, and the highest scientific treat- 
 ment, for life, if need be, if himself or any member of his 
 family should be deaf and dumb, or afflicted with blind- 
 ness, idiocy, insanity, or, last of all, helpless poverty. What 
 individual or corporation could be found to insure a laborer's 
 family against all accidents and deprivations, physical and 
 mental, from every source, through life, for one-half of one 
 per cent on the income of the family head, or for twenty 
 times that sifm ? 
 
 J'oT all this, and much more that might be added, the 
 recipient of a revenue from any occupation, trade, or profes- 
 sion, of any sum not exceeding six hundred dollars, if he 
 has no visible property, pays an annual tax of not over two 
 dollars, or four cents per week ! As we have already said, 
 considered in itself, disconnected from other forms of taxa- 
 tion, this is very unequal, and consequently unjust, as be- 
 tween the different classes. The obvious result is to trans- 
 fer an undue share of the burdens of State, county, and town 
 expenditure from the mechanical and laboring classes to 
 the agricultural ; thus promoting the interest of the former 
 at the expense of the latter. 
 
 But all this applies, it must be remembered, to taxes 
 imposed under State or municipal authority only, from all 
 wljich the poll-tax payer escapes entirely by paying two dol- 
 lars. 
 
 Effect of the Two Systems. — "We are now able to compare 
 the results of the two different systems ; viz., national and 
 State taxation. In the national, we find that the greater 
 part of all taxes are indirect: the State and municipal 
 taxes are, with slight exceptions, direct. The former fall 
 almost wholly on consumption ; the latter, upon property. 
 The first is unjust to labor, or the non-property-holding 
 classes : the other is unjust to capital, or those who hold 
 taxable estate. One operates as an offset to the other. 
 
CHAP. XII.] STATE TAXATION. 337 
 
 Neither is just in itself, nor does the action of the two sys- 
 tems conjointly establish perfect justice ; but it approximates 
 as nearly to it, perhaps, as any other system of taxation 
 ever adopted, or likely at present to be adopted. 
 
 Before leaving the subject of State taxation, we will 
 briefly notice the inquiry often made, why the United- 
 States government does not assign to each State its share 
 of the public burdens according to its general valuation, 
 and allow the State authorities to collect the amount at the 
 same time, and in the same way, as all the direct taxes of 
 the State are levied and collected. In reply to this, it may 
 be said, that, if the national government could rely im- 
 plicitly upon the fidelity and promptness of every State, it 
 would be by far the most economical and efficient mode 
 of collecting the revenue. The expense of collection would 
 be almost nominal, probably not exceeding one-tenth of the 
 sum now required ; and an army of office-holders might be 
 left free to engage in productive employments. But such 
 has been the state of society in some of the States in times 
 past, that reliance could not be pla,ced upon their promptly 
 assessing and collecting a national tax ; nor can it be ex- 
 pected that the time will soon come when such a measure 
 would be practicable. 
 
 TAXATION OP CREDITS. 
 
 It has sometimes been maintained that credits ought not 
 to be taxed, but all assessments be made upon values, or 
 property, personal and real. Taxes, it has been argued, 
 ought not to be laid upon persons, but upon that out of 
 which they can alone be paid ; viz., property. 
 
 But credits are taxed as well as values. A holds a farm 
 worth 110,000, mortgaged to B for 15,000. A pays taxes 
 upon the whole valuation, and B upon $5,000, as money at 
 interest. A, it is said, is doubly taxed. This is a practical 
 question, that has puzzled legislators in every age and coun- 
 try. Let us therefore carefully examine it. 
 
 22 
 
838 DISTRIBUTION. [BOOK IV. 
 
 Suppose A and B aforesaid form an entire community, 
 and that the whole tax of 1150 is imposed on property. 
 The whole valuation will then be 110,000 (A's farm), and 
 the rate one and a half per cent, which A pays, and B goes 
 untaxed. We will now change the principle, and have both 
 property and credits taxed. The valuation will then be, 
 A's farm, f 10,000, and B's money at interest, $5,000;. 
 total, 115,000 ; and, with the same amount to be assessed 
 (1150), the rate will be one per cent, of which A pays 
 one hundred, and B fifty, dollars. So, then, we discover 
 that A is not doubly taxed, as assumed, but at the worst 
 pays only twenty-five dollars, or one-third, more than his 
 share. Such must, in principle, be the result of this kind 
 of taxation, taking a whole community together. All the 
 amount taxed iipon credit is so much relief to taxation 
 upon property. This seems to be clear ; and the justice of 
 the thing is established by the fact that A bought his farm 
 knowing that it would be subject to a full taxation, and 
 bought it cheaper, as we have shown in another place, on 
 that account. B, on the other hand, accepted his mortgage 
 on the same ground, knowing it would be subject to tax on 
 the common valuation. Is either party, then, wronged? 
 
 But perhaps another reason may be given why A should 
 pay taxes upon the whole value of his farm ; viz., that, hav- 
 ing the usufruct of the whole, he is entitled to all the profits 
 on the farm. " But he don't own the whole of the farm." 
 True, that is his misfortune : if he did, he would obtain a 
 larger amount of net profits ; but his obligation to pay tax 
 on the Whole is not impaired, because he has the use of 
 a part of B's capital. As the owner of the farm, A has a 
 chance for all the profits that can be made from the whole ; 
 while, by the taxation of B on the mortgage, the former 
 saves a part of what he would otherwise pay in taxes. One 
 pays taxes for the profits of business ; the other, for the 
 income on his capital. 
 
 In this case we find another very clear illustration of the 
 
CHAP. XII.] STATE TAXATION. 339 
 
 correctness of the income-tax policy. If there were no other 
 tax than upon income, the matter would stand thus : — 
 
 A's income from his farm, say 
 
 He deducts the interest he pays B 300 
 
 A pays tax on his net income of $600 
 
 B's income is taxed upon 300 
 
 Total income to he taxed 900 
 
 Amount to be raised, one hundred and fifty dollars : of this, 
 A will pay one hundred dollars, and B fifty; and there 
 would be no question as to the justice of the system by 
 which both were thiis taxed. If A's income should be 
 more or less than nine hundred dollars, he would pay more 
 or less, and B must pay less or more accordingly. 
 
 In the absence of the income-tax principle, what can be 
 more equitable and just than the practice of taxing both 
 mortgagor and mortgagee ? If the former were allowed to 
 deduct from his inventory the amount he owed the latter, 
 it would often happen, that, the mortgagee not living in the 
 same town or State, so much property would escape taxa- 
 tion altogether. This in some communities, especially our 
 Western States, would be a great evil. That much hard- 
 ship may often result from taxing credits as well as prop- 
 erty is undoubtedly true ; but that only affords additional 
 evidence that the income-tax principle is the only correct 
 one. Next to this would be the levying of all taxes upon 
 property exclusively ; and if adopted at the veiy commence- 
 ment of a social organization, as at the landing at Plymouth 
 in 1620, it would secure a just taxation, because all property 
 would be created, held, and transferred under that well- 
 known condition. 
 
 TAXATION OP GOTEENMENT BONDS. 
 
 The question of taxing credits assumes great practical 
 importance, when regarded in relation to the national debt 
 
3i0 DISTRIBUTION. [BOOK IV, 
 
 of the United States. We will assume that debt to be three 
 billion dollars (13,000,000,000). This forms a lien or mort- 
 gage upon the national wealth, which the Secretary of the 
 Treasury, in his report, December, 1865, estimates at a little 
 over fourteen billions : for convenience, we will call it fifteen 
 billions. In that case, the national debt will be equal to 
 one -fifth of the national wealth. On this debt of three 
 bUlions, the interest, at six per cent, will be one hundred 
 and eighty millions. If we suppose that all other demands 
 on the Treasury amount to one hundred and twenty mil- 
 lions annually, we have an aggregate of three hundred 
 millions as the amount of taxation. The national debt, if 
 included in the national valuation, would increase it twenty 
 per cent, or from fifteen to eighteen billions. This would 
 reduce the rate of taxation by one-sixth, or 16| per cent ; 
 that is, if only property was taxed, the rate would be two per 
 cent; if property and national stocks, the rate would be 
 1.66. 
 
 Should the national debt be exempted from taxation, there 
 wiU be one hundred and eighty millions of income that will 
 go untaxed by State and municipal authority ; and that is a 
 large share of the net income of the entire people, or what 
 tliey can save after supplying their necessary consumption. 
 The subject, therefore, is one of surpassing interest to the 
 country. Quite fortunately, however, the matter is wholly 
 within the control of Congress, which can, as fast as the 
 present bonds and other securities become due (and they 
 may all be redeemed * within seven, and most of them with- 
 in three years from 1865), convert them into bonds not 
 exempted from general taxation. 
 
 Public faith should be kept inviolate, but public justice 
 should also be secured as soon as possible. Better far to 
 pay a high rate of interest, if need be, than have so large a 
 share of individual income, and, consequently, of ability to 
 pay taxes, escape its proper responsibilities. This is desira- 
 
 * Except the twenty-year bonds, which mature in 1881. 
 
CHAP. XII.] STATE TAXATION. 341 
 
 ble, not only as a matter of policy in removing a prominent 
 cause of popular dissatisfaction which may sooner or later 
 endanger the security of the debt itself, but as an economi- 
 cal advantage to the country. 
 
 The effect of exempting the public debt from taxation may 
 be illustrated as follows : A has an income of one thousand 
 five hundred dollars, derived from a salary ; B has an equal 
 income, derived from coupons on the national stocks. A 
 must pay taxes, and, of course, must economize accordingly : 
 B pays no taxes, and consequently has no occasion to save 
 on that score. Now, as all national capital comes from the 
 savings of the people, it can be seen at once, that, if one- 
 sixth part* (in amount) of the tax-payers are exempted 
 from taxation, they are, to an equal extent, exempted from 
 all necessity of saving. 
 
 We are aware that the holders of public stocks pay indi- 
 rect taxes (customs, excise, &c.), but so also does the man 
 who has no interest in the funds. What we intend to say 
 is, that so far as a man's wealth is invested in untaxed secu- 
 rities, in so far he has no motive to save arising from a taxa- 
 tion to which all x)thers are liable. Looking, then, at its 
 economical bearings merely, ought not all public securities 
 to be included in the general schedule of taxation, both by 
 the national government, and the States, cities, and towns in 
 which the holders reside ? 
 
 CONSOLIDATION OP THE NATIONAL DEBT. 
 
 While this work is passing through the press, a proposition 
 is made in Congress to consolidate the debt of the United 
 States into a uniform five per cent stock, having thirty years 
 to run, payable, interest and principal, in gold. 
 
 It is, doubtless, desirable to effect such a consolidation, 
 
 * It is, doubtless, far more than one-sixth part of the net national income, 
 probably at least one-fourth, or 25 per cent. A large share of the estimated 
 fifteen biUions of aggregate wealth is of a character to escape taxation. 
 
342 DISTRIBUTION, [bOOK IV. 
 
 provided it can be done in an economical and proper man 
 ner ; but the proposal to exempt the consols from taxation 
 is quite another matter. We have already spoken of the 
 invidious, as well as unjust, operation of a system which 
 exempts from taxation one-sixth part of the national re- 
 sources ; but, since the proposal has been made, it becomes 
 desirable, we think, to give the subject some further consid- 
 eration. 
 
 We shall not dwell upon the political bearings of a meas- 
 ure sure to create abiding dissatisfaction ; sure to be a most 
 dangerous weapon in the hands of political aspirants, and 
 certain to endanger eventually the security of the debt it- 
 self. We shall speak only of its economic bearings. 
 
 1st, The exemption of three billion dollars from taxa^ 
 tion for the usual State, county, town, school-district, and 
 parish purposes, will create a very considerable and influen- 
 tial class of persons, who, while they will have the legal right 
 to vote appropriations for all public objects, will be under no 
 obligation to pay a farthing of the amount raised; who, 
 while interested in having large public improvements made, 
 will have no responsibility for the expense of them : a class 
 to whom it will be a matter of entire indifference how large 
 the assessments may be, or how unwisely or wastefuUy the 
 public finances may be conducted. Can any reasonable man 
 think it expedient and proper to create such a class ? Does 
 any one doubt that its influence would be unfavorable to the 
 public welfare ? We already exempt labor, to a great ex- 
 tent, from the burdens of State and municipal taxation, by 
 limiting the poll-tax to a fixed and very trifling amount, so 
 that the poll-tax payer can vote any sum he pleases with 
 entire impunity. By exempting tlrree billions of the national 
 credit from taxation, it is now proposed to place capitalists, 
 so far as they are owners of the public stocks, in the same 
 favored position. The interest of these two parties will then 
 be identical in regard to all public expenditures paid for by 
 a direct tax on property, as State and municipal charges 
 
CHAP. XII.J NATIONAL TAXATION. 343 
 
 generally are. Both can vote away money, and leave the 
 unfortunate property-holders to settle the bills. By the ex- 
 emption proposed, government creates a great antagonism 
 in the body politic. It grants a special and most important 
 favor to one class, at the expense of others. It may be 
 iirged, that the favor has been paid for by the. creditors of 
 the government, in that they took the stock at a less rate 
 of interest than they would have done had it been subject 
 to taxation. But can government, with any propriety, make 
 any such condition ? Can it rightfully grant, for any con- 
 sideration whatever, a dispensation to one class of citizens 
 from all pecuniary obligation to State, city, and town au- 
 thority throughout the nation ? Surely not, consistently 
 with justice and equality, because in one community the 
 favor granted may be worth one per cent, in another two. 
 In one locality, it may advance the general valuation one- 
 half; in another, only one-tenth : in one municipality, it may 
 increase the general rate of taxation five mills on the doUar ; 
 in another, twenty. 
 
 Can that be just and equal ? And yet all taxation, under 
 a free government, must be seen to be clearly impartial and 
 just, or the people will not submit to it. 
 
 2d, Such an exemption will create a powerful influence 
 against the payment of any thing but the interest of the debt. 
 This can be readily seen, and hence we perceive another un- 
 favorable effect from the proposed policy. The debt should 
 be paid off as soon as practicable. It should not all be 
 placed out of reach for thirty years, and exempted for all 
 that time from contributing to its own discharge, unless we 
 are prepared to resign ourselves to never-ending taxation 
 for the payment of interest. 
 
 In a sectional point of view, the exemption principle will 
 be very unequal in its bearings. In the new States, where 
 capital is comparatively scarce, and local taxation necessarily 
 heavy, its operation will be especially oppressive and odious. 
 Every available dollar will be put into government bonds. 
 
344 DISTRIBUTION, [BOOK IV. 
 
 unless it will command an excessive rate of interest on indi- 
 vidual security. Will not this enhance the rate of interest, 
 where capital is most scarce ? If so, will it not be most 
 burdensome to those who can least afford to bear severe 
 taxation and high rates of interest ? 
 
 3d, A consideration is, that the contemplated exemption 
 has a direct and powerful tendency to cripple the industry 
 of the country by absorbing a large proportion of its wealth 
 into the debt of the government. If the national bonds 
 should be relieved of taxation for thirty years, no more will 
 go abroad for sale, and those now in Europe will he returned 
 upon us. Of that there can be no doubt. The difference 
 occasioned by the exemption here, which does not attach to 
 bonds held abroad, will be so great as to insure their return 
 to the American market. That this will make the working 
 capital of the country scarce and high, and thiis greatly in- 
 jure all the industry of the nation, especially that engaged 
 in manufactures, is beyond a question. 
 
 The last consideration we shall name is, that the proposed 
 measure is entirely unnecessary. Such a policy should never 
 have been entered upon. It was bad financiering, even in 
 the darkest hour of our national struggle, and is wholly 
 inexcusable now. 
 
 But it may be replied, " The government cannot negotiate 
 its loans at five per cent, unless the exemption is made." 
 Very well ; then promise six. The rate of interest is far 
 less essential than equality in the taxation by which that 
 interest is paid. If one-sixth more interest is to be pro- 
 vided for, there will be one-sixth more property on which to 
 assess the tax that is to meet it ; the burden upon the peo- 
 ple is not increased, only equalized. 
 
 The British government pursued a wise financial policy 
 during its great contest with Napoleon. It consolidated its 
 national debt, issued only three-per-cents, and negotiated 
 these on an average discount of about forty-one per cent. 
 Her exigency was great, but the United States is under no 
 
CHA.P. XII.J NATIONAL TAXATION. 345 
 
 such extreme necessity. If a policy is adopted which com- 
 mends itself to the capitalists of the world, American consols, 
 at a lo\T rate of interest, will, like the British, command 
 money on the most favorable terms. But there must be no 
 tricks, no subterfuges, no unjust exemptions, which sensible 
 men well know are certain to breed public discontent, and 
 imperil the national securities. All .must be fair, honest, 
 and just ; the resources of the United States are ample, and 
 rapidly increasing ; we only need a wise and faithful admin- 
 istration of them.* 
 
 "We have said there was no necessity for the proposed 
 measure ; but it would be well to decide fully and finally 
 upon the policy of consolidation into one stock, at one rate of 
 interest ; yet it is in no wise necessary to bind the govern- 
 ment to issue the whole amount, as proposed, on thirty 
 years. The debt is not all due at this time : if a part, say 
 one thousand millions, were now authorized for thirty years, 
 when that was taken up the expediency of issuing more on 
 so long a time could be more judiciously decided upon than 
 at present ; besides, if only a part were now offered, it would 
 be taken with more avidity than if the whole were put at 
 once on the market. Policy, therefore, as well as economy, 
 requires a limitation of the issue of thirty years' bonds. 
 
 The proposal to save thirty millions per annum, by issu- 
 ing bonds at five per cent, untaxed, instead of six per 
 cent, in order to form a sinking fund, we regard as idle and 
 delusive. The project never will be carried through. Na- 
 tional sinking funds have always failed of success, and, in 
 the nature of things, always will ; besides, if such a fund 
 were to be provided for, it could be done more advanta- 
 geously without exemptions from taxation. 
 
 * Siiice the foregoing was written, Congress has laid a tax upon the income 
 derived from the government bonds ; but the same Invidious exemption exists 
 in regard to all other taxation, and, as predicted, gives rise to much dissatis- 
 fitction. 
 
346 DISTEIBUTION. [BOOK IT. 
 
 CHAPTER XIII. 
 
 FOREIGN INDEBTEDNESS. — I. ECONOMY OP FOREIGN INDEBTED- 
 NESS. 
 
 Pecuniary obligations, between different nations, may be 
 of four different kinds : — 
 
 1st, Individual Indebtedness^ — This can only be of limited 
 and temporary duration, siace it must soon be paid, or 
 wiped out by insolyency. 
 
 2d, Corporate Indebtedness. — This is of two kinds : (a) the 
 bonds or other obligations of incorporated companies formed 
 for industrial purposes, the building of railroads, &c. ; 
 and (5) the bonds of municipal corporations, cities, towns, 
 and counties. These have been issued to an enormous 
 extent in the United States, and a large amount have 
 been disposed of abroad. These two kinds of indebtedness 
 are alike in this, that they may be enforced by law upon the 
 promisors. Property may be attached and sold, if it can 
 be found ; and as, in the case of municipal corporations, 
 there is rarely any deficiency in that respect, the latter are 
 quite sure of ultimate, if not prompt payment. 
 
 3d, State Indebtedness. — Nearly all the States of the 
 American Union have contracted debts, and issued coupon 
 bonds, which, to a considerable extent, have been sold 
 abroad. These rest upon a different footing from the pre- 
 ceding, since they cannot be enforced by any legal process. 
 They are secured only by the honor of the promisor. The 
 Constitution of the Union gives no authority to the general 
 government to compel a delinquent State to regard its obli- 
 gations ; and no foreign power, if disposed, would be allowed 
 to enter the national territory. So there is no remedy. 
 State indebtedness abroad must amount, at the present time, 
 to many millions. 
 
CHAP. XIII.] , FOREIGN INDEBTEDNESS. 347 
 
 4th, National Indebtedness. — Great Britain has a deht, 
 as heretofore stated, of eight hundred miUions sterling ; but 
 it is almost entirely held at home. Tiie rate of interest on 
 her consols is only three per cent, and there is little induce- 
 ment for capitalists in America to invest in them ; but it is 
 quite otherwise with the United States. Interest here is at 
 least six per cent on the best securities. 
 
 We may safely assume, that the civil war has caused, or 
 will cause, the issue of United-States stocks to the amount 
 of nearly three thousand million dollars. According to 
 the comptroller's statement, seven hundred millions of these 
 have already gone abroad ; and it is certain, if the credit of 
 the government is preserved, a large part of the balance will 
 take the same direction. Is this desirable, or otherwise, 
 economically considered ? 
 
 II. THE EXPORTATION OP PUBLIC STOCKS. 
 
 Wlaether the sale of such stocks abroad is desirable or 
 not, will depend entirely upon the character of the commod- 
 ities sent in return for them, whether these be for advan- 
 tageous or disadvantageous consumption ; and this again 
 will depend upon the financial and commercial condition of 
 the country from which they are sent. Suppose one hun- 
 vired millions sent to England, and returned in railroad 
 iron, which, put into use, pays a net income of ten per cent, 
 besides facilitating the transport of cotton and wheat, and 
 thus adding to the national wealth. As these stocks pay 
 the American holders but six per cent, and by selling them 
 and investing the amount in railroads they get ten, there is 
 a clear gain in income of 66f per cent. Tlie foreigner, on 
 the other hand, who could only get four per cent for his 
 money in home investments, now gets six, an improvement 
 upon his income of fifty per cent. Both parties are benefited. 
 On the other hand, if the amount sold were returned in 
 fancy goods, jewelry, &c., which increased the consumption 
 of luxuries, but in no way contributed to reproduction, 
 
348 DISTRIBUTION. [BOOK IV. 
 
 the country would in a short time be poorer to the whole 
 amount. The foreigner would hold his bond, and get his 
 interest ; but the American would have nothing to show for 
 it. Or stocks may be exported in payment for an actual 
 balance of trade. If, with all our export of commodities 
 and specie, there . still remains an adverse balance, Ameri- 
 can stocks of one kind or another may be sent and sold to 
 adjust it. By this last operation, the debt is merely " ex- 
 tended," or postponed ; and as the interest upon this must 
 be annually paid, a larger export of commodities, specie, or 
 stocks must be made in the future. 
 
 If the foregoing illustrations of the manner in which a 
 foreign debt may be conti-acted are correct, as we think will 
 not be disputed, the remaining question is, what policy 
 on the part of the United-States government could have 
 secured in the past, or can secure in the future, a desirable 
 return for its bonds sent abroad. 
 
 If ^ all bonds were sold for cash, and the specie sent in 
 return, the operation would be simple, and its effects appar- 
 ent ; but bonds, when sent abroad, in reality enter into the 
 exports of the country, are negotiated through bankers, 
 and their proceeds become " exchange." If a railroad 
 sends its bonds abroad, the returns will probably be in 
 the iron used for its construction ; but, if a city or State, the 
 funds are to be expended at home, and the currency of 
 the country is all that is desired by the sellers. The bonds 
 go into the hands of a banker or agent, who negotiates 
 them abroad, and holds the amount as foreign exchange, 
 which he sells to the merchant, who wishes to remit for pur- 
 chases abroad. As these operations increase the quantity 
 of exchange for sale, they naturally promote importations, 
 not of money, but of merchandise. And here we must 
 ask pardon for again referring to the hackneyed theme of 
 an inflated currency. If, at the time when bonds are thus 
 beipg sent abroad, the currency of the country is expanded, 
 prices generally advancing, profits enlarging, and there is 
 
CHAP. XIII.] POEEIGN INDEBTEDNESS. 349 
 
 great inducement to extend trade, the importer, consciously 
 or unconsciously, is affected by this state of things, and 
 sends forward large orders. The consumption of foreign 
 goods is encouraged, since they are easily paid for (in 
 promises), at home and abroad. It will not be surprising 
 if the consumption of the country is thus increased to the 
 full amount of the bonds sold ; at all events, there can be 
 no doubt that it will be increased to a very considerable 
 extent. 
 
 The fact that the sale of these b6nds has brought into 
 market a large amount of foreign bills of exchange gives 
 the banks an inducement to increase their discounts, because 
 there will be no caU for specie to be sent abroad, the only 
 thing they ever seriously fear. Thus, on every hand, facili- 
 ties for expansion and additional consumption are multi- 
 plied. At present (1865), American stocks are exported 
 under circumstances absolutely appalling. With gold at 
 forty per cent premium, foreigners can obtain them at Tip- 
 per cent ; that is, at a discount of 28^ per cent. "With 
 the amoixnt so disposed of, merchandise is purchased and 
 returned to the United States, where it is sold at the ex- 
 travagantly inflated prices of a redundant credit currency. 
 What the consumer of the imported commodities is thus 
 taxed, and what the country actually loses, it is neither 
 easy nor agreeable to calculate. But such is the condition 
 of our financial affairs at present ; and it is quite likely to 
 continue, as no effectual measures are being taken at the 
 present time to contract the currency. 
 
 There are those who advise, as a remedy for the evils of 
 over-importation under such circumstances, the imposition 
 of a very high tariff, so that this influx of foreign goods 
 may be prevented. But, however disinterested such coun- 
 sel may be, the remedy proposed will not meet the case. 
 We have already proved, if we have proved any thing in 
 this work, that the quantity of currency is more influential 
 in determining the amount of foreign importations than the 
 
350 DISTRIBUTION. [BOOK IV. 
 
 rate of tariff duties. While there is a great excess of cur- 
 rency, twice or thrice the legitimate amount required by 
 the exclianges of the country, as at present, nothing short 
 of absolute prohibition of all trade will prevent importa- 
 tions, however high the tariff, which, although it does have 
 a tendency to reduce the consumption of foreign goods, 
 may be more than counterbalanced by a superabundant cur- 
 rency. The remedy lies in another direction ; viz., in the 
 restoration of the currency to a specie standard. This, al- 
 though it should be a gradual process, would, as soon as 
 it began, check importations and increase exports ; the pre- 
 mium on gold would be reduced ; and our stocks, when 
 sold abroad, would bring us in return the full amount of 
 their value. The process of saving amongst all classes 
 would at once commence. Debts, principal or interest, can 
 only be paid by savings ; and economy will begin when con- 
 traction is inaugurated. 
 
 With the present inflated currency, with high prices, 
 large speculative operations, and extraordinary profits, the 
 idea of economy is simply absurd. Hence the great neces- 
 sity of a change of policy. No country was ever being 
 more rapidly depleted than the United States at the present 
 moment (1865), though the fact will only be realized when 
 the consummation of the present disastrous policy has been 
 reached. 
 
 FALLACIES RESPECTING FOREIGN INDEBTEDNESS. 
 
 No sentiment or opinion is more common, perhaps, among 
 the people, than that it is very undesirable, or dangerous 
 even, to have the national debt held abroad. Is this opinion 
 well founded ? 
 
 1st, A debtor cannot always choose who his creditor shall 
 be. If deeply involved, those will hold his securities who 
 are most able to hold them. They will, like commodities, go 
 where they are most wanted, where they will bring the 
 highest price. 
 
CHAP. XIII.J FOREIGN INDEBTEDNESS. 351 
 
 2d, It makes little difference to the debtor, if he can meet 
 his obligations when due, who may hold tliem. There is 
 no friendship in trade. Native or foreigner will alike de- 
 mand his pay, when he has a right to do so. 
 
 If these propositions are true, we see that it is quite im- 
 possible to prevent foreigners from purchasing our national 
 securities, and of little importance if we could. It is a great 
 misfortune, that we are deeply in debt as a nation. If that 
 indebtedness were wholly to our own people, it would be 
 quite favorable ; for then, as a people, we should owe nothing 
 at all, since what was to the debit of one citizen would be 
 to the credit of another : but if this cannot be, and if capi- 
 tal is worth more to us than it is to others, then is it not 
 fortunate if others are ready to loan us theirs, that is, are 
 ready to take our public indebtedness ? As an admitted 
 fact, the use of capital is about twice as valuable in the 
 United States as in England : why, then, should we not 
 allow Englishmen to hold our public debt ? 
 
 We are aware that there is a deep prejudice in the public 
 mind against this. That prejudice has influenced the finan- 
 cial action of the government. When the war of the Re- 
 bellion broke out, and vast demands were made upon the 
 national treasury, instead of looking abroad for capital, 
 and offering our loans in foreign markets, on favorable 
 conditions, such a course was officially denounced as de- 
 rogatory to the American people. Foreign capitalists were 
 actually snubbed, if we may use so unscientific a term. The 
 Confederates on the other hand, took the wise precau- 
 tion, from the oiitset, to establish their credit abroad, and 
 negotiated loans as extensively as possible. This fact gave 
 strength to their cause, since they soon built up in Europe 
 a large pecuniary interest in their success. A foreign loan 
 to the United-States government of one hundred millions 
 in tlie latter part of 1861 would have saved the country 
 several hundred millions, inasmuch as the suspension of 
 specie payments might thus have been postponed for a 
 
352 DISTRIBUTION. [BOOK IV. 
 
 twelvemonth, and perhaps even been avoided through the 
 war. By this means, the prices of all the government had 
 to purchase would have been kept down to the natural 
 standard. This measure, if accompanied with the expul- 
 sion of all bank currency from circulation and with the 
 issue of government notes to take their place so far as de- 
 sirable, would, in the end, have saved a great part of the 
 present national indebtedness. 
 
 But, whatever may be true in regard to the past, it is 
 unquestionably an object of much importance to secure 
 foreign loans in the future at a low rate of interest. It is 
 not a question whether We shall owe a foreign debt, for 
 that is certain ; but whether we shall negotiate it abroad at 
 par at five per cent in gold, or at home at six per cent in a 
 depreciated currency. If bonds were made payable, prin- 
 cipal and interest, at London, Paris, Hamburg, and Frank- 
 fort, in the currency of those places, and suitable efforts 
 were made to inform foreign capitalists in regard to the 
 resources of the United States, there is not the slightest 
 doubt that most advantageous operations might be made. 
 
 But this, we are aware, cannot be done so advantageously 
 now as if we had a sound currency. At present, we could 
 only negotiate at a discount proportionate to the discount 
 upon our currency ; say, about thirty or forty per cent : but 
 even that rate would be more favorable than negotiations 
 at home. No financial operations can be made to tlie best 
 advantage anywhere, until the currency is restored to a 
 specie basis. Then the credit of the nation will be fully 
 established, and its loans at five per cent may be sold at real 
 par ; that is, for a currency equal to gold. 
 
 What the objections to foreign loans are, we have never 
 heard stated ; those who have opposed such loans having, 
 so far as we have seen, contented themselves with denunciar 
 tion : but the argument which seems to be floating in the 
 public mind is, that such a debt will give foreigners an ad- 
 vantage over us, since they may, at any time, combine to 
 
CHAP. XIII.J FOREIGN INDEBTEDNESS. 353 
 
 send back our bonds, sell them for what they will bring, 
 carry off the specie, and throw our banks into suspension. 
 A frightful result, indeed. But is there any foundation for 
 such a supposition ? Do not men act according to their in- 
 terests ? Wlien hundreds of millions of our stocks are held 
 abroad, is it likely that the holders will " combine " to send 
 all, or any large amount, of them back, and force a sale, 
 when they cannot do so except at a great loss to them- 
 selves ? 
 
 What object would be gained by it ? Wliat damage would 
 they do us ? If they sacrificed their stocks, we should buy 
 them in at great advantage. 
 
 But it may be said, that they might drive our banks into 
 suspension. Possibly they might ; but what of that ? The 
 banks are accustomed to it : it would be nothing new or 
 uncommon. Besides, if the stocks were lield at home, and 
 money became scarce, or the credit of the government was 
 suspected, the public stocks would be thrown upon the 
 market at once, and with the same result. British consols 
 are thus thrown upon the market : why not American 
 stocks ? 
 
 From whatever point of view we may look at the subject, 
 we find there can be no well-founded objection to the sale 
 of American stocks in Europe. On the other hand, such a 
 sale of them must be advantageous, when made under a sound 
 currency. 
 
 FALLACIES RESPECTING A NATIONAL DEBT. 
 
 1st, That a national debt is public wealth. 
 
 " The funded debt of the United States is, in effect, the addition 
 of three thousand millions to the realized wealth of the nation. . . . 
 It is three thousand millions added to its available capital." * 
 
 * See pamphlet issued by " Jay Cooke, General Subscription Agent for the 
 Sale of Government Bonds," entitled, " How our National Debt may be a 
 National Blessing." Philadelphia, 1865. 
 
 23 
 
354 DISTRIBUTION. [BOOK IT. 
 
 If this is so, it is fortunate, so far as the financial condi- 
 tion of the country is concerned, that the Rebellion took 
 place ; that it continued so long, and cost so much. Had 
 it lasted long enough to have made the debt tenfold greater 
 than it now. is, the " available capital " of the nation would 
 have been correspondingly enlarged ; and, Of course, its 
 power of production so much increased. It must be a mis- 
 fortune, economically considered, that the war closed so 
 early. But let us examine into the truth of the assertion 
 that " a national debt is public wealth." 
 
 How was it created, and for what ? 
 
 It was contracted for war expenditures. The operation 
 was simply this : A certain part of the people, having the 
 ability to do so, furnished the nation with the means to carry 
 on the war. These persons became the creditors of the 
 government, and they now hold the public stocks. All the 
 rest of the people are debtors, and jointly owe the amount 
 of the debt. It is a lien upon estates, personal and real, and 
 must remain so until liquidated. Are those who are the 
 debtors to the bond-holders any richer in consequence of the 
 existence of the public debt ? Certainly not : they are just so 
 much poorer. They must subtract from their incomes, each 
 year, so much as they have to pay for interest on the na- 
 tional debt. Are the bond-holders any richer in conse- 
 quence of the creation of this debt ? If they actually loaned 
 money, that is, coin, as some did in 1861, for which they are 
 receiving only the usual rate of interest, they are neither 
 richer nor poorer for the operation. They have got pablic, 
 instead of private, securities for their funds. If they subse- 
 quently loaned mere credit currency, or capital at prices 
 advanced in consequence of the depreciation of the currency, 
 then, in so far, they gained what the government lost ; or, 
 rather, what that part of the people lost who must pay the 
 debt and interest. There was no increase of wealth in con- 
 sequence of the increase of prices, but merely a transfer of 
 commodities from one party to another, without an equiva- 
 lent. 
 
CHAP. XIII.J FOREIGN INDEBTEDNESS. 355 
 
 But " the national debt is public wealth." Then it fol- 
 lows, that, if the national debt were repudiated, the nation 
 would be three thousand million dollars poorer. Is that 
 so ? Surely not. The holders of the stocks would be 
 poorer, doubtless, by the amount of their bonds, which enti- 
 tle them to interest semi-annually, and final payment in 
 gold ; but just what they lost their debtors would gain, and 
 the general wealth of the nation would not be affected to the 
 amount of a dbllar, except, that, in so far as the debt is 
 due to persons abroad, the repudiation of it would save that 
 amount to the nation. Other than this, neither the security 
 nor tlie insecurity of the national debt has the least effect 
 in determining the national wealth. 
 
 2d, But, again, it is said that " the debt is active, available 
 capital; " and, in illustration, it is said " that a man having, 
 say, twenty thousand dollars of the bonds, can engage in any 
 kind of business at once, just the same as if he had so much 
 cash capital." 
 
 Now, what is the fact ? The bonds being good securities, 
 the holder can exchange them for cash, and with this can 
 obtain any description of capital he may need. The bonds, 
 then, are not capital, but only the security upon which capi- 
 tal may be had. If the holder had notes against individu- 
 als of unquestionable credit, he could do the same. Are 
 private notes, then, capital ? Surely not. The man who, 
 having invested his money or capital in public securities, 
 wishes to exchange them again for capital, can do so read- 
 ily, because the nation is pledged to repayment, with inter- 
 est. Bonds, while the credit of the government is sustained, 
 are only a very convenient form of credit. They liave no 
 element of capital about them. A thousand billions of them 
 would not add a farthing to the capital or wealth of a nation, 
 or increase the productiveness of any department of indus- 
 try. 
 
 So far from aiding production, a national debt has an 
 effect directly opposite. It depresses industry by the 
 
356 DISTRIBUTION. [BOOK IT. 
 
 taxation it imposes, and reduces its power to compete 
 with otlier countries. If a laborer pays fifty dollars per 
 annum more for the commodities he consumes, in conse- 
 quence of taxation occasioned by the interest upon the 
 public debt, then he must have fifty dollars more wages, or 
 reduce his style of living to such an extent as to save that 
 sum. If the former, his higher wages will enhance the cost 
 of products, and he will be less able to compete with the 
 foreign manufacturer or producer. • 
 
 3d, The third fallacy is, that a public debt gives stahility 
 to government. 
 
 Upon what should the security of a government depend ? 
 Evidently upon the convictions of the people that it is a 
 good government ; that it secures to them life, liberty, and 
 the pursuit of happiness. Any people who know they have 
 such a government, will need nothing to assure their loy- 
 alty and attachment. Where government rests upon uni- 
 versal suffrage, the power is wholly in the hands of the 
 people, and no law or constitution can have any perma- 
 nancy, that does not receive their approbation. Any thing 
 that is regarded as oppressive and unjust will certainly be 
 abolished. 
 
 France has a large national debt ; yet her government has 
 been revolutionized time and again, without any reference 
 to that fact, and without at all disturbing the security of 
 the rentes. National debts will be paid, if the people 
 please to pay them ; and governments will be sustained, 
 if the people choose to sustain them. 
 
 But it is said, that, since every person who owns a part 
 of the public debt will be interested in the permanency of 
 the government, all such will certainly be loyal ; and, as 
 these will be in great numbers scattered over the whole 
 country, and belonging to the most influential classes, 
 their social and political co-operation will afford security to 
 our political institutions. Such reasoning assumes, that 
 every man who owns a certificate of stock, will, on that 
 
CHAP. XIII.J FOREIGN INDEBTEDNESS. 35T 
 
 account, be loyal to the government. Let us examine the 
 matter. How numerous are those bond-holders who are 
 expected to sustain the government and its debt ? 
 
 (1) There are those who directly hold the bonds. 
 
 (2) Those who have stock in State and national banks 
 whose capital is invested in government securities. 
 
 (3) Those who have deposits in savings institutions, the 
 funds of which are largely invested in public stocks and 
 in banks, whose capital, as just stated, is in the same kind 
 of investment. 
 
 These are the classes on whom reliance is placed to give 
 stability to government, in consequence of the interest they 
 are supposed to have in the public tranquillity, as security 
 for the national debt. 
 
 What the aggregate number of persons in all these classes 
 may be, we have no means to determine ; but it is, doubt- 
 less, much less than most people imagine. For — 
 
 (a) Some seven hundred millions of the bonds are held 
 abroad. 
 
 (J) Many millions are held by aliens in this country. 
 
 (c) A large amount is held by females. 
 
 (c?) Vast sums are held by trustees and guardians. 
 
 (e) Of the savings-banks depositors, who are interested 
 to a limited extent, a majority, probably, have no vote. 
 
 (/) It is well known, that the capital stock of the cur- 
 rency banks is held largely by widows and orphans. 
 
 (^) A large part of the debt is absorbed by great capital- 
 ists, holding 150,000 to 1500,000 each. 
 
 How many votes, then, can all these parties give ? The 
 whole number of voters in the United States is some five 
 millions. What portion of the whole belong to the above 
 classes ? Certainly a very small share indeed. 
 
 But this is not a full view of the case. Of those who do 
 own stocks, and can vote, very few — not one in ten, proba- 
 bly — have a sufficient ownership to counterbalance the 
 amount of taxation they encounter in consequence of the 
 
358 DISTRIBUTION. [BOOK IV. 
 
 debt. The average amount to the credit of each person in 
 the savings banks of New York and Massachusetts is about 
 f 225 ; and we may safely assume that to be the general 
 average throughout the country. Then it is quite certain 
 that an immense majority have an interest iu the savings 
 banks of not over |200. What is the mterest of all these 
 small holders, in reference to repudiation ? 
 
 For example, a laboring man, having $200 in bonds or 
 in a savings deposit, expends $400 per annum, derived 
 from his wages, for articles required in the support of his 
 family. What amount of taxation will he incur annually, 
 In consequence of the national debt ? Is it not a very mod- 
 erate estimate, that ten per cent of all his expenditures will 
 be occasioned by the higher duties, taxes, excise, &c. Ten 
 per cent on |400 is f40, which this man must pay annually ; 
 while his whole income from the $200 in bonds, or savings- 
 bank deposit, is only $12. Is it for his pecuniary interest 
 that the public faith be kept inviolate ? If lie must pay $40 
 annually, while he gets but $12, how long will it take to use 
 up the $200 he has in government bonds ? In less than 
 eight years, he would have lost a sum equal to the amount 
 of his stock, and then be for ever after liable to the same 
 amount of taxation. Very clearly, the sooner the public 
 debt is repudiated, the better for this laborer, though hold- 
 ing $200 in the public funds. 
 
 We make the same comparison in regard to a man who 
 holds $1,000 in stock. His income we will suppose $2,000, 
 which he expends. On the scale before given, he will pay, 
 in increased prices, $200, while his coupons are but $60 per 
 annum ; a balance against him of $140. How long will his 
 interest require that the coupons be paid ? Clearly, the 
 sooner they are worthless, and the taxation they impose 
 removed, the better. Another view may be given, of the 
 relations of the debt to the population of the country. It 
 may be assumed, that the debt will be equal to about $100 
 to each person, if the population is thirty millions. Then a 
 
CHAP. XIII.] FOREIGN INDEBTEDNESS. 359 
 
 family of five persons owe |500 of the public debt, and, on 
 an average, must pay the annual interest upon the same ; 
 say, from $30 to |40. A little reflection will satisfy any 
 one, that the number of families that hold |500 of the 
 national bonds, compared vdth the whole number, must 
 be very small ; and, therefore, that a vast majority can have 
 no pecuniary interest in securing the payment of the na- 
 tional indebtedness. 
 
 In these illustrations, we see the folly of the assumption 
 that a public debt gives security to government. Of all who 
 are directly or indirectly owners of the public obligations, 
 not one in twenty has so large an interest that he would 
 not be greatly benefited by its repudiation. Of those who 
 vote, probably not one in fifty has an interest in the public 
 debt sufficient to counterbalance the taxation he must en- 
 dure in consequence of its existence. How idle, then, to 
 talk of the stability a national debt gives to a republican 
 government, under which the will of the people is the su- 
 preme law ! 
 
 On the other hand, who does not see plainly that such a 
 debt, from the necessary taxation it imposes, must be a con- 
 stant source of irritation and dissatisfaction ; that a party 
 will inevitably be formed for its overthrow, and that in such 
 a party will be found sectionalism and ail the bad and dan- 
 gerous elements of society ? The future peace and prosper- 
 ity of the nation is more endangered by the national debt 
 than by all other causes. In a country where the people 
 have little or no power at the ballot-box, a public debt may, 
 doubtless, be made an effective engine of tyranny, and con- 
 tribute to the enslavement of the masses ; but it is quite 
 otherwise where suffrage is universal. 
 
 4th, A fourth fallacy is, that a national debt ensures pro- 
 tection to home industry, since the heavy taxation it causes 
 will, if laid on foreign goods, secure that object. Having 
 already discussed the question of protection, we need not 
 tlow enter upon it ; but remark, that a large national debt 
 
860 DISTRIBUTION. [bOOK IV. 
 
 does not make it certain that there will be a high protective 
 tariff. Great Britain has the largest debt of any nation in 
 the world ; yet she has abandoned her protective system. 
 She has become satisfied that such a luxury is too great a 
 hinderance to her commercial prosperity, too heavy a burden 
 upon her home- industry ; and that she can only compete 
 with other nations, in her manufactures, by maintaining 
 freedom-of trade. No nation has had a larger experience 
 of the operation of a severe protective system than Great 
 Britain, and in none is it more heartily repudiated. 
 
 6th, But, again, it is said that a national debt is desirable, 
 as a basis for a national currency. That this is an idle 
 assumption, we have already endeavored to show. No such 
 foundation is needed for any currency which the good of a 
 nation demands. It is a false and pernicious system which 
 requires any connection with national indebtedness. Debt 
 is no sound basis for banking. Banks should be created to 
 loan capital that exists, not debt for capital that has disap- 
 peared. 
 
 We will briefly notice one other fallacy in regard to a nar 
 tional debt ; viz., that the generation which contracts it is 
 under no obligation to pay it ; since, having been contracted 
 for the good of the country, posterity ought to share, at 
 least, the burden of it. "What is the principle involved in 
 this statement ? Clearly, that one generation has the right 
 to create a debt for such purposes, and to such an extent, as 
 it deems best, and impose on another the payment of the 
 whole, or of such part as it does not choose to discharge out 
 of its own resources. Can this be true ? Does it not follow 
 from this, that one generation has the right to enslave an- 
 other, since, if it can impose a tax, it can enslave ? for, to the 
 extent of the tax, it is slavery, or labor taken withoxit com- 
 pensation. Suppose the tax carried to such an extent as 
 to consume all the products of the laborer over that which 
 is absolutely necessary to existence. If the present genera- 
 tion may lay a tax of ten dollars on each producer for all 
 
CUiP. SIII.] FOREIGN INDEBTEDNESS. 361 
 
 time to come, it may lay one of a hundred dollars, or a thou- 
 sand. If it may take away a fourth of a man's income, it 
 may take a half, or why not the whole ? The right to tax 
 posterity at pleastire is the right to establish a most terrific 
 despotism ; and yet this is one of the popular sophisms of 
 the present day. 
 
 A slave is one who does not enjoy the fruits of his labor, 
 further than to preserve his efficiency, and to keep good the 
 niimber of laborers. It is little matter in what way this is 
 brought about, whether by lawless violence or legal exac- 
 tions. The result is the same. The British laborer feels 
 it, has always felt it, and, so far as we can judge from the 
 present, always will. He cannot be bought and sold. That 
 is chattelism ; that would convert him into capital : but his 
 earnings can be taken from him to pay interest upon debts 
 contracted long before he was born, and for purposes that 
 all now admit w;ere useless. 
 
 If such is the effect of the principle which establishes the 
 right to entail upon posterity unlimited indebtedness, can it 
 be safe, economically considered ? Surely no man can give 
 an affirmative answer. " But nations must sometimes cre- 
 ate debts." To this we reply, — 
 
 1st, That the occasions when nations are really so com- 
 pelled, or can rightfully do so, rarely occur. The great 
 struggle through which the United States has just passed, 
 is one of the strongest cases that has ever been presented ; 
 and yet, had the currency been sound at the commencement, 
 and had a sufficiently effective system of taxation been 
 adopted, there is little doubt that the war expenditures 
 might have been met as incurred. It is certain that almost 
 all the service and material was furnished by the country ; 
 and therefore, had the taxation been so laid as to apportion 
 the amount judiciously and fairly, the whole cost might 
 have been provided for, and we to-day be essentially free 
 from delit. "Without entering, however, upon this question, 
 ■we can safely assume that the whole should be paid off 
 
362 DISTRIBUTION. [bOOK IV. 
 
 ■within the present century, which will also be within the 
 present generation, as a generation is reckoned. We are 
 told by the Secretary of the Treasury (Report, 1865), that 
 two hundred millions paid annually, for principal and in- 
 terest, will extinguish the debt within the period named. 
 Does any one doubt the ability of the people to do this, if 
 they will ? Is it not their duty, if they can ? 
 
 Unless it is the settled policy of the nation to have a per- 
 manent debt, it should at once commence the payment, and 
 continue to discharge it in a regular, systematic manner ; 
 for, unless the work is commenced promptly, it will never 
 be done. Like England, and other European countries, we 
 shall submit to never-ending taxation for mere interest. 
 
 We need not pursue the examination of these fallacies 
 further : indeed, an apology is demanded for noticing them 
 at all. And that apology must be found in the respectable 
 and semi-official source in which they originated. The 
 pamphlet referred to would be of little consequence, how- 
 ever, were it not for a prevalent popular delusion, that, 
 somehow or other, a national debt is real wealth. It is that 
 fallacy which we have attempted to expose. 
 
 In conclusion, we will only observe that any people capa- 
 ble of maintaining self-government, and worthy of free insti- 
 tutions, will need no other bond of union than their common 
 loyalty ; no other sentiment than that of honor and hon- 
 esty, to induce them to sustain a national debt, contracted 
 in good faith for the preservation of national existence. 
 
 CHAPTER XIV. 
 
 EISE AND GROWTH OP THE MODERN FINANCIAL SYSTEM. 
 
 No large national debt has ever been paid, or in any way 
 discharged, except by repudiation. The debt of the old 
 Erench monarchy was wiped out with the " assignats." 
 
CHAP. XIV.] MODERN FINANCIAL SYSTEM. 363 
 
 The debt incurred in the American Revolution vanished in 
 •worthless " continental money." The present debts of Eng- 
 land, Prance, Austria, and other European countries, are so 
 large, the constantly increasing demand for more extensive 
 and costly armaments so pressing, so absohitely overwhelm- 
 ing, that the hope of any payment of the principal cannot be 
 reasonably indulged. A national debt may be regarded, 
 under the existing war policy of the world, as a fixed insti- 
 tution, an inevitable appendage of government. 
 
 The United States, which, up to the time of the great 
 Rebellion, formed the only exception among the principal 
 nations of the earth, has entered upon the same course. 
 That general system of finance, of which national indebted- 
 ness forms so important a fact in its influence upon the 
 industrial interests of mankind, deserves a careful consid- 
 eration. 
 
 When William of Orange succeeded to the throne of 
 England, Louis XIV., then at the zenith of his power, 
 refused to acknowledge him as a legitimate monarch, and 
 espoused the cause of the exiled Stuart. War, of course, 
 followed. But fighting, in consequence of the invention of 
 gunpowder, and the changes it gradually introduced into 
 warfare, had become an expensive luxury ; a game which 
 kings, with their limited and uncertain revenues, could ill 
 afford to play at, particularly for a great length of time. 
 War with one so powerful as the Q-rand Monarque could 
 not be safely commenced or successfully prosecuted, while 
 every penny must be extorted from a reluctant and now 
 independent Commons', and the taxes immediately assessed 
 on the large land or other property holders of the realm. 
 
 Such was the difficulty which King William encountered ; 
 but, fortunately for his fame, he was a shrewd financier, as 
 well as an able soldier. Up to this time, England had never 
 had a permanent organized national debt, a national bank, 
 or any regular and reliable system of revenue. Grants and 
 subsidies had been voted, from time to time ; duties and spo- 
 
364 DISTRIBUTION. [BOOK IV. 
 
 cial taxes had been imposed; but these were not to be 
 depended upon.* 
 
 The monarch might and did borrow money from time 
 to time, in great emergencies, but on the most disadvan- 
 tageous terms. The credit of tlie government was always 
 low, because there was no regularity or system in the pub- 
 lic finances. Men had no confidence in the responsibility 
 or punctuality of the government. William changed all 
 this. He borrowed for a specified period, and promised the 
 punctual payment of the interest semi-annually, and the prin- 
 cipal when due ; and pledged " the public funds " for the 
 fulfilment of his promises. Hence the public securities were 
 called " the funds." 
 
 He negotiated loans and issued stocks. He granted an- 
 nuities, upon the payment of specific sums. Interest and 
 principal were secured by a pledge of the public funds, or 
 revenues derived from various sources. 
 
 Tins put a new face upon the financial affairs of England : 
 but something further was desirable; viz., an agency by 
 which the national debt would be readily managed, and its 
 semi-annual interest promptly paid. 
 
 This was accomplished by the incorporation of a national 
 bank, consisting of the holders of the public stocks, to the 
 amount of £1,200,000. 
 
 One thing more was wanting ; viz., a permanent and suffi- 
 cient income, to meet not only the interest on the accumu- 
 lated debt, but the current expenses of the government, 
 already large, and constantly increasing. To effect this, a 
 land-tax was established ; small, indeed, in amount, and 
 upon a fixed valuation, so that it could not be increased with 
 the increasing value of the land. 
 
 * That this has been disputed, on the authority of Mr. Macaulay, we are 
 well aware ; but we do not find any tiling in his statements that contradicts 
 our views of the subject. Partial efforts, more or less successful, for the es- 
 tablishment of a thorough financial system, had already been made in Eng- 
 land, Italy, and some other countries of Europe; but the great work was 
 at length successfully inaugurated during the reign of William and Mary. 
 
CHAP. XIT.] MOBERN FINANCIAL SYSTEM. 365 
 
 A system of duties on all imports was also enacted, and 
 an excise laid upon all home manufactures and products. 
 In short, a system of indirect taxation was adopted, far 
 more general and effective than any which had before 
 existed. 
 
 Thus was completed the grand triad of the system of 
 finance, inaugurated by the English Revolution; viz., — 
 
 FUNDING, BANKING, AND INDIRECT TAXATION. 
 
 The immediate, as well as ultimate, results of the new 
 system are alike remarkable and worthy our attention. 
 
 1st, The credit of the government was now firmly estab- 
 lished. 
 
 It could borrow more money, and at a lower rate of inter- 
 est, than ever before. Men of small means could now loan 
 money to the government, and with entire confidence. The 
 whole community could be laid under contribution. 
 
 2d, Government was, enabled to carry on war by borrow- 
 ing, instead of imposing taxes. War could be waged with 
 credit, instead of cash. Parliament had only to vote a loan. 
 No expenditure need be stopped for want of funds, while the 
 national credit was unimpaired. This was a great change. 
 Many a war had been abruptly closed for want of funds. 
 There was to be no such necessity hereafter. 
 
 3d, This course removed the fear of immediate and press- 
 ing taxation from the rich, because the greater part was 
 now to fall upon the masses of the people, who pay taxes, 
 not in proportion to property, but to consumption. This 
 was an agreeable consideration to the wealthy classes ; and 
 the more so, because, as the public stocks were multiplied, 
 better opportunities were afforded for investments. 
 
 4th, Especially was the new policy acceptable to the aris- 
 tocracy, who, at that time, even more perhaps than now, 
 monopolized the public offices, and whose revenues and pat- 
 ronage were increased by governmental expenditures. 
 
366 DISTRIBUTION. [BOOK IV. 
 
 We have said that William became involved in a war with 
 Prance. In eight years, besides expending all he could 
 raise in taxes, he increased the national debt from £1,200,- 
 000 to £21,500,000. A peace of five years followed Anne's 
 accession (1701), during which five millions of the debt 
 were paid off. Then came the war of the Spanish succes- 
 sion. The ostensible object was " to humble the Bourbons, 
 and deprive Philip V. of his crown." This lasted eleven 
 years, and added £37,500,000 to the debt, besides consum- 
 ing £6,500,000 raised in taxes ; so that, at the peace of 
 Utrecht, the national debt was £54,000,000. 
 
 In 1727, the House of Hanover succeeded to the throne, 
 in the person of George I., and then came a peace of twenty- 
 six years ; but, in all this time, the public debt was reduced 
 to the extent of only £7,500,000. Why? Because it was 
 no object with the ruling class to pay off the debt, since 
 the national stocks had become the most eligible investments ; 
 so the resources of the nation were squandered upon the 
 court. In 1739, therefore, the debt was £46,500,000, when 
 the war of the Austrian succession took place. Its specific 
 object was to secure the throne of Austria to Maria Theresa ; 
 and the debt was carried up to £78,000,000. Then came 
 eight years of peace ; but the debt was reduced only three 
 millions. 
 
 In 1756 commenced what was known in this country as 
 " the old Prench War," or " the Seven Years' War." It was 
 caused by a dispute about colonial boundaries, or, as the 
 wags of those days said, " about a few acres of snow in 
 Nova Scotia ; " but it eventually involved a great part of 
 Europe, and the American colonies of both Prance and 
 England. 
 
 Then followed a peace of twelve years ; but only £10,500,- 
 000 were paid off. The war of the American Eevolution 
 lasted seven years, and carried the debt up to £239,000,000. 
 In the ten years of peace and prosperity which followed that 
 great contest, the public debt was reduced but £5,000,000, 
 
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CHAP. XIV.] MODERN FINANCIAL SYSTEM. 367 
 
 notwithstanding that the resources of England were largely 
 increased, and her ability to reduce the national indebted- 
 ness was ample, if the disposition to do it had existed. 
 
 In 1793 began the war that grew immediately out of the 
 French Revolution. This lasted for nine years, and increased 
 the debt to £526,000,000. Then, in consequence of the 
 Treaty of Amiens, a period of one year's peace intervened ; 
 but it was only an armed truce : military preparations were 
 continued, and the public debt was increased £3,000,000. 
 
 In 1803 commenced the final struggle with Napoleon, 
 which terminated in 1815, leaving the British debt at 
 £865,000,000 sterling: During the twenty years following, 
 £87,000,000 were paid off. This was from necessity, rather 
 than choice ; a measure of policy adopted to secure the 
 credit of the government. In 1835, the debt was but £778,- 
 000,000 ; but the emancipation of eight hundred thousand 
 slaves in the West Indies added to the debt £20,000,000. 
 It has stood at £800,000,000, very nearly, ever since. We 
 give in Diagram No. 8, inserted here, an illustration of 
 the facts as we have stated them. 
 
 We have given this history of the rise and p ogress of 
 the debt of Great Britain, as exhibiting the natural effects 
 of such a system as she inaugurated during the reign of 
 William and Mary. But we have shown only a part of the 
 system. The history of the national bank is interwoven 
 with that of the national debt. It was incorporated in 1697, 
 with a capital, as we have said, of £1,200,000. As the 
 public debt was enlarged, the capital of the bank was in- 
 creased ; that is, more and mo e of the debt was incorpo- 
 rated into the bank organization, until it amounts, at the 
 present time, to £14,475,000. This bank, as before stated, 
 has never had a shilling of capital to lend to the people ; 
 it has simply held a certain amount of the national stocks, 
 and, upon the credit of these, has issued its own promises 
 to pay ; and these promises, having been made a legal tender 
 by Parliament, have circulated as money. 
 
368 DISTRIBUTION, [BOOK IT. 
 
 The government has no interest whatever in the bank, so 
 far as its profits are concerned ; but it lias always stood by 
 it, sustained it by its influence and legislation, besides allow- 
 ing a large annual sum for its services, in paying the divi- 
 dends on the public debt. When the bank was obliged to 
 suspend payment, in 1797, the government came to its 
 rescue, by legalizing the act ; and the bank went on issuing 
 its notes during the twenty-three years that followed, and 
 sometimes to an amoiint so excessive, that gold was carried 
 up to a premium of twenty-five to forty per cent : generally, 
 however, during this period, the difference was small, — some 
 ten to fifteen per cent. The last feature to be noticed in 
 this connection is that system of indirect taxation which 
 became so general and efi&cient under the new financial 
 policy. Duties, as we have said, were laid upon every 
 description of foreign merchandise, and excise upon all 
 articles of home production. This measure was indispensa- 
 ble to the full development of the system. When the 
 masses of the people can be taxed in such a manner that 
 they are almost unconscious at the moment that they are 
 taxed at all ; when the amount taken is in very small sums, 
 so that, if the fact were understood, it would hardly be 
 appreciated ; when the aggregate amount for a month or a 
 year cannot be ascertained, except approximately, and then 
 only by long and intricate calculation, — taxation may be 
 carried to its utmost possible limit, so far as to leave to the 
 poorer classes only the bare necessaries of life. Such a 
 people may feel that they are very poor, but they will regard 
 this as the consequence of their low wages ; they may feel 
 that they are oppressed, but will naturally attribute it to 
 the want of justice or generosity on the part of their 
 employers. The true cause of their poverty and suffering 
 they do not perceive. The gross taxes imposed in Great 
 Britain in 1859 amounted to seventy-three millions sterling, 
 equal to f 14 per head, through the whole population, or $70 
 for a family of five persons. Such a taxation, if collected at 
 
CHAP. XIT.] MODERN FINANCIAL SYSTEM. 369 
 
 all, must be taken, as it is taken, imperceptibly, as it were 
 a penny at a time. This grand system of currency and 
 finance, so fully established in Great Britain, has. at this 
 time become the policy of all civilized, and to some extent 
 even of uncivilized countries, — funding, indirect taxation, 
 paper-money banking. 
 
 RESULTS OP THIS FINANCIAL SYSTEM. 
 
 1st, An immense extension of the war system. Prior to the 
 introduction of this policy, standing armies and armaments 
 were exceedingly limited. Now all Christendom is armed, 
 by land and sea. France leads the van, with an army of 
 some 700,000 ; and each nation is struggling to create and 
 support the largest possible military and naval establish- 
 ment : and all this can be done of credit, if need be ; there 
 is no limit to these prepartions, while national credit holds 
 out. 
 
 2d, Universal and constantly increasing indebtedness. This 
 is true of nearly every country in the world. England, 
 indeed, has not increased her debt for the last thirty years ; 
 but almost every other government has been borrowing 
 money from year to year, until many of them are as much 
 burdened by their indebtedness as England, because, in 
 proportion to their wealth and resources, they are as deeply 
 involved. Prance, we suppose, is really more oppressed by 
 taxation than England. Prance is a great nation of poor 
 people, compared with England or the United States. She 
 has but a small margin for taxation. The same, indeed, 
 may be said of many other European nationalities. 
 
 3d, Impoverishment of the masses. This is especially 
 apparent in England. What has become of that yeomanry, 
 once the pride of the country? Their little estates have 
 disappeared, have been swallowed up by the terrible system 
 of taxation to which they have been subjected. The pleas- 
 ant hedges which still surround the small enclosures, once 
 
 24 
 
370 DISTRIBUTION. [BOOK IT. 
 
 constituting the freeholds of her yeomanry, may yet be 
 seen in all parts of the country. They are the monuments 
 of an industrious, brave, and independent class of men, 
 now extinct. These lands are indeed tilled by the hands of 
 their descendants, no longer yeomanry, but peasants, almost 
 the paupers of the nation. How strikingly true this is, may 
 be seen in the fact that there are but one-third as many 
 " holdings " at the present time as one hundred and fifty 
 years ago, while the wealth and population of England have 
 doubled many times. How this has been accomplished, 
 may be seen from statements made by Professor Levi of 
 the whole taxation of Great Britain for the year 1858.* 
 
 Total Taxation. Paid by the Upper ClaBaes. Middle ClaBaea. Working Clasaee. 
 
 £73,000,000 £22,550,000 £30,930,000 £20,320,000 
 
 Prom this analysis, it appears that the amount paid by 
 the middle and working classes is equal to five-sevenths of 
 the entire revenue, while those who monopolized the landed 
 estates of the country, and an enormous proportion of 
 its public stocks and circulating capital, paid but two-sev- 
 enths. 
 
 We have said that no large national debt has ever been 
 paid or discharged, except by repudiation ; nor does it 
 appear that such debts are likely ever to be paid, unless the 
 war policy of the world is changed. All have been created 
 by war, and are perpetuated by constant demand for addi- 
 tional armaments. 
 
 Tlie economy of a national debt, under the modern 
 financial system, must always impoverish the productive 
 classes. Its entire influence on them is oppressive. It 
 deprives them of their honest reward, by a false currency, 
 which robs them of a large share of their nominal wages ; 
 it imposes upon them, through indirect taxation, an undue 
 proportion of the public burdens, and is, in fact, a stupen- 
 dous enginery for depressing them, though perhaps not so 
 
 * Levi on Taxation, p. 82, London edition. 
 
CHAP. XV.] INHERITANCE AND BEQUEST. 371 
 
 intended. Hitherto we liave known little of its effects in 
 the United States. Until the present time, we have felt 
 little pressure from public indebtedness and consequent 
 taxation ; but the case is now altered. We have an im- 
 mense debt, and a larger amount of annual interest than 
 any other people on the face of the earth. Hence the great 
 importance of understanding the whole subject of modern 
 finance by the people themselves; for without such an 
 understanding of it, however much they may suffer, they 
 cannot hope for relief. They must know the cause of their 
 sufferings, or they cannot apply the remedy. 
 
 CHAPTE-R XV. 
 
 ON THE LAWS OP INHEBITANCB AND BEQUEST. 
 
 Men die, and the property they have acquired or held during 
 their lives must pass into the possession of others. May the 
 person who is about to leave the world say to whom his 
 wealth shall immediately descend ? May he go farther, and 
 say to whom it shall descend for all coming time ? May 
 he go farther still, and determine what specific use shall be 
 made of his wealth for ever ? Or shall the laws of the State 
 decide the questions, — to whom, for what purposes, and for 
 how long, the wealth of deceased persons shall descend ? 
 Does the world and its wealth belong to the living or the 
 dead, or to both in common ? If to both, what portion 
 should belong to each ? If the dead are allowed to control 
 a part, why not all ? Which party, the living or the dead, 
 will most intelligently decide how wealth can be advan- 
 tageously employed in production, or in any other mode, for 
 the benefit of the living ? 
 
 These are the points involved in the subject of Inheri- 
 tance and the testamentary disposal of property, and are 
 
372 DISTRIBUTION. [BOOK IV. 
 
 important in an economical point of view, irrespective of 
 all other considerations. These questions have been prac- 
 tically decided by the laws and institutions of society in 
 different ages and countries. Governments have always 
 interfered in regard to the estates of deceased persons, to 
 such an extent as to prescribe limitations and conditions. 
 So far as these have been in harmony with instincts of 
 humanity, and the laws of value, they have been beneficent 
 in their operation. But all the wealth, all the institutions, 
 all the interests of society, should ever be regarded as fully 
 under the control of the existing generation of men. This 
 should be a fundamental principle in civil polity ; and, if law 
 may interfere in this matter at all, it may do so to any 
 extent the public interest shall demand. 
 
 Mr. McCulloch,* in his " Principles of Political Econ- 
 omy" (page 267), says: "Every man should have such a 
 reasonable power over the disposaf of his property as may 
 be necessary to excite his industry, and to inspire him with 
 a desire of accumulating. But if, in order to carry this 
 principle to the furthest extent, individuals are allowed to 
 chalk out an endless series of heirs, and to prescribe the 
 conditions under which they shall successively hold the 
 property, it would be taken entirely out of the market ; it 
 might be prevented from ever coming into the hands of 
 those who would turn it to the best account ; and it could 
 neither be farmed nor managed in any way, however advan- 
 tageous, that happened to be inconsistent with the will." 
 
 Mr. McCulloch here recognizes the correct principle ; viz., 
 that the interests of those who are laboring and suffering 
 now, are paramount to the whims and caprices of those who 
 have passed from the stage of action ; in other words, that 
 the earth belongs to the living, and not to the dead. To 
 exhibit the enormous abuses and perversions to which these 
 mortmain holdings must lead, we need only refer to the old 
 
 * Author of the " Commercial Dictionary," and one of the best writers 
 of his time upon Political Economy. 
 
CHAP. ST.] INHERITANCE AND BEQUEST. 373 
 
 Countries of Europe, England especially, where millions on 
 millions of wealth are held and used, not for the purposes 
 originally intended, but often for the very opposite. Many 
 of the objects for which benefactions are thus made, become 
 obsolete or absurd ; yet the property must be held and mis- 
 used, if really used at all. 
 
 It has been said, that nothing is more unwise than to 
 attempt to bind posterity with parchment ; and, the more 
 enlightened the public mind becomes, the more apparent 
 will be the utter folly of allowing the past to govern the 
 present. 
 
 Yet the author just quoted, advocates, with the most sur- 
 prising inconsistency, the laws of primogeniture, and makes 
 an argument, though a very weak one, in favor of giving 
 the whole estate to the oldest son ! — an illustration of what 
 has too often been found in the writings of English econo- 
 mists, who seem generally to assume, in advance, that the 
 laws and institutions of their own country are right, and 
 therefore the laws of wealth must be made to appear in 
 conformity with them. Mr. McCuUoch would probably 
 never have been made a public officer, and held a lucrative 
 position under government, if he had taught the opposite 
 doctrine. 
 
 In some countries, the laws have not only provided for 
 the manner in which wealth may he disposed of by testa- 
 mentary provisions, but have often ordained that certain 
 estates shall he inalienable. Thus, the landed property of a 
 people, seized by violence, has been made a perpetual inher- 
 itance to the favored parties and their descendants for ever. 
 This class of persons has often been invested with the 
 powers of government ; and class legislation has strength- 
 ened and increased what force or fraud had achieved. 
 
 So far as a class, more or less strictly limited, or highly 
 distinguished, reaches a position of property or influence 
 by moral perfections, by high intellectual endowments, or 
 by successful business .operations, agreeably to the laws of 
 
374 DISTRIBUTION. [BOOK IV. 
 
 "wealth, and under the test of ordinary competition, it is not 
 taken out of the principles heretofore laid down. But so 
 far as it has been placed arbitrarily in the possession 
 of large properties, and is maintained so by thwarting 
 the action of natural laws, it is by that removed from the 
 primitive rule of distribution, and requires to be separately 
 considered. We shall regard it only from an economical 
 point of view. 
 
 The nobilities of the world have, in fact, been formed 
 off-hand, generally out of the personal favorites of the 
 monarch, or distinguished soldiers, by the grant of large 
 privileges and valuable estates. Would this perpetuate a 
 nobility ? On the one hand, we have the argument, a priori, 
 that the possession of wealth tends to secure its own con- 
 tinuance, both because possession is nine-tenths of all the 
 points, and because the vis inertice is against a change ; that 
 the family which has property to-day has a better chance, 
 other things equal, to have it next year or next century, 
 than those who have it not. But other things are far from 
 equal, which introduces the argument from experience ; viz., 
 that estates tend to go out of the hands of any special 
 class. The forces that scatter are stronger than those that 
 hold together. Outside is a hostility to the individual ap- 
 propriation, that never ceases, arising out of the desires of 
 the entire community for that particular property. There 
 is not a sentient being who has not the instincts that would 
 impel him to seize it if he could. Within, to hold the gates 
 against the assault of the whole world, is the solitary pos- 
 sessor. His strength must some time fail ; his vigilance, 
 some time relax. 
 
 Such, in a figure, is the tendency of wealth to scatter. 
 By an order of things in which we can seem to see great be- 
 nevolence, no family or class can secure the integrity of its 
 estate. Otherwise, property would tend to aggregate itself, 
 so as to crush competition, and leave the greater part of 
 the world destitute. As it is, the foolish son dissipates the 
 
CTHAP. XV.] INHERITANCE AND BEQUEST. 375 
 
 gatherings of the wise father, and alienates the lands that 
 have been annexed, acre after acre, by prudence, and fru- 
 gality. A single break in the succession of industry and 
 economy will scatter the accumulations of ages. This 
 liability of the rich is the property of the poor. Just as 
 surely as the lapse of ages wears down the craggy moun- 
 tain-tops, to form the soil of the humble valleys, so surely 
 do aggregations of wealth gravitate every hour to the gen- 
 eral level. 
 
 To contravene this provision of nature, the law of the 
 land often shuts in these estates by arbitrary enactment 
 or judicial interpretation, and so keeps out the busy, unre- 
 lenting competition, which otherwise would, sooner or 
 later, bring the proudest structure to the ground. All 
 such legal arrangements may be summed up in — 
 
 THE LAWS OP PRIMOGENITUEB AND ENTAIL. 
 
 1st, Of the rightfulness of such laws. 
 
 In the order of nature, no man brings with him into the 
 world a store of wealth for his subsistence and support 
 through life, or finds it waiting especially for him. His 
 means of livelihood are to depend on the inborn faculties 
 of appropriation, on the store of wealth already existing 
 from which these may draw, and on the natural agencies 
 of production which they may employ. But if the latter 
 conditions are removed, and the man is forbidden access 
 to the fields of labor, he is condemned to be destitute, in a 
 greater or less degree, no matter how well endowed, or how 
 fully he obeys all economic laws. With these open to him, 
 he is certain of success. It hinders not at all, that all the 
 wealth of the world is now taken up, that every inch of 
 ground is possessed. Though utterly without legal claim, 
 he is yet, in his faculties of industry and appropriation, 
 sure to become the owner of some part of it, at least suffi- 
 cient for his wants. 
 
376 DISTEIBUTION. [BOOK IT. 
 
 The tiny tree pushes its way through the matted sod. It 
 comes out, one little stem, two little leaves. The squirrel 
 looks disdainfully over it. The ant can gnaw its trunk. 
 Pounds of atmospheric weight are already on its fluttering 
 expanse. Yet it stands. The world and the air are now 
 absolutely full, present not one inch of vacant space. The 
 universe seems to have no room for the little stranger. Yet 
 it grows. Simply confiding that the world had need of it, 
 the seed broke its shell, and crept upward to the light. 
 And in the same unshrinking faith of a mission and of 
 room that shall be provided, it grows, atom by atom, till the 
 biparted leaf has become the giant tree, and takes its place 
 in the crowded universe, with always room to grow, and 
 never an inch to spare. 
 
 So, in the state of nature, man enters on life, feeble and 
 destitute, but with powers of absorption and assimilation 
 as evident as those of the tiny tree. These, not human 
 charity or human jiistice, award the world's wealth, and 
 sustain the lives for wise purposes created. But; if the tree 
 is planted in a pot, its capacity of growth is dwarfed to the 
 dimensions of the place in which it finds itself. It cannot 
 enlarge ; not because its vital germ is deficient, but because 
 it is placed in a false position, and deprived of natural 
 aliment. If the confines are too close, the tree starves and 
 dies. 
 
 This is precisely the injustice and mischief done by laws 
 of primogeniture and entail. So far as they operate, they 
 shut off the industry of the world (and the wants which 
 that industry must supply) from its proper field. We have 
 said that the liability of wealth to dissipate is the property 
 of the poor. It is so. A man entering the world may have 
 no claim to any share of its previous gains ; but he has a 
 claim to a chance at them. This is the provision nature has 
 made for his maintenance. This is his inheritance. He 
 has a right, at least as complete as the plant, to get his 
 growth and his support out of the soil about him. There 
 
CHAP. XV.] INHERITANCE AND BEQUEST. 377 
 
 is nothing in this view agrarian or communistic. It admits 
 that property should be sacred ; but it asserts that it should 
 be alienable. The right of property does not include the 
 right of the wise to get wealth, and of fools to keep it. To 
 shut up any part of the world, for the benefit of one, is to 
 rob all others, not of it, but of their chance to acquire it 
 lawfully. A system of entail dwarfs all existing industry, 
 so far as it operates. It has even proceeded to beggar an 
 entire people. There is, therefore, no economic censure too 
 severe for it. 
 
 2d, But, besides the general objections to such a system 
 on the grounds of justice, we meet certain considerations 
 of expediency that deserve notice. 
 
 (1) The capital thus kept together by laws forbidding 
 alienation is often so large that it cannot be managed by 
 individuals for the best economic advantage. Of course, a 
 government might provide for the preservation of properties 
 not excessive. But it is not such that have been made per- 
 petual ; and there can be no occasion to lock up, in this 
 way, moderate estates. Great accumulations will be made 
 under any free and peaceful government ; and it is neither 
 the right of government, nor the interest of society, to inter- 
 fere to scatter them. The sacredness of property makes a 
 greater demand than the mere productiveness of capital. 
 Besides, this has been collected, and is kept together, by 
 economic virtues, which should ever receive their natural 
 reward. But it is not in the order of things that such moun- 
 tains of wealth should remain. They will be rent asunder, 
 or worn away, in the lapse of comparatively few years. 
 
 Many reasons might be given why wealth, in such aggre- 
 gations, is never so efl&ciently managed ; but the assertion 
 hardly requires proof. We find, in certain countries, exten- 
 sive systems of polygamy ; but it is notorious that popu- 
 lation does not advance as with those people where the 
 Christian law of marriage is observed. Monopoly of wealth 
 no more tends to reproduction than monopoly of wives. All 
 
378 DISTRIBUTION. [BOOK IT. 
 
 this is true, even if the desire of increase remained the same ; 
 but, — 
 
 (2) Such aggregations of wealth destroy, in great part, 
 the desires which lie at the root of all activity. The spring 
 of industry is want. Let us take into calculation the sum 
 of one million of dollars. It cannot be doubted, that this, as 
 a reproductive agency, would be quickened by more desires 
 if in the hands of one thousand men, than if in the hands 
 of only one hundred. Without an attempt at mathematical 
 accuracy, it is certainly true that the machinery of repro- 
 duction would be set in motion by a deeper and broader 
 stream of human wants. It is evident, that the impulse of 
 the mass, the one thousand, will be greater ; but it may be 
 questioned whether the impulse of each one is not greater 
 in the former than in the latter case. Certainly the neces- 
 sities of each will be more pressing : why not his activities 
 more aroused ? How much mightier, then, the current of 
 energy with which the greater body moves on to its object ! 
 
 On the other hand, if we suppose the sum to be vested in 
 the possession of one person, we shall have the desires 
 greatly weakened. This is not the man who, " from the 
 rising of the lark to the lodging of the lamb," toils with 
 Tinrelaxed nerve ; to whom every gain is needful bread ; 
 from whom every saving removes a pain. 
 
 Erskine, as his courage sank in dismay on his first plead- 
 ing, seemed " to feel his children pulling at his gown," and 
 so took heart to go on. Everywhere it is the hands of 
 the little ones, plucking at the sleeve, that elevates labor 
 into heroism. 
 
 (3) Such aggregations draw off an undue proportion of 
 wealth into luxuries. This is the necessary consequence 
 of what has just been exhibited ; while its own results will 
 appear more specially in the department of " Consumption." 
 When the stern pressure of necessity is removed from 
 human activities, they bound into a thousand sports and 
 caprices. 
 
CUAP. 2V.] INHERITANCE AND BEQUEST. 379 
 
 (4) Such aggregations of wealth often come to men not 
 competent to administer them, either in use or enjoyment. 
 This appears in the very necessity of a law of entail. 
 
 Under a free system, capital is sure to go into the hands 
 best fitted to manage it for the highest economic good. It 
 may pass through strange experiences, and take on many 
 doubtful forms ; but it never, for a moment, escapes from 
 the grasp of economic laws, and must, at the last, reach 
 and rest upon true economic desert. 
 
BOOK V. 
 CONSUMPTION. 
 
 CHAPTER I. 
 
 DIVISIONS OP THE SUBJECT. 
 
 There is a production, and there is a destruction, of wealth; 
 but the latter is not the subject of scientific inquiry. Its 
 phenomena may, at times, be prodigious, terrific ; its effects 
 may be most baneful and grievous ; but there is no philoso- 
 phy of it. It is all either unintelligent or malicious. Sci- 
 ence is only of what is good, or may be made good ; and 
 of what is amenable to laws, either of human direction or of 
 human comprehension. The flood that drowns a thousand 
 farms, the storm that whelms a fleet, the earthquake that 
 shakes a city to the ground, are not so important to the 
 eye of philosophy as the difference between yesterday's leaf 
 and to-day's. 
 
 It is not, therefore, with wealth, as disposed of in destruc- 
 tion, but in consumption, that we have to speak. 
 
 Consumption is the use of wealth. . 'It is precisely the con- 
 verse of production. If production were, on the one hand, 
 the creation of an article, consumption would be its annihi- 
 lation. But as human labor cannot bring one atom into 
 existence, so neither can it return one to nothingness. 
 Since man's efforts expend themselves in arranging matter 
 into certain desirable forms, so man's satisfactions do, 
 directly or indirectly, soon or late, exhaust those properties 
 [3801 
 
CHAP. I.] • DIVISIONS OP THE SUBJECT. 381 
 
 or peculiarities of form that have been imposed on matter ; 
 and leave it, in the act and for the time, vacant of the ele- 
 ments of value. This result is reached in the consumption 
 of wealth. 
 
 There can be no use of wealth, without this change of 
 form ; while tlie merest change of form oftentimes answers 
 all the conditions of consumption. This consumption may- 
 be for any purpose, — for luxury, wastefulness, or reproduc- 
 tion ; may be within any time, — from the slow wear of the 
 precious metals to a perishing that is almost simultaneous 
 with the making ; may be in any degree, — from a total dis- 
 appearance, as when wood is burned, to a change which the 
 most practised eye can hardly detect. 
 
 In the economical sense, iron ore is consumed when it is 
 wrought into chains and bars. These, again, are consumed 
 when they are arranged into a bridge, though each may still 
 retain its single shape. And, when the bridge has been 
 worn out in time, it is said to be consumed, though it still 
 remains as an element in all articles which have received 
 value by carriage over it. 
 
 Each one of these changes is an act of consumption ; and 
 at each. the character of the change determines the new state, 
 and the result, both in individual or national wealth. At 
 each, there is an application to a new purpose, and a new 
 economical direction is imposed. 
 
 While the iron remained in bars, it was liable to be 
 wrought into a bridge, as it was ; or into ploughs, for the 
 tillage of the earth ; or into weapons, for the destruction of 
 man. When it was directed to one of these, a new object 
 was produced : it was consumed ; not annihilated, but 
 changed in its form and purpose. It is evident that the 
 effects on society and on industry would be vastly differ- 
 ent, as one or the other of these directions should be taken. 
 The bridge itself might be used for facilitating commerSe, 
 or for transporting armies ; and, in each case, the new appli- 
 cation would be a consumption of the article, the new pro- 
 
382 CONSUMPTION. [book v. 
 
 duct and the new result in wealth being determined in the 
 choice of uses to which it should be put. 
 
 The seed is consumed when it is planted in the ground 
 to bring forth one hundred-fold. The cigar is consumed 
 when it goes off in smoke. 
 
 Such consumption of wealth is constantly taking place in 
 industrial society ; and in this light we see the great impor- 
 tance of the principles which govern in this department: 
 what momentous decisions are made at each change of the 
 form imposed by labor on matter ; how the wealth of the 
 world goes up or down, with the new direction given it. 
 Although such consumption comes far more slowly in some 
 instances than in others, and seems at times to be indefi- 
 nitely delayed, yet it is true that wealth has its generations, 
 like the race of man ; that, in so long a time, all the present 
 accumulations of labor will have expended themselves ; and 
 that upon the provision made for reproduction will depend 
 the condition of the future. The world might be stocked 
 full of useful and precious goods, yet become seedy m ten 
 years, and beggarly within the life of man. And not only 
 is the change of form and the new direction of vital impor- 
 tance ; but it is made so frequently, in such multitudinous 
 ways, often so silently and unobserved, always with so 
 much of complication and uncertainty, that the principles 
 which should control it have an interest at once, and a 
 difficulty beyond those which' belong to any other part of 
 political economy. 
 
 It would be impossible to give a catalogue of all the dis- 
 tinct acts of consumption that take place in the narrowest 
 field and in the shortest time. It might be even impossi- 
 ble to decide distinctly when any one of them actually began 
 or ended ; so that, if the science depended on determining 
 them accurately, we should be forced to close our inquiries 
 at once, as useless. No eye can detect their processes ; no 
 thought can reach down to the real spring of economical 
 life. But we can find in the general results, as they come 
 
CHAP. II.J MISTAKEN CONSUMPTION. 383 
 
 out in national or individual experience, enough for practical 
 instruction and guidance. 
 
 We cannot see the grain grow, or fix its daily increments ; 
 yet we know the fact of its growth, and can study the condi- 
 tions of its best development. So we cannot mark the peri- 
 ods of wealth, or note its phases ; yet in its great harvests 
 we can see the kindness or unkindness of the soil, the re- 
 freshing of the showers, or the parching of the drouth. 
 
 To employ a figure : Exchange and distribution form the 
 trunk of the tree, between the two branching worlds, above 
 and below. Through that narrow compact body passes all 
 that the intricate web of roots has to give, the product of 
 their silent, humble work ; all that the interlacing limbs and 
 boughs, more fortunate and conspicuous, have to spend. 
 Below is the world of production, where myriad agencies 
 appropriate and assimilate the properties of the soil. Above 
 is the world of consumption, where is given off, in every 
 variety of foliage and flower and fruit, of use and beauty, 
 what has been long and patiently gathered. 
 
 The consumption of wealth may be regarded as of four 
 kinds, — mistaken, luxurious, public, and reproductive. We 
 shall speak of them in that order. 
 
 CHAPTER II. 
 
 I. MISTAKEN CONSUMPTION. 
 
 What shall we do with that large class of industrial ac- 
 tions which bring no reward to those who perform them ? 
 
 We find labor and capital applied with the purpose of 
 reproduction, but without result. And this not occasionally ; 
 but the share of failures can almost be determined with 
 certainty, and is found to bear no inconsiderable proportion 
 to business enterprise the world over. Indeed, in some 
 occupations, entire success forms the exception. 
 
384 CONSUMPTION. [book v. 
 
 These cases of mistaken industry would present very few 
 questions but for the secpndary uses to which we sometimes 
 find them applied. Gibbon describes the towers, citadels, 
 and palaces of Rome as built on the foundations of the 
 ancient temples, theatres, and arches. We can draw a 
 figure thence to our modern industry. The fortunes of one 
 generation often rise from the failures of that which went 
 before. If we trace the history of many of the most 
 flourishing establishments, we shall find them resting at 
 last on some great outlay of capital, or expenditure of labor, 
 that ruined some man or corporation, and finally went to 
 pay taxes or office rent. Such has been the fate of many 
 of the railroads of the United States ; so much so, that it 
 has passed into a proverb that such stock must be sunk once 
 to pay at all. A railroad is established, starts with brilliant 
 prospects, and, after a descending course for a few years, 
 arrives at bankruptcy. Even so, when the stock can be had 
 for nothing, it may not pay for running, and lies idle, or 
 half run. But perhaps the industry of the country takes 
 a sudden start, or pushes up gradually, finds the old track 
 there, and demands .that its goods be carried to market. 
 The experiment is made ; and soon the road is worked to its 
 utmost capacity, enriching holders, who had forgotten the 
 existence of their stock. 
 
 The same thing occurs frequently in the course of indi- 
 vidual enterprises. Men undertake great matters, launch 
 into immense expenses, and, after sinking the full amount 
 of their capital and credit, stop hopelessly. The works 
 stand idle and melancholy for years, till some new industry 
 or some shrewder manager takes them at half cost or for 
 nothing, and gets a fortune out of them. 
 
 When one of the later emperors would build a monu- 
 ment of his achievements, he was forced to use fragments 
 of older architecture ; and so, history tells us, the head of 
 Trajan frowned from the arch of Constantine. Many a 
 modern fortune is pieced out of the wreck of earlier 
 industry. 
 
CHAP. 11.] MISTAKEN CONSUMPTION. 385 
 
 This, of course, presents only the best view of such mis- 
 taken investments. There are cases where industry, instead 
 of coming back to re-animate the lifeless body by sudden 
 movements, forsakes even the habitations it has delighted 
 in ; and the machinery of to-day becomes old-fashioned 
 and useless under the surprising inventions of to-morrow. 
 Every locality has its " folly," named from some hapless 
 adventurer, who undertook more than he could carry, and 
 which has reached a death from which there is no resurrec- 
 tion. Long lines of railroad stretch across the country, 
 forsaken, apparently for ever, of passengers or freight. 
 Mills and factories stand tenantless till they crumble. 
 These only enumerate the gigantic failures of industry ; 
 while the amount of labor and capital misapplied in ordi- 
 nary ways is beyond computation. The three causes for 
 these industrial misadventures are as follows : — 
 
 1st, Capital is fallible in its calculations. Plausible 
 schemes, based on views that are partial or temporary, draw 
 even the ablest financiers into such investments. It would 
 be out of reason that such errors should not be committed, 
 even with the keen scent of personal advantage and trained 
 observation. 
 
 2d, Extravagance is, however, the prime cause of busi- 
 ness failure. Men, in originating enterprises, sanguine in 
 feeling, and exhilarated by the possession of large capital, 
 almost invariably indulge in a scale of outlay which the 
 return does not justify. They find it unpleasant or undig- 
 •nified to omit any thing from the completeness of preparation 
 out of considerations of economy. The result is, that the 
 expense of starting drags on them through the whole course, 
 and perhaps ruins them. They are kept down all the time 
 by the original outlay, and often have to vacate their 
 magnificent establishments for the entrance of parties who, 
 getting them at half price, can afford to keep and work 
 them. 
 
 3d, Another reasoa is found in those accidents or great 
 
 26 
 
386 CONSUMPTION. [book v. 
 
 developments which transfer business from one seat to 
 another, just as wells give out with no apparent cause. 
 The axis of commerce shifts its place, and leaves tropical 
 bones and tropical fruit high on the northern hills. 
 
 What shall we do in our discussion with such invest- 
 ments of labor and capital ? Shall industry carry them on 
 its books, like bad debts, in the hope that something may 
 some time come of them ? Political economy here takes a 
 lesson from the legislation by which obligations are out- 
 lawed after -a certain time, and declares that wealth, unpro- 
 ductively applied, is not capital ; that it must be struck out 
 of the account of the world's goods, to be reckoned either 
 as loss or luxury. Whatever, from any cause, fails to rec- 
 ompense its outlay, though it may still have some utility, 
 is to be considered as so much added to the common 
 agencies of society. If any thing comes out of it, this is to 
 be counted as so much received from the gratuitous gifts of 
 nature. Whoever, by shrewdness or chance, has possession 
 of them, is fortunate. A canal or railroad, whose stock has 
 been once sunk, stands in just the same relation to political 
 economy as do rivers and natural causeways, which facili- 
 tate travel, and render production easy, but are not capital, 
 in the scientific sense of the term. 
 
 CHAPTER III. 
 
 n. LUXURIOUS CONSUMPTION. 
 
 Luxury, — what is it, and what are its effects, economically 
 considered ? Noah Webster defines it as " a free or 
 extravagant indulgence in the pleasures of the table, as in 
 rich wines and expensive diet, or delicious food and liquors; 
 voluptuousness in the gratification of the appetites, or the 
 free indulgence in costly dress and equipage." We must 
 
CHAP. III.] LUXURIOUS CONSUMPTION. 387 
 
 give a far wider definition for our purposes, in the science 
 of which we treat. A fine house is certainly as mucli a 
 luxury as fine clothes or costly wines ; so are statuary and 
 paintings ; so are a vast number of articles of common con- 
 sumption in every condition of life. It is quite clear, too, 
 that \\'hat would be esteemed a great extravagance in the 
 royal establishment of Dahomey would be far otherwise in 
 the humblest dwelling of Europe. The wigwam and the cot- 
 tage exhibit very different phases of luxury. The loathsome 
 poisons of " Grin Lane " are as truly luxuries, perhaps in the 
 sense of Webster more so, than the "rich wines" and "deli- 
 cious liquors " of the palace. Idleness is a cheap enjoy- 
 ment in some spheres of life ; but many a seamstress's wealth 
 cannot buy her the time to weep. 
 
 " My tears must stop, for every drop 
 Hinders needle and thread." 
 
 It is apparent that a specific definition of the term "lux- 
 ury " is impossible ; yet we can give a general formula that 
 will be sufficient for our purpose. Luxury in the commu- 
 nity is indulgence in those expenditures which are beyond 
 the reach of the great mass of the people : luxury in the 
 individual is indulgence in those expenditures which are 
 beyond the strict necessities of maintenance, according to 
 the customs of the social or economic class to which he 
 belongs. It is not luxury for the ambassador of a nation 
 to pay thousands of dollars for a great disagreeable state 
 carriage, if the etiquette of court prescribes it : it is lux- 
 ury for a laborer to pay five cents for a ride to his work, if 
 he could as well walk. 
 
 Of course, this standard will vary in different countries, 
 the inhabitants of one being able to command many indul- 
 gences which are denied to others. The luxuries of 
 Europe are daily fare in Asia, while articles of common de- 
 cency in an Irish hovel are unknown in the court of Delhi. 
 Nor only this : the scale of luxury changes with every year. 
 
888 CONSUMPTION. [book v. 
 
 Those articles which in one generation indicate wealth, 
 become common property in the next. This results from 
 the general progress of society and the constant advance of 
 economic powers. As production rises, it covers the monu- 
 ments of earlier taste or grandeur. 
 
 The direction, too, of luxurious consumption varies with 
 the culture and the aspiration of those able to indulge in it. 
 In one circle, it will run to horses and hounds ; in another, 
 to paintings and statuary : some will turn for enjoyment to 
 architecture ; others, to dress and equipage ; more, still, 
 to feasting and dissipation. 
 
 The ground of luxurious consumption is, perhaps, best 
 determined by the boundaries of its neighbors. It embraces 
 nothing that is spent in the purpose of a reproduction, more 
 or less immediate and direct. The necessary consumption 
 of a people depends chiefly on absolute wants, is not greatly 
 a matter of choice, fancy, or taste ; but its luxuries, those 
 things which it may or may not have, depend entirely, for 
 their kind and degree, upon moral and intellectual charac- 
 teristics. Consequently, they furnish an index of the 
 national civilization. 
 
 1st, Do luxuries directly encourage industry ? 
 
 We shall reach the truth of this by illustrations. When 
 William IV. came to the throne of England, he erected a 
 tower at one of the entrances of the palace where he made 
 his residence. It cost $500,000. There was no pretence 
 of utility whatever in the building. It was pure luxury. It 
 was an elegant structure. It gratified the monarch's taste. 
 It was highly ornamental to the castle and the grounds. 
 What was the economical effect ? The erection gave em- 
 ployment to mechanics and laborers ; it made a call for 
 materials and architectural skill ; it made trade brisk in the 
 neighborhood. Was it therefore beneficial ? Suppose it 
 had accorded more with his majesty's views to take the 
 same money, and with it erect two hundred cottages on the 
 crown lands, at an expense of $2,500 each. This would 
 
CHAP. III.] LUXUBIOUS CONSUMPTION. 389 
 
 have called for as much labor and materials as the tower ; 
 would have given as great an impetus to trade. At the 
 same time, it would have brought into existence comfortable 
 residences for the families of two hundred laborers. If the 
 cottages were rented at a moderate rate, the income would 
 be equal to a fair interest, and the dwellings would stand 
 for generations, a valuable property, conferring happiness 
 and comfort on a thousand people. 
 
 But there is more to come. We said, " take the same 
 monej." What money? Whose money? Now, in argu- 
 ments for govermental luxury, it is always assumed that 
 the money is in the treasury. But how came the money 
 into the public coffers ? Who furnishes the money ? The 
 sober, steady industries of 'the country. The money to 
 make King William's tower came from Leeds and Shef- 
 field and Manchester. It encouraged one class of artisans. 
 True. Whom did it discourage ? A class that is always out 
 of sight in such reckonings, — the class that pays the taxes. 
 
 Then, so far, it only amounts to changing the capital of 
 the country from one hand to another ; employing one class 
 by turning oiF another ; a change that is never made with- 
 out distress and loss. 
 
 There is still more to be said. If the wealth had remained 
 in the hands of the manufacturer, say, it would have been 
 capital, and supported workmen this year. So has the 
 tower. But, in the latter use, next year it will be no longer 
 reproductive ; while, in cotton-spinning or land-draining, it 
 would grow with every day, and furnish unfailing employ- 
 ment for labor. A thousand dollars spent in luxury will 
 pay a thousand dollars of wages (less certain little items). 
 A thousand dollars employed as capital will, in ten years, pay 
 twenty thousand dollars of wages. Such is the difference 
 in results. 
 
 A similar instance is that of a man expending ten thou- 
 sand dollars on an enl&,rgement of his house for purposes 
 of grandeur or enjoyment, or laying it out in draining and 
 
390 CONSUMPTION. [book V. 
 
 improving fifty acres of land. In either case, he pays a cer- 
 tain amount of wages ; but, in the latter, he has added a 
 permanent value to the country ; increasing his own annual 
 income, and affording the means of employing a certain 
 amount of labor to the end of time. 
 
 Wealth, employed as capital, is an annuity made out in 
 the name of the laborer, and good for life. 
 
 There is no possible case in which the employment ftf 
 wealth, for purposes of luxury, as opposed to reproduction, 
 can be said directly to advantage industry. It is only the 
 fierce blaze of the burning house, at which a few may be for 
 a moment warmed, but which goes out, leaving desolation 
 where was habitation and home. 
 
 2d, Do luxuries indirectly encourage industry ? Here we 
 must turn sharply on our previous decision, and see a fur- 
 ther meaning in luxurious consumption than first appeared. 
 Unquestionably, a wholesome luxury is one of the most im- 
 portant principles of production. What is it that kindles 
 the desire of acquisition ; that keeps the hand strong to 
 labor ? Is it not the hope to spend ? For what else, the 
 wretched miser excepted, do men toil early and late ? It is 
 the promise of future enjoyments that calls out half the work 
 of the world. It is tliis that makes the difference between 
 nations. No man passes by the abode of leisure and refine- 
 ment without receiving an incitement to effort. 
 
 There is one practical limitation of this principle, which is 
 of great social and economical importance. It arises from 
 the relative position of those who do, and those who as yet 
 cannot, indulge in luxurious consumption. If a few are 
 very rich, and the many very poor, the expenditures of the 
 former have very little effect on the condition of the latter. 
 Since these cannot aspire to the enjoyment of their superi- 
 ors, their ambition, instead of being excited, is depressed. 
 If, on the contrary, the interval between the classes is nar- 
 row, and the differences moderate, the luxuries of the rich 
 exert strong and increasing desires in those who are less 
 
CHAP. m.J LUXURIOUS CONSUMPTION. 391 
 
 wealthy. These desires create wealth. It is not the gifts 
 of nature, nor the constraints of law, that heap- up the 
 stores of value. It is the force with which man moves to 
 production, wholly determined, as that is, by his economic 
 desires. The luxury of European courts has no elevating 
 influence upon the masses : quite otherwise. Robbed to fur- 
 nish the means of others, they are hopeless of ever attain- 
 ing to such fortune themselves. But where the grades of 
 society are fixed only by differences of natural endowment, 
 and so are moderate and regular, rising by easy steps, the 
 entire population becomes inspired with the piirpose of 
 reaching a higher position. In such a state, the imaginar 
 tion can hardly run ahead of wealth. 
 
 We have, then, attained the principle, that luxurious con- 
 sumption, while it directly gives no help to industry, but 
 rather spends in one hour's enjoyment the provision of 
 months or years, may yet, by its influence on man's desires, 
 create a productive force which shall make its extravagance 
 seem economy, its waste appear frugality itself. 
 
 But this is only true of harmonious, temperate, and well- 
 proportioned luxury. There are indulgences, great courses 
 of indulgence, which, while they excite momentarily to pro- 
 duction for the means of gratification, do yet, by their certain 
 and inevitable effect, on the physical and mental powers 
 of the individual, by their demoralizing and perverting influ- 
 ence on the community, prostrate industry, and overturn 
 the foundations of the state. Many as are the unfortunate 
 possibilities which attend upon production and distribution, 
 they are all inferior in interest to the momentous decisions 
 of consumption ; and here in luxury, as we find the spring 
 of all beneficent activity, we also find the root of all eco- 
 nomic evils. So vast and so important are the issues here 
 involved, that many of them are taken away from the politi- 
 cal economist by the statesman or the moralist. We do not 
 propose to follow these principles into all their results ; con- 
 tent with only indicating their starting-point and direction. 
 
892 CONSUMPTION. [book v. 
 
 Such is luxurious consumption, in its definition and its 
 general principles. "We shall further discuss the degree to 
 which it is, or may be, carried in any community. 
 
 CHAPTER IV. 
 
 ON THE DEGREE OP LUXURIOUS CONSUMPTION. 
 
 "We mistake, if we attribute luxuries to the rich alone. 
 It is estimated, on the best authority, that of the taxes paid 
 by the laboring poor of England, out of every twenty-one 
 shillings, eleven shillings and fourpence were paid for what 
 was, in the economic view, not necessary, and, in the 
 sanitary view, not beneficial. If we estimate the amount 
 expended for luxuries by the corresponding class in our 
 own country, we shall find it as much greater as nature is 
 more liberal, labor more free, taxes lighter, and the working- 
 man more ambitious and sanguine ; while, if we turn to 
 Prance, we find the proportion much smaller; yet even 
 here the laborer has his holiday, and his theatre or fair. 
 
 Paradoxical as it may sound, it may be said that a 
 certain amount of luxuries forms a part of the necessary 
 wages of the laborer in these countries. Indeed, it is true 
 of all countries ; for the human mind and the human body 
 wiU have rest and recreation in some form. Man is not all 
 laborer. Some indulgence is the demand of that part of 
 his nature which looks out on another field than produc- 
 tion and accumulation. And in this light we see the vast 
 importance of such social and moral influences as shall 
 determine the laboring classes to those relaxations and 
 amusements which really refresh both mind and body, 
 and elevate the whole tone of being. K we mistake not, 
 a mighty industrial revolution, that promises effects more 
 searching and permanent than many ilkistrious victories in 
 arms, is now being accomplished by the divergence in taste 
 
CHAP. IV.] LUXUEIOUS CONSUMPTION. 393 
 
 and amusements of two nations. Great Britain has, thus 
 far, maintained supremacy in useful and ponderous manu- 
 factures ; while the artisans of Prance have been almost 
 alone in the department of elegant and delicate fabrics. 
 But the signs are clear that France is rapidly rising into 
 superiority in the former class of industries, and may yet 
 attain the primacy throughout the world. The French 
 workman is so economical, not only in his personal habits, 
 but, in handling materials and tools, has such generally 
 correct and wholesome tastes, and is so simple in his wants, 
 that his work is cheap as well as efficient. On the contrary, 
 the English laborer seeks more and more the delusive relief 
 of strong and impure liquors, and, by this, adds so much to 
 his expenses, and takes so much from his power in produc- 
 tion, as to place him at a real and increasing disadvantage. 
 It hardly admits of question, that, if the present causes 
 operate for twenty years to come, the close of that period 
 will find the most mercurial and sensitive people of the 
 world enjoying the supremacy of its weighty and useful 
 manufactures. 
 
 National taste determines, in a great measure, the de- 
 mands of wages. It is only required, by our present ob- 
 ject, that we take a good look at the luxuries of the poor ; 
 not by any means grudgingly. Indeed, we may ask why 
 laborers are not everywhere allowed more time and means 
 for enjoyment, outside the dull routine of work and the dry 
 subsistence of life. It is a wise and Christian statesman- 
 ship that seeks to enlarge the simple pleasures of the poor. 
 It is a capital charge against despotism in every form, that 
 it breaks down the power of the humbler classes, to claim 
 them. As the intelligence of laborers increases, and their 
 political franchises extend, they will assert a larger share 
 of the products of industry ; and very much of this will go 
 into what we call, not invidiously, luxuries. 
 
 But it is with regard to the richer classes that the ques- 
 tion of luxuries becomes especially important. The amount 
 
894 CONSUMPTION. [book v. 
 
 of wealth directed to these objects can hardly be over- 
 estimated. 
 
 The excise and customs authorities of Great Britain re- 
 cently made an , attempt to ascertain the shares of certain 
 articles consumed, severally, by three classes into -which 
 they divided the population of the kingdom. The result is 
 shown in the following table : * — 
 
 Class. 
 
 Persons. 
 
 Tea consumed. 
 
 Sugar consumefl. 
 
 1st, Upper . 
 
 . 1,000,000 
 
 17^ per cent. 
 
 22 1 per cent. 
 
 2d, Middle 
 
 . 9,000,000 
 
 38 
 
 38 
 
 3d, Lower . 
 
 . 18,000,000 
 
 44^ „ 
 
 39J „ 
 
 
 28,000,000 
 
 100 
 
 100 
 
 In these simple articles, which are almost included in 
 the strict necessaries of life, we see the great excess of the 
 expenditure of the upper classes. When we rise to take in 
 services of plate and sets of jewelry, galleries of pictures 
 and parks of deer, studs of horses and packs of hounds, we 
 shall be impressed with the immensity of outlay devoted to 
 the luxuries of society. 
 
 We are not surprised to hear that at Rome " almost any 
 profession, either liberal or mechanical, might be found 
 in the household of an opulent senator ; " f that one 
 thousand barbers, one thousand cooks, and one thousand 
 cup-bearers were employed in the imperial service of Con- 
 stantinople, while the chief cook had a retinue of twenty 
 menials ; that the baggage of a Persian monarch was 
 carried by twenty thousand camels, even in campaign ; that 
 Zingis Khan maintained seven thousand huntsmen and 
 seven thousand falconers ; that the revenue of two thousand 
 villages supported the temple of Sournat ; that four cities 
 were allowed for the personal expenses of the dogs of a 
 royal establishment ; J that the household of Philip II. 
 
 * Levi on Taxation. t Gibbon. 
 
 X The poodle of the Empress Liyia seems to have been neglected. If the 
 authorities may be accepted, it enjoyed the entire services of only one man. 
 — Gibbon, oh. 49, n. 155. 
 
CHAP. IV.J LUXURIOUS CONSUMPTION. 395 
 
 mimbered one .thousand five hundred, while the queen was 
 attended by four physicians. 
 
 Nor was the luxury of those times of barbarous might 
 greater than that of to-day. An easy walk with any people, 
 whether in city or country, will afford contrasts as striking 
 and painful as that between the palaces of Susa and the 
 corners into which the common ^people crept for sleep ; 
 between the mansions on the Quirinal and the holes in 
 which " Rome's rats " hid their wretched lives. 
 
 1st, What are the causes that set wealth apart for 
 luxury ? 
 
 (a) The most essential is the existence of a surplus. 
 Other things equal, the degree of luxury will be as the 
 surplus. The latter, however, will depend not so much on 
 the general mass of wealth as on its apportionment among 
 producers. 
 
 (J) The desire to gain and the desire to spend are 
 antagonistic. They meet in every act of life, and one or 
 the other must have its way. Luxury is the victory of the 
 latter passion. The mere possession of a surplus is not 
 enough. Some men remain eagerly devoted to gam, when 
 their wealth is counted in millions : others retire, satisfied 
 with the most moderate competency. The force of either 
 motive will be greatly influenced, both by the security and 
 the profitableness of investments. Every thing that renders 
 business unsafe, makes withdrawal more desirable. On the 
 other hand, every thing which raises the reward of capital, 
 takes something from the zest of luxury. 
 
 2d, To what extent can wealth be devoted to luxury ? 
 
 Gibbon gives countenance to the theory, that no state 
 can, without soon becoming exhausted, support more than a 
 hundreth part of its population in arms and idleness. This 
 is to be understood as a hundredth part of the population, 
 taken out of the able-bodied males ; say, a twentieth part of 
 these. The estimate is interesting, and has a certain share 
 of truth ; but its form shows it to be a very rude one. 
 
396 CONSUMPTION. [book v. 
 
 Does it make no difference whether this portion is simply 
 unproductive or also destructive ? Does it make no dif- 
 ference whether these idlers are maintained in the dreamy, 
 half-naked indolence of Asiatics, or in the splendid luxury 
 of courts ? no difference whether the general production of 
 the country is large or small ; whether the wants of tlie 
 people and the necessities of government are few and 
 simple, or many and great ; whether rice enough for a year 
 can be had by the labor of two weeks, as in India, or a 
 bushel of grain costs the labor of eleven days, as in 
 Lapland? The Athenian was content with his figs and 
 philosophy: the cultivated Roman craved the brains of 
 birds-of-paradise for his food, and was positive he wanted a 
 palace on the Quirinal. Which maintained the larger share 
 of its population in idleness? When Frederick the Great 
 faced all Europe in arms, rye bread and potatoes, powder 
 and lead, were all he served his army, — marshals and 
 drummers alike. By such parsimony, he was enabled to 
 make Prussia what she was, — "all sting." France, with 
 the perfection of her warlike equipment, and the fastidious 
 taste of her citizens, could not maintain a proportionate 
 number of troops, even under the conscriptions of the 
 empire. 
 
 It is in this light that we see the impossibility of fixing, 
 for all nations, all climates, all ages, a common proportion 
 of luxury that can be maintained, without bringing down 
 the standard of industrial well-being. At the same time, it 
 is plain that for each nation, at any time, there must be a 
 point beyond which wealth cannot be spent in enjoyment, 
 or time in idleness, without first oppressing the laboring 
 class by hard exactions, and afterwards debasing the entire 
 state. 
 
 • We have already anticipated the remark, that idleness or 
 leisure is a form of luxury, — a form of luxury that, in 
 either sense, is almost unknown, to some peoples, whirled 
 about, as they are, on the untiring wheels of manufacture 
 
CHAP. IV.] LUXURIOUS CONSUMPTION. 397 
 
 and trade ; a Jorm of luxury that, as idleness, is the most 
 costly of all indulgences, that corrupts all manners, perverts 
 all the offices of nature, wastes all the powers of labor, 
 and has its complete result in poverty, ignorance, and 
 political servitude ; a form of luxury which, as leisure, 
 adorns life, and makes it worth living, compacts the 
 acquirements of study and toil, re-creates and refreshes 
 the whole man, and leads upward to an eternal rest and 
 felicity. 
 
 OP LEARNING AND ART. 
 
 These, in the economic view, may have value, and so may 
 be produced, exchanged, distributed, and consumed. The 
 reward they receive, the price they bring, is in no sense 
 due to them in their own right, because they are true, 
 beautiful, or good ; but arises legitimately out of the desires 
 they gratify, and the labor they cost. It is the appreciation 
 of a service rendered. That reward will vary in form and 
 degree, at every state of society. The wandering Homer 
 was content with the most simple hospitality. The modern 
 man of letters has his rooms, his club, his carriage, his 
 opera, paid for perhaps out of very mild criticisms on the 
 blind bard of Greece. There is not a real scholar of 
 the present day who would not work ten years in the mines, 
 to hear Homer recite the parting of Hector and Andromache. 
 So differently is the same service counted in different ages. 
 Cicero, long before he reached the height of his fame, had 
 received, by will, ,£170,000, as a tribute to his genius. The 
 younger Pliny was loaded with wealth by his admirers. 
 The laureate of England drinks to the royal bounty in 
 royal wine. Blackstone's legal profits did not permit his 
 marriage till his thirty-eighth year. A popular novel or 
 sketch-book to-day earns a fortune. 
 
 Thus it is that learning and art enter into wealth. While 
 their rewards are uncertain, and apparently wayward, they 
 have yet, from the mythic days, had a place with the most 
 
898 CONSUMPTION. [book v. 
 
 substantial industries. Whatever may be true of the quality 
 of such productions, the amount of labor bestowed on them 
 obeys strictly the same laws of supply and demand which 
 govern the growth of cotton or wheat. Economical science 
 has no occasion to take them out of the same category. 
 When one man gives his efforts to any work of this 
 character, and finds one other who has a desire for it, that 
 work begins to have value, comes hereby into the domain 
 of political economy, and must submit to its principles. 
 Milton, chaffering for the price of " Paradise Lost," forms 
 no royal exception to the sovereignty of the empire he has 
 entered. 
 
 What is the character and effect of such consumption ? 
 This is a question doubly interesting, having an importance 
 to general scholarship, as well as to our immediate science. 
 Of course, learning and art have not necessarily to establish 
 an economic usefulness, in order to justify their pursuit. 
 In their own names, they have sovereignty, and claim 
 homage. But there is an economic relation which we 
 cannot overlook, and which must affect, somewhat, the 
 place which they shall be accorded in the world. In brief, 
 their effect upon industry may be defined as follows : So far 
 ■ as they give dignity to human aspirations, furnish new 
 objects to human desires, enlarge ambition, develop the 
 useful sciences, and suggest the application of new powers, as 
 the telegraph, the locomotive, and the magnet ; so far as they 
 unite and harmonize social and political divisions, — they 
 are of inestimable value ; and such consumption of wealth 
 as rewards and encourages them is seed thrown into a soil 
 more grateful than any land of fable or story. But so far 
 as learning or art tend to produce that unmanly senti- 
 mentalism which shrinks from dirty details, present duty, 
 and simple fact; that mawkish cosmopolitanism, moral or 
 political indifference, which weakens each nationality, with- 
 out promoting the union of all ; that softening of the 
 mental fibre, that dissolution of the will, which makes man 
 
CHAP. IV.] LUXURIOUS CONSUMPTipN. 399 
 
 the slave of his circumstances, and even of liis fellows ; 
 and, worst of all, that selfish fastidiousness which shuts 
 itself in from human activities and social alliances, to dwell 
 in dreams and idle imaginations, whether of philosophy or 
 art, — why, in so far, we must call such an employment of 
 time and labor, not merely unprofitable, but mischievous, 
 consumption. 
 
 SUMPTUARY LAWS. 
 
 No subject stands so peculiarly related to scientific 
 inquiry as this. There is no scheme of governmental action 
 which can present a more clear and convincing argument, 
 drawn from the nature of things, and even from experience, 
 prior to actual legislation ; while none has been more 
 eflfectually exploded by trial. There seems to be a perfect 
 reason for sumptuary laws ; yet the general sense of 
 civilization has, after full experiment, settled decisively 
 against them. 
 
 It is impossible to look about the smallest community, 
 without being grieved at the manner in which much of its 
 labor and wealth are expended. What enlightened person 
 can pass once through any street of human habitation, 
 without seeing very many instances of folly, extravagance, 
 perversion, and indolence, which are wasting the best gifts 
 of God and the fairest hopes of man ? And, when this 
 view is carried out to all the communities of a nation, it is 
 not strange that philosophers and statesmen have coxne to 
 believe most earnestly, that by salutary curbs on expen- 
 diture and spurs to exertion, by reforming dress, diet, 
 equipage, and establishment, they could multiply mani- 
 fold the comforts of the people, the resources of the state, 
 and the means of social and moral culture. And why not ? 
 That there is no reason manifest in the nature of things is 
 proved by the fact, that everywhere, and at all times, the 
 most benevolent, temperate, and sagacious, alike of political 
 
400 CONSUMPTION. [book V. 
 
 rulers and of political writers, have agreed in recommending 
 stringent sumptuary provision and inspection by law. 
 
 And yet nothing has more utterly and conclusively 
 failed. It is not that the evil is imaginary; for enough 
 wealth and power are wasted to make every human being 
 comfortable and happy. It is not that the state of tilings 
 is unsusceptible of reformation ; for the matter is one whol- 
 ly of human choice, and open to the control of the public 
 sanctions. It is not that the aggregate sense of the com- 
 munity, in matters of consumption (not of production), is 
 not, on the whole, more enlightened and less fickle than that 
 of individuals. We say, on the whole ; for there have been 
 instances in which laws were even behind the instincts of 
 the community, and proposed to compel the popular energies 
 and tastes to less advantageous forms of consumption. As 
 instances, we may cite the enactment in the reign of Charles 
 II. of England, prescribing, under penalties, the interment 
 of the dead in shrouds made of wool, for the encourage- 
 ment of that manufacture ; the Spanish Cortes, petitioning 
 in the same breath for the prohibition of coaches and 
 encouragement of bull-fights ; and all of the recent legisla- 
 tion of this country, in any form, which has taken for its 
 principle the absurdity, that to issue bonds for expenses 
 incurred in the work of destruction adds any thing but 
 weight to the national burdens, and can introduce aught 
 but grievance and faction into our politics. Yet, as we said, 
 the major will of the community would, on the whole, 
 prescribe a more harmonious and healthful consumption of 
 wealth than that which follows individual choices. Why, 
 then, has law, acting to this end, failed of its purpose so 
 universally and so manifestly, that such enactments are 
 hardly ever proposed at the present day, even by the most 
 sanguine of philanthropists ? 
 
 It is difiicult to give a full and satisfactory explanation. 
 One reason is, that such enactments are very easy of 
 evasion. Expenditure is not a matter that submits readily 
 
CHAP, v.] PUBLIC CONSUMPTION. 401 
 
 to inspection and proof. The interest of the producer and 
 of the desire of the consumer are against the enforce- 
 ment of the law. Then, again, luxury can take on so many 
 forms, can slip so readily from the grasp of definitions 
 and specifications, that the law becomes a greater trouble 
 to its officers than to its offenders. 
 
 But the grand reason is, that it is against human nature ; 
 and with this we may fairly close our objections. 
 
 Biifall these furnish no conclusion against the regulation 
 of public morals and manners in things that affect the 
 happiness and safety of the community. It is no longer 
 legislation to supplement the wisdom of the individual or in- 
 struct industry. It becomes the defence of the general good. 
 It is not a breach of personal rights, but the safeguard of 
 public liberty. If there is any habit or practice which 
 brings disease and suffering and disorder, which abridges 
 the power of labor and the span of life, which inflicts 
 misery upon the innocent and unoffending, which entails 
 expense upon the whole community for the charge of 
 pauperism and the punishment of crime, there can be no 
 doubt of the right and duty of the people to protect them- 
 Belyes, through the power of their government, by the most 
 severe and efficient laws that can be devised. To deny this 
 is to deny the validity of government itself. 
 
 CHAPTER V. 
 
 m. PUBLIC CONSUMPTION. 
 
 Theee is an economical reason for government. Without 
 the strong arm of the public force, men could not work 
 immolested, or retain the results of their labor. Without 
 law, production would be hindered directly, by the confusion 
 of society and the interruption of violence. But far more 
 
 26 
 
402 CONSUMPTION. [book t. 
 
 serious would be the secondary effects on industry. All 
 motives to the accumulation of wealth would be withdrawn, 
 by the insecurity of property. Its possession might even 
 become an object of terror. 
 
 We cannot, indeed, trace society back to anarchy ; for a 
 state of anarchy is impossible with human nature. Even 
 the savage tribes take on political forms. Like a drop 
 whose cohesion is violently broken, the public body seeks 
 to form itself anew, or at least to aggregate itself about two 
 or three new centres. Absolute isolation is not merely 
 impolitic : it is impracticable. But, as far as we can go back, 
 on the path of social order, we find industry answering 
 to law. » 
 
 To what share is government entitled in the general 
 production ? If, as we have seen, it is the indispensable 
 condition of all wealth, it can rightfully claim a part of all 
 wealth ; and that part will be, at the least, enough to sustain 
 itself in this economical function. It owns just as much 
 of this wealth it has helped to create as is necessary to 
 continue itself ; for, without this, wealth could not be. The 
 absolute necessities of government, then, afford the mini- 
 mum measure of its share in wealth. 
 
 Has government no right to more than what is essential 
 to its support in this economical function ? Its industrial 
 work embraces a wider field than appears in the simple 
 statement. In America, education is required as a part of 
 the public police ; and our eminent statesmen have estimated 
 the outlay of schools and colleges cheap, in the results on 
 order and security. In Great Britain, the church has been 
 held to be a legitimate agent of the public force, and its 
 maintenance is provided for out of the public purse. Gov- 
 ernment may employ means of influence, numerous and 
 remote, all in the interest of peace. 
 
 But has it no right to property beyond this ? Plainly 
 it has. We must not be as stringent in our scientific 
 •views as young Gobbo, and complain that " this making of 
 
CHAP, v.] PUBLIC CONSUMPTION. 403 
 
 Christians will raise the price of pork." Political economy 
 recognizes that humanity has other interests than wealth, 
 and respects the claim of government to duties and services 
 for the sake of a moral good. But such reasons should 
 appear clearly. Nothing should be taken arbitrarily, or for 
 contingent use. Man is the direct producer, and the product 
 remains in his hands. If government, as indirectly engaged 
 with him, enters with a claim to share the profits, it must 
 show cause distinctly for whatever it takes. It is the part 
 of the statesman, not of the economist, to judge of occasions 
 like these. 
 
 Having defined the right of government economically to 
 participate in wealth, two considerations naturally precede 
 the discussion of methods : — 
 
 1st, Government should undertake nothing that can be 
 left to individual enterprise. 
 
 If we admit that the difficulties which surround industry 
 are imposed for our good, and form a part of our discipline 
 and culture, political society palpably acts on a false idea 
 when it relieves the citizen of his own proper responsibil- 
 ity, care, or labor, and assumes his natural duties. This, 
 however, is not the only reason against such interference. 
 Government never does the work of individuals as well as 
 it can be done by individuals. 
 
 It is related of Herodes Atticus, that, having come upon a 
 great treasure concealed in the ground, he took it to Nerva, 
 and pressed it on his acceptance, saying, " it was too con- 
 siderable for a subject to use." — " Abuse it, then," replied 
 the emperor. The anecdote has great significance as to the 
 employment of wealth. Its abuse by the citizen is almost 
 preferable to its use by the state. If government were 
 conceived to be always wise, it would still be better, on the 
 whole, that citizens should direct their own industrial mat- 
 ters, wisely or unwisely, as might happen. But, when the 
 liability of government to err is confessed, we have a double 
 argument against taking the fee or use of wealth out of 
 
404 CONSUMPTION. [book t. 
 
 private hands. It cannot be too often or earnestly insisted 
 on, that individual, interested supervision is the grandest 
 economical condition, and should never be departed from 
 till the work becomes too vast for single hands. 
 
 2d, Government should do nothing for display. 
 
 For ages the science of politics might be summed up in 
 the word " pageantry." To dazzle the vulgar eye, and over- 
 awe the common sense of the people, by splendid equipage 
 and stately building, has been the main theory of rulers. 
 The system certainly has not failed for want of trial. 
 There have been governors who earnestly sought to prove, 
 that the power of the law and the peace of the subject did 
 not depend on show. The simplicity and austerity exhib- 
 ited by Carus of Eome, Julian of Constantinople, Elizabeth 
 of England, the Great 'Frederick of Prussia, and the Saracen 
 caliphs in all ages, stand in marked contrast with the wicked 
 and ruinous extravagance that has marked the administra- 
 tion of most of the governments of the world. 
 
 It is gratifying to believe, that, in some countries, the 
 advance of economic principles has relieved the people 
 of great burdens by limiting the display of government. 
 Imagine the storm in Parliament, had it been proposed to 
 buy the great Sanci diamond * for the British crown. Yet, 
 two centuries ago, the heart of England would have craved 
 it for the royal brow. 
 
 3d, The expense of government will vary according to 
 the circumstances and character of the people. 
 
 Some peoples have a government as simple, primitive, and 
 cheap as their clothing ; while others, no more highly civil- 
 ized, manifest an inclination to complicated and refined 
 forms of administering law, which bring a heavy burden of 
 taxation on the present, and entail permanent debt on pos- 
 terity. Some nations are obliged, by their position, to build 
 themselves around with fortifications, and maintain extensive 
 forces, just as some countries can keep out the ocean only 
 * Disposed of at private sale in 1865. 
 
CHAP, v.] PUBLIC CONSUMPTION. 405 
 
 by artificial dikes and levees ; others have a natural 
 strength, or an isolation, that is good to them as strong^ 
 armies. Some peoples can be governed readily in the plain- 
 est manner by rulers who, like the caliphs, sweep their 
 own floors, patch their own shoes, milk their cows, and live 
 on soldier's fare ; others are siipposed to require an im- 
 mense amount of pageantry to dazzle the public eye, and 
 occasional wars, wasting thousands of men and millions of 
 money, to divert the common mind from troublesome ques- 
 tions, and keep the peace at home. 
 
 Russia spends yearly three dollars a head in governing 
 her people and supporting her armies ; Prussia, five dollars ; 
 the United States, up to 1860, two and a half dollars, reck- 
 oning only the federal establishment ; Great Britain runs 
 her expenditure up to ten dollars. Political economy has 
 great charity for claims based on public considerations. 
 It allows that whatever is really necessary for peace and 
 order and property, in full view of the national peculiari- 
 ties or geographical difiiculties, is economically well spent 
 and a good investment of capital. 
 
 It is not alone the direct office of preventing immediate 
 crime, and protecting present property, that government per- 
 forms at so great cost. Civil law is an educator. It gives 
 a prospect and a security for the future ; it multiplies the 
 ambitions and the desires of all who live under it ; it ele- 
 vates the self-respect and trains the self-control of aU good 
 citizens. 
 
 Yet government charges heavily for what it does. The 
 yearly revenue of the European states is, at present, very 
 little, if any, short of fifteen hundred millions of dollars. 
 The expenditure of the United States, even if no attempt 
 is made to liquidate the public debt, will not, probably, be 
 less than three hundred millions ; and this, exclusive of all 
 the service of State and municipal government. 
 
 On the whole, it may be said of this duty of capital to 
 support government, that it pays, as an investment, what- 
 
406 CONStTMPTION. [BOOK V. 
 
 ever it may necessarily cost ; but that the expense should 
 be strictly held down to the lowest practicable figure. 
 
 DOBS PUBLIC CONSUMPTION ENCOURAGE INDUSTRY ? 
 
 We shall get the principles of such a discussion, in their 
 bare form, by taking the extreme actual cases of this mode 
 of consumption. 
 
 There have been instances in which the people of cities, 
 and even generally of States, have claimed work at the 
 hands of government, to support life ; and we find that such 
 provision has been at times really made. 
 
 "We will suppose the claim to be founded on absolute 
 necessity, no w:ork whatever being offered at private hands. 
 The state, in compassion or from fear, employs the mass 
 of its laborers on public works, and pays them from the 
 public purse. 
 
 What is the real condition of things ? It is one of two : — 
 
 1st, If the work so performed is unnecessary, having 
 been arranged solely to meet the popular emergency, this 
 is merely a mode of government charity. So much is taken 
 out of the resources of the state to maintain its indigent 
 citizens. It comes finally as a tax on all productive indus- 
 try. The classes that create values are called on to con- 
 tribute, it may be largely and painfully, to feed and clothe 
 those which do not. 
 
 How does this answer the conditions of a successful 
 charity ? 
 
 (a) Such artificial industries require great expense be- 
 yond the simple wages which the laborer receives from the 
 national treasury. If these workmen were employed only 
 in digging trenches to fill them up again, the additional 
 cost would be only for tools to work with and land to work 
 over. But government, in such cases, always maintains a 
 certain semblance of purpose. There is a pretence of useful- 
 ness", immediately or remotely. This generally calls for a 
 
CHAP, v.] PUBLIC CONSUMPTION. , 407 
 
 great amount of material, in one form or another, all of 
 which makes a dead loss to the community, not even the poor 
 getting it as charity. Such is the case where costly public 
 buildings, or vessels of war, are constructed simply to pro- 
 vide labor for the destitute. Often the expense to the state 
 is many times greater than the sum which is divided among 
 the suffering poor. There are, besides, the salaries of offi- 
 cials, in great numbers, to superintend the labor ; no incon- 
 siderable item in public industries. 
 
 (by We have, on the other hand, an advantage ; viz., that 
 this mode of receiving charity saves the self-respect of the 
 workman. If government adjusts the rate of wages intel- 
 ligently, it is certain that none but those who really need 
 employment will seek it ; and in receiving wages for work, 
 even if that work is fictitious, they will not feel degraded. 
 Of course, it is economically very desirable that the instinct 
 of self-support should be kept strong and keen among the 
 laboring class. 
 
 (c) There is also the consideration \that these artificial 
 enterprises entail a burden on the future. The work, when 
 completed, is handed over to the public authorities, to be an 
 object of costly maintenance, till happily destroyed by time 
 or violence. In this way a tax is perpetuated on the com- 
 munity for a relief that was perhaps of the most temporary 
 character. 
 
 2d, If the work to be performed is, in whole or in part, 
 necessary or desirable, the pay of the laborer is so far taken 
 out of the denomination of charity. He has rendered a real 
 advantage, — it may be to the full extent of the wages he 
 receives. Neither government nor his fellow can question 
 his right to the remuneration, or taunt him with pauperage. 
 Still, supposing this mode of employment necessary, we 
 have some important considerations presented. 
 
 (a) Though the laborer renders the full value of his 
 wages, the public often does not receive it. It is a perfectly 
 established principle, that, in most departments of industry, 
 
408 CONSUMPTION. [book V. 
 
 government cannot compete with individuals. The dis- 
 honesty and indifference of its agents need not be dwelt 
 on here. It is a recognized maxim of business, that self- 
 interest and personal observation are the conditions of 
 that intelligence and economy which secures success. How 
 entirely evident it is, that the public will seldom, if ever, be 
 fortunate enough to obtain officers who can, if they would, 
 manage its affairs as their own ! 
 
 (6) There are times and cases in which this wholesale 
 employment by government may be useful, even if we allow 
 the superior cheapness of individual work. There are 
 great enterprises which can be undertaken only by the 
 constituted authorities of the nation. There are duties, 
 not only too large for private or corporate power, but too 
 important to be left to the chances of individual manage- 
 ment. Such, of course, is the maintenance of civil and 
 military police, which, so far as it is necessary, must be in 
 public hands, and cannot be let or farmed out, consistently 
 with the honor and dignity of government. 
 
 (e) But these occasions for government to enter the 
 field of industry are few and definite. They cannot be 
 exceeded without loss of wealth and demoralization of 
 labor. Government should not only refrain from under- 
 taking any work not necessary in its own interest, but 
 should, as far as possible, let out what is necessary to com- 
 petition and individual enterprise. Wherever the character 
 of the operation is not such that its reliability concerns 
 immediately the existence of the nation or the lives of 
 citizens, it should be left to the general industry. 
 
 We have, thus far, discussed the employment of laborers 
 by government, on the strict supposition of a necessity ex- 
 isting at the time. We have seen that such a necessity 
 might overrule economic laws, and justify governments in 
 such a course ; but we have also seen those evils, even 
 in this case, which will save us any very extended con 
 sideration of the question, whether governments should, 
 
CHAP, v.] PUBLIC CONSUMPTION. 409 
 
 without reference to an immediate distress among its 
 people, enter the market of labor ; and, in the consumption 
 of wealth, become a competitor with individual industry, 
 even when the objects selected are wholesome and natural. 
 
 (a) In a free people, and with fair laws of distribution, 
 there will seldom bo occasion for such employment by 
 governments, except in its own interest. No able-bodied 
 laborer can render to an ofl&cial as much service as to an 
 individual employer ; the reason being, that the former is 
 not capable of receiving the service so perfectly. And it 
 ought never to be true, that an able-bodied laborer is 
 compelled to seek work at the hands of government. It 
 win not happen, until wicked laws have deprived him of 
 that employment, which, in a natural order of things, he 
 obtains simply in virtue of his ability to achieve the satis- 
 faction of human wants. 
 
 (J) Such employment by government perpetuates de- 
 pendence. It has been found strikingly true in the history 
 of great experiments after this fashion. Men once accus- 
 tomed to feed at the public board, whether .as princes 
 or day-laborers, are very loath to return to the primitive 
 fare of private life. Eelief from the stringent but neces- 
 sary laws of competition becomes almost a second nature; 
 and few are found willing to break off from this reliance on 
 government support. 
 
 (c) Such employment by government demoralizes the 
 general industry of the country. A false scale of prices is 
 estabhshed, since government does not buy or sell under 
 exactly the same motives as individuals. An unnatural 
 competition is introduced into labor. The market is im- 
 properly controlled by the immense resources of the 
 administration : in consequence, all other branches of pro- 
 duction are, to a greater or less extent, disturbed and kept 
 restless. 
 
 (d) Such employment by government induces political 
 corruption. It is not consistent with our purpose to enlarge 
 
410 CONSUMPTION. [book V. 
 
 upon this subject, but only to show its place. The fact is 
 undeniable ; and while government must accept, as a neces- 
 sity, a certain amount of improper influences attending its 
 operations, this should be a potent argument against any 
 assumption, on its part, of unnecessary work. 
 
 'a great part of the discussion of this question would 
 more aptly come into the department of " Production ; " but 
 it is so bound up with popular theories of government ex- 
 penditures, as encouraging industry, that it is fairly brought 
 within the present field of inquiry: and it is from the 
 point now reached that we get the best view of that absurd 
 doctrine which proclaims that national extravagance stimu- 
 lates trade, and promotes the general welfare. 
 
 "We have seen, that any expenditure by government, even 
 for necessary purposes, is made at a disadvantage to itself, 
 and is attended by many marked inconveniences and mis- 
 chiefs to society ; and that, so far as consistent, individual 
 enterprise should be substituted. In how strong a light, 
 then, do we see the folly of that scheme of national pros- 
 perity which looks to lavish outlay by government for any 
 purpose, whether productive or destructive, of luxury or 
 war! The share of some interested portion of the com- 
 munity may be larger, or come more easily ; but the sum of 
 wealth is diminished, and the healthful laws of distribution 
 are disturbed. 
 
 Yet, in the recent gigantic warlike operations of the 
 United States, it was a daily experience to hear the accept 
 ed teachers of political philosophy gravely pronounce the 
 condition of the country to be most gratifying, loudly 
 congratulating the public on the stimulus given to industry 
 by the outlay of government. Trade was brisk, because the 
 nation was running three thousand millions in debt, to be 
 just so much poorer for centuries. We do not question that 
 the occasion justified the expense ; but this was none the 
 less an unfortunate necessity, and the liveliness of business 
 was the most melancholy feature of the national condition. 
 
CHAP. VI.] CHARITT AND POOB-LAWS. 411 
 
 CHAPTER VI. 
 
 CHARITY AND POOR-LAWS. 
 
 In its broadest sense, half the world' exists on charity ; 
 and the amount of wealth so distributed, exceeds calcu- 
 lation. 
 
 Man comes into the world a helpless being. If left alone, 
 he dies. He has not the faculties of self-defence and self- 
 support that brute young possess. Years pass before he 
 attains the power of maintaining his own existence. 
 
 Even in the best states of society, woman is, to a great 
 degree, rendered, by delicacy of constitution, incapable of 
 self-support. At times, the fierce competitions of trade 
 may be hushed when she comes among them ; yet she must 
 always subsist somewhat by the sufferance of the fiercer 
 and stronger sex. In the barbarous state, she is the tool and 
 slave of man. 
 
 Besides these large classes, the field of adult manhood is 
 trenched upon by accidents of birth or circumstance, that 
 render thousands incapable, physically or mentally, of earn- 
 ing a livelihood. 
 
 All these must live by charity. 
 
 But in the sense of economy, in our modern civilized 
 state, the field of this agency is greatly limited. The family 
 relation adopts by far the greater part of all who are help- 
 less to control their own condition. There have been peo- 
 ples where children were the property of the state, and 
 were reared at the public charge. There have been com- 
 munities where women were had in common, and their 
 maintenance was included in the budget of the treasurer. 
 But the world has settled down to the family relation, and 
 so we are to consider it. 
 
 But there are yet melancholy outcasts from society, — 
 aged folk and cripples and young children, — who have lost 
 
412 CONSUMPTION. [book V. 
 
 their staff and stay by the natural course of life, by the rav- 
 ages of vice, by appalling accidents, or by the devastations 
 of war. These form a great community, over which the 
 state is called to watch with tender care ; a solemn trust, 
 appealing to the holiest feelings of our nature. For these 
 it has to provide, not food and shelter alone, but healing for 
 their diseases, correction for their vices, help for their in- 
 firmities of body and mind, instruction and useful arts, as 
 far as they are capable of receiving them. 
 
 Such are the natural constituents of this class ; but un- 
 fortunately, by social obstructions and political oppression, 
 we find, in some communities, thousands of able-bodied 
 and hard-working men dragged down into the mire of 
 beggary, compelled by wicked institutions to shameful 
 want. * 
 
 There is hardly any social result so distressing as the 
 reduction of the healthy workman to the low ground of 
 charity. This, found in almost any degree in a political 
 system, must be held to offset a great many splendid merits ; 
 while freedom from such conditions must be accepted as 
 satisfaction for many conspicuous defects. Legislators 
 should ever consider the independence of the poor man as 
 the visible " fulfilment of the law." It is a crying curse, 
 that ever a stout man, glad to work, should be forced to 
 beg. 
 
 In the United States, the question of charities has not 
 that engrossing interest which it commands in the older 
 peoples of the world. Land here is so cheap, labor so much 
 in demand, that no able-bodied man has any excuse for 
 •pauperism. And even a large share of those disabled 
 by severe accidents are yet competent to earn something 
 for livelihood, in a country where every hand is wanted for 
 work. It is probable, that the pauperage of the nation is 
 not, in ordinary times, equal to one-half of one per cent of 
 its population ; while England and Wales had, in 1859, four 
 and a half per cent; Holland, in 1866, eight and a half; 
 
CHAP. VI.] CHAEITY AND POOB-LAWS. 413 
 
 Belgium, in 1846, sixteen ; East and "West Flanders rising 
 that year to thirty per cent. 
 
 The methods of charity have not, therefore, the same 
 importance with us which they bear elsewhere. It is a 
 matter of profound concern with others, that pauperism 
 should be in every way discouraged, and that what of it 
 is necessary should be as cheaply arranged as possible. 
 Here, the only occasion for anxiety is, lest some unfortu- 
 nate should be overlooked in the general prosperity of the 
 country. It will not, however, be without interest and in- 
 struction to regard carefully the practical principles which 
 should govern the administration of charity. 
 
 1st, What classes are entitled to charity ? 
 
 Manifestly all who are unable to subsist in human de- 
 cency without it. 
 
 But should government provide nothing for those who, 
 having wantonly wasted their means and gifts of labor, find 
 themselves, and those dependent on them, suffering for the 
 necessaries of life? We answer, that the liberty of the 
 subject is not a privilege to become a pauper; that gov- 
 ernment has the right to protect itself; that it may, by 
 stringent enactments concerning vagrancy and indolence, 
 anticipate the operation of such causes ; that it may en- 
 courage industry by rewards, or compel it by pains and 
 penalties ; that it may apply to vicious pauperism the same 
 severity as to crime. Yet, when all this is granted, and 
 all this done, there will still remain a certain degree of 
 physical want, the result of sinful and slothful habits. 
 Of this the state must have charge. No man may be al- 
 lowed to starve, however clearly his destitution may be 
 the effect of his own folly or wickedness. " It is better," 
 said the Roman law, "that vagabonds should die of hun- 
 ger, than that they should be supported in their beggary." 
 In the light of Christianity, we have a wider view of politi- 
 cal duties. The sharpest incitement to labor, the sternest 
 punishment of vice, is equally just to society and' kind to 
 
414 CONSUMPTION. [book T. 
 
 the subject; but that the vilest outcast should perish of 
 hunger by the actual permission of government, would 
 eclipse the brightest glories of conquest or commerce -which 
 a Christian nation can acquire. 
 
 Here we have an important practical precept concerning 
 governmental or individual charity; viz., the frequent and 
 careful revision of claims to assistance. There should be 
 no prescription in beggary, nor any thing taken for granted. 
 The inability of self-support should be distinctly proved, or 
 the applicant forced to work. 
 
 2d, Who should administer charity ? 
 
 An argument might be made from the principle of benev- 
 olence and the sensibility to another's distress found in the 
 constitution of our nature, that charity was not alone de- 
 signed for government, but that the relief of the poor is appro- 
 priate to private hands. And there is a plain, economical 
 reason, in that such contributions can be made more timely, 
 more judiciously, and more cheaply, by the offices of indi- 
 viduals than by public agencies. There is a further reason, 
 not less economical than moral, that assistance rendered 
 in this form does less hurt to the feelings of the recipient. 
 The interests of production, not less than the law of kind- 
 ness, object to the unnecessary lowering of the self-respect 
 of any class or person. To accept charity from a neigh- 
 bor, under the pressure of extraordinary misfortune, could 
 impeach the honor of no one ; but to take bread from gov- 
 ernment carries with it a sort of taint of beggary through life. 
 
 But this does not in the least excuse mendicancy, whose 
 principle is directly opposed to that of intelligent, equable 
 charity. It is prohibited, under severe penalties, in almost 
 all communities, though the sympathy of the solicited and 
 the condition of the solicitor take much from the terrors of 
 the. law. 
 
 Here, then, in individual contributions, we have one of 
 the main instruments by which the relief of the poor should 
 be effected. 
 
CHAP. VI.] CHARITY AND POOR-LAWS. 415 
 
 There is another class of voluntary agencies, standing 
 between individual charity and that of the state, consisting 
 of mutual-relief societies and trade associations, established 
 for the purpose of assisting their members over the rough 
 places of life. When honestly formed, and held to their 
 legitimate work, they have, economically, all the advantages 
 of division of labor. With this they unite a considerable 
 share of intelligence, as to the special deserts of applicants. 
 There is also, and principally, the consideration, that relief 
 from tills source is thought to have nothing degrading, 
 and so preserves the self-respect of those who receive the 
 aid. 
 
 This agency is very extensive in all the countries of 
 Europe, and in all the States of America. By the most 
 recent statistics available, the voluntary associated charities 
 of London alone include the efforts of four hundred and 
 eighty-six institutions, with the annual expenditure of 
 £1,222,529, while the mutual-relief societies of Prance 
 niimber 4,125, with a membership of 535,233, which, with 
 four persons to a family, would give a sphere of activity 
 embracing more than two millions of people. 
 
 Prominent, too, in this view, we see the noble, economical, 
 and Christian scheme by which the great body of Quakers, 
 or Priends, throughout the world, assume the care and 
 support of all the infirm or helpless of their order ; so that 
 no one can come upon the colder charities and harsher dis- 
 cipline of public maintenance. 
 
 Yet all these methods cannot be relied on, by themselves, 
 for all times and at all places. The state should assume 
 the responsibility and control of the poor everywhere. It is 
 a part of the national concerns that no subject shall suffer 
 from want. After all that individual and associated charity 
 can do, there will be an immense amount of the most 
 repulsive and unromantic want and misery awaiting remedy 
 by government. 
 
416 CONSUMPTION. [book V. 
 
 3d, By what branches of the government should public 
 charity be administered ? 
 
 We answer, that, in the mere relief of poverty, local 
 authorities be charged with the dispensation, though the 
 state may, and indeed should, compel them to do it, and 
 perhaps regulate the degree and manner of it. Wherever 
 a pauper has his residence, there he should receive what- 
 ever assistance he is to have. More work can be got out of 
 him, his character and claims will be better understood, he 
 will be nearer to returning into the condition of self-support, 
 and each community will have an active interest to diminish 
 its pauper age. All this is additional to the greater expense 
 of monster workhouses, and the corruption they are sure to 
 breed. 
 
 We said, " in the mere relief of poverty." But govern- 
 £aent charity has to do with other classes with which the 
 rule of assistance is directly opposite. Hospitals for the 
 disabled, asylums for the insane, schools for the blind, — 
 these should be aggregated to secure the best scientific treat- 
 ment and the greatest natural advantages. 
 
 4th, To what extent should charity be given ? 
 
 To the lull extent of the necessities of the subject. The 
 destitute, whether maintained in their own homes or in 
 houses devoted to that purpose, should be required to do all 
 the work they are really able. This is just ; for the govern- 
 ment has the right to diminish its own burden. It is kind ; 
 because, by keeping up their habits of industry, it preserves 
 self-respect and bodily vigor, and may in time enable them 
 to return to a condition of self-support. To render any 
 more assistance than is really necessary, is not to relieve 
 pauperism, but to create it. 
 
 The English system includes two methods: 1st, The 
 allotment, which is the cheap rental to the poor of certain 
 portions of land, from which, by their own industry, to 
 procure some of the necessaries of life ; 2d, The parish 
 allowance, which affords weekly assistance to a certain 
 
CHAP. VI.] CHARITY AND POO&-LAWS. 417 
 
 amount, — say, two shillings, — to eke out wages. These, in 
 some circumstances, may give a real and permanent relief ; 
 but it is found in England, that this kind of charity is so 
 general, that employers reduce wages still further, in expec- 
 tation of it, and the laborer is soon brought to distress 
 again. Such a state of things is a misfortune, arising, not 
 from defects in the system of charity, but jointly from the 
 want of independence and intelligence in the laboring class, 
 and from the operation of vicious institutions, which lock 
 up the natural means of subsistence, or take them away in 
 excessive taxes. 
 
 It is in this failure — acknowledged equally by govern- 
 ment and by scientific writers — of the English charitable 
 system, under which one million families have been kept 
 in substantial pauperism, while there was found at least 
 another million "just above the paupers, always in peril, 
 lest they should become paupers," * — it is here we reach the 
 true principle of this matter of public charity. 
 
 Poor-laws may be effective, to the full extent, in provid- 
 ing for all pauperism that results from natural or accidental 
 disability of body or mind for self-support. Government 
 may relieve every form of such distress with entire satisfac- 
 tion of the individual need, and with perfect justice to the 
 community. But, as soon as the necessities of a people 
 bring able-bodied workmen within the scope of poor-laws, it 
 is certain that, while temporary relief should be afforded, 
 the remedy must be sought elsewhere. The reason is as 
 follows : Charity to the disabled is simple gratuity, wholly 
 outside the laws of value, and involving a definite expense ; 
 but charity to the laboring class is an absurdity, only 
 explained by the wickedness of human institutions. It is 
 an absurdity liable to indefinite repetition. It indicates 
 that the point has been reached below which oppression and 
 greed cannot go. The Creator of this bountiful order has 
 made provision for the support, the comfort, and the 
 
 * John Bright, 1865. 
 27 
 
418 CONSUMPTION. [book V. 
 
 gratification of all our kind. Poor-laws, pernjanently 
 embracing in their charity able-bodied workmen, simply 
 show that the gratification was long since abandoned ; that 
 comfort was afterwards denied by oppressive requirements 
 or restrictions ; and that now the lowest plane of injustice 
 has been reached, in the inability of the laborer for self- 
 siipport. There is no further descent ; nor have poor-laws 
 any virtue to bring back the right order of things. The 
 great, the sole, regulating principle of economical life, 
 viz. the entire self-sufiiciency of labor, has been destroyed ; 
 and nothing but laws returning labor to its own full rights, 
 not affording it charity, can restore health and harmony. 
 There is no proper ground for charity but the inability to 
 labor ; and, when under the stress of government injustice 
 and social falsehood, it departs from these limits, it begins 
 a wandering that has no end. The pauperism of America 
 is the result of accidents, and expires with its special 
 causes. The pauperism of Europe is the effect of system, 
 and perpetuates itself. 
 
 England will retain her million of pauper families ; her 
 other million of families, suspended over pauperism by a 
 cotton thread ; her three millions more, scantily subsisted 
 and nourished, — until the axe is laid by giant hands at the 
 root of the evil. 
 
 The quackery of the Middle Ages applied herbs and 
 balms, not to the bleeding wound, but to the injurious 
 sword. Such are poor-laws for pauper populations. It is 
 not poor-laws, but rich-laws, that are needed. / The rela- 
 tions of capital to labor, of government to the people, of the 
 soil to the hand, need to be re-adjusted. 
 
 5th, In what form Should charity be administered ? 
 
 In deciding this question, we shall find it convenient to 
 distinguish between two classes of recipients ; viz., perma- 
 nent paupers and those occasionally destitute. Of the 
 former class we need hardly more than refer to the alterna- 
 tives of in-door or out-door, mechanical or agricultural 
 
CHAP. VI.] CHARITY AND POOR-LAWS. 419 
 
 employment, of home-relief or poor-house maintenance. 
 The habits and circumstances of each community must 
 determine the methods of its charity. This class, being in 
 the main composed of those hopelessly dependent, does not 
 present such perplexing questions as arise, when, by national 
 calamities or natural causes, great bodies of helpful indus- 
 try are deprived of support. The famine of 1693 reduced 
 twenty-five thousand in Paris alone to a starving condition, 
 and for a while overwhelmed the laws relating to mendi- 
 cancy. The great number of persons now dependent on 
 government support,* throughout the Southern section of 
 the United States, strikingly illustrate that class of calami- 
 ties which may reduce a population almost to general 
 beggary. These, when they come, must be promptly and 
 amply provided for: labor must be saved at all expense, 
 humanity out of the question. 
 
 (1) Such charity must not be administered in connection 
 with stated pauperism, or in public institutions. 
 
 (2) This is the best field for individual benevolence, 
 tmless the prostration of business is so universal that 
 nothing but the credit and authority of the government can 
 intervene. 
 
 (3) Government may, by foreign loans or other means, 
 remit the pressure of ordinary taxation. 
 
 (4) Government may appropriate the necessaries of life 
 for the public good, if the emergency is as great as would 
 justify the same invasion of property in war ; not otherwise, 
 not merely to save expense or extinguish speculation. 
 
 (5) Government may very properly employ its marine 
 and its finance in furnishing subsistence promptly, at low 
 rates, and on easy terms. 
 
 (6) Government may, in exceptional cases, offer employ- 
 ment on works of public concern. This should be done at 
 least to the extent of such enterprises as are in themselves 
 desirable and profitable. The time' of general distress is 
 
 * Winter of 1865-6. 
 
420 CONSUMPTION. [book t. 
 
 the only time in which government can largely enter the 
 field of industry without working a considerable share of 
 disturbance and mischief. All works of manifest utility 
 should be undertaken at such a time. This will cost less, 
 and be a mighty kindness to the suffering poor. Govern- 
 ments have often proceeded much further than this, have 
 undertaken works that involved a far greater expense to 
 itself than relief to labor, and entailed a permanent burden 
 on the country. This was done in Ireland during the great 
 famine, and has more than once been done in Prance. The 
 policy of such employment is very doubtful ; for, — 
 
 (7) Government should administer its charity to the 
 necessary amount by direct personal assistance, generally 
 of supplies in kind, through its own local agencies. The 
 degradation of accepting relief is, in such cases, removed 
 by the universality of the distress. It is the most appro- 
 priate and least costly remedy. For example: it is not a 
 matter of question, that the assistance which the United 
 States furnished during the Irish famine, in its cargoes of 
 provisions and clothing, was more sensible and effective, in 
 proportion to the expense, than the outlay of the British 
 Government on useless roads. 
 
 But the occasions for such extraordinary charity are few. 
 The greater the freedom of intercourse, the wider the 
 ramifications of trade, the quicker the sympathies of indus- 
 try, the less frequent and the less destructive will be all 
 local and temporary calamities. In the present winter, 
 when, by the unusual severity of war, hundreds of thou- 
 sands of families have been thrown on the public support, 
 government, both State and national, has adopted, without 
 hesitation and without discussion, the most simple, eco- 
 nomical, and beneficial method of relief. There has been no 
 loud outcry for grand public works. No useless costly piles 
 will remain as tokens of this hard winter, and burdens to 
 every succeeding year. The hungry mouths have fed off 
 the hand of government, open now in charity, as lately 
 clenched in wrath. 
 
CHAP. VI.] CHAEITT AND POOR-LAWS. 421 
 
 6tli, In what spirit should charity be administered ? 
 
 In that of kindness and respect. No condition of life 
 and character is so abandoned that it needs or deserves 
 that marks of ignominy should be attached. When the 
 murderer, with his bloody hands, is to be executed, the sen- 
 timent of the community shrinks from the idea of adding 
 insult to his doom. He is treated among no magnanimous 
 people with contumely or outrage. If his manhood is 
 respected, even in his crime, should not those who are the 
 victims of misfortune, or at the worst of only passive vices, 
 be free from more than the disgrace which is necessary to 
 their condition ? It is unchristian, it is cowardly, to insult 
 by word or badge the unfortunates of society. No true 
 man wiU do it : no brave people will allow it to be done. 
 The followers of Mahomet would not suffer a tattered bit of 
 paper to blow by them or remain on the ground, but would 
 reverently pick it up, lest it should contain some fragment 
 of Alcoran, There is no broken piece of humanity in the 
 mire of poverty and crime on which the proudest of earth 
 can place his foot, and not crush God's image. Tenderly, 
 reverently, should we bear ourselves to all ; but to none more 
 kindly, more ourselves rebuked, than to the forlorn and 
 helpless. 
 
 Yet there should be no weakness or paltering in charity. 
 While all harshness and contumely are avoided, public 
 maintenance should never be made desirable to the able- 
 bodied workman, nor should even the feeble be allowed to 
 escape just so much of labor as their condition permits. 
 This is justice to the community, and kindness to the 
 unfortunate. Especially should the public sense discourage 
 and banish that shameless and obtrusive mendicancy by 
 which the bold and bad snatch away the portion of the 
 weak, the honest, the retiring poor. The truly helpless 
 and suffering should be sheltered under the wings of 
 charity ; the indolent and wasteful, driven out into the 
 storms of the world. 
 
422 CONSUMPTION. [book V, 
 
 CHAPTEE VII. 
 
 I. THE FINANCE OP WAR. 
 
 The finance of war is greatly perplexed to the popular mind 
 by one fallacy, which is, that a, vastly greater amount of 
 money is needed in time of war than of peace. Bewildered 
 by this notion, than which none can be more absurd, the 
 public are easily induced to sanction a whole class of 
 measures that would be generally recognized as injurious in 
 ordinary times, but are imagined to have some virtue to 
 bring out a greater amount of money to meet the supposed 
 emergencies of war. The truth of it is, if we suppose no 
 extra importation of foreign material for consumption (and 
 nineteen-twentieths of the expenditures of all wars are for 
 domestic labor and material), there is no larger production, 
 no more commodities to be exchanged, no more services to 
 be rewarded, and consequently no more occasion for the use 
 of money. 
 
 But government now becomes the great operator, employs 
 perhaps ten times its usual number of agents, expends ten 
 times its usual resources. It then has need of more 
 money : but as it only takes the place of former employers, 
 of former consumers, so it only needs to take their place in 
 the receipt of money ; and that may be effected by prompt, 
 equal, and thorough taxation, — taxation, too, conducted by 
 the established methods, and in accordance with such prin- 
 ciples as we have laid down. A state of war, therefore, 
 instead of being, as it is usually made, a reason for depart- 
 ing from the ordinary rules of public economy, is an 
 additional reason for adhering closely to them in every 
 particular. 
 
 War is a business as much as agriculture. The same 
 resources are necessary : there must be materials, provision, 
 
CHAP, vn.] THE FINANCE OP WAE. 423 
 
 tools, labor. This is all that is needed in either; nor is 
 there the least difference in the two, considered as modes of 
 production : their principles and methods are the same. It 
 is only when considered as modes of consumption that they 
 have separate relations to the science of wealth. " Eaising 
 money" has been generally accepted as the great business 
 of a nation in war ; but it is no more so than in ordinary 
 times. What is wanted is labor, tools, provision, and ma- 
 terials : that is what is to be " raised." And at least an 
 equal amount, though of different kinds and for different 
 purposes, is " raised " every year or day of peace. Govern- 
 ment, however, is now the great employer ; and, as it is to 
 furnish these, it must get them from the community which 
 has them, and has been operating them. This, as we said, 
 requires taxation, but needs no financial jugglery, as is 
 supposed ; and involves no departure from ordinary prin- 
 ciples. 
 
 Indeed, war might be carried on without money ; has been, 
 to a great extent. The public force might always, as it 
 often has, fill its armies by conscription ; its granaries, by a 
 tax in kind ; its arsenals, by compulsory labor. The greatest 
 armies the world has ever seen were raised, supported, and 
 disbanded without a money chest. In the advance of 
 civilization, it has been found more expedient, as it is more 
 just, that government should purchase all it consumes in 
 war, obtaining the means in money by taxation. But, as 
 war does not increase the number of laborers or augment 
 their power in production, it remains true that there can be 
 no greater occasion for the employment of money, whose 
 only office is to exchange the products of labor. 
 
 But it may appear, that, if foreign labor (as mercenary 
 soldiers) or foreign material (the products of foreign labor) 
 is introduced, there will be a greater demand for money to 
 make the exchanges of services and values. Of the first, it 
 may be said, that the employment of mercenaries is, in fact, 
 too small to be of any account in ttie great calculations of 
 
424 CONSUMPTION. [book v. 
 
 warlike expenditures. The latter is of importance, but 
 really forms a small fraction of the actual outlays of war, 
 probably not equal to the reduced wages of domestic labor 
 in arms, as against the same labor in peace ; it being true 
 of almost all armies, that their pay is below the average of 
 industrial occupations. But, if we allow all the actual 
 importation of foreign material to be so much added to the 
 necessity for money, the effect will be simply what has been 
 already indicated in the philosophy of currency. Money 
 will be exported up to a certain point to pay for imports : 
 this will lower home prices, diminishing the domestic ex- 
 penditures of government, and encouraging the export of 
 produce, which will continually tend to restore the balance. 
 Beyond the point at which money cannot be sent off, with- 
 out domestic distress, government must resort to credit- by 
 loans. Such loans, however, cannot increase the money in 
 the country ; for, even if they first assume that form abroad, 
 they are turned into material before imported.! 
 
 This discussion, it should be borne in mind, has ^only 
 regarded the amount of money required in war.* We have 
 had nothing directly to say as to the amount of capital 
 employed. Of this we express no opinion ; while we main- 
 tain that it is unquestionably true, that no greater volume 
 of money is needed to effect all the exchanges mcident to a 
 state of war. 
 
 * For an able discussion of the subject in all its bearings, see " A Critical 
 Examination of our Financial Policy," by Simon Newcomb. D. Apple- 
 ton & Co., New York. 1865. 
 
 t The foregoing argument is based on the assumption that the currency is 
 sound at the commencement of the war, and a nation thus prepared for war. 
 
CHAP. VIII.] ECONOMY OP THE WAR SYSTEM. 425 
 
 CHAJPTBE VIII. 
 
 ECONOMY OP THE WAR SYSTEM. 
 
 "War is the greatest fact that presents itself in this part 
 of our general subject. Its consumption, its expenditures, 
 are wholly for unproductive purposes, and not only unpro- 
 ductive, but absolutely destructive of those by whose labor 
 wealth is produced. War demands by far the largest part 
 of all the revenues of civilized governments throughout the 
 world. It therefore claims consideration as far as our limits 
 will permit. 
 
 That war is a political necessity while no. preparation is 
 made for preserving peace, cannot for a moment be denied. 
 So also were private combats and the wager of battle in by- 
 gone ages. Disputes will ensue between nations as between 
 individuals ; and, if no provision is made for umpirage or 
 arbitration, a resort to the sword is inevitable. Hence the 
 great^system of war. But for established laws and courts 
 of justice, individuals would, of necessity, be compelled to 
 seek redress for private grievances by an appeal to brute 
 force. This would not, indeed, determine which of the parties 
 were in the right, only which was the stronger or more fortu- 
 nate in the struggle. So of nations. When differences arise 
 between them, how can they be settled except by a trial of 
 strength? There is no well-defined, well-established code 
 of international law ; there is no tribunal of international 
 justice : how then, except in battle, can their disputes be 
 adjusted? It is a well-established principle, that a man 
 should not be a judge in his own case ; and therefore, as 
 between individuals, it is decided, that, instead of the wager 
 of battle, the aggrieved party shall submit his case to the 
 arbitrament of his fellow-citizens. But, as between nations, 
 no such arrangement has as yet been made. 
 
 Hence we are to contemplate war as a political neces- 
 
426 CONSUMPTION. [book^ T. 
 
 sity, until the nations of the earth shall estahlish a code of 
 international law, and institute a high court of appeal, to 
 which their disputes shall be referred for adjudication. 
 
 War, then, in the sense in which we are to look at it, is 
 not an accidental fact, but an established system ; and, as an 
 economical question, is to be regarded from three different 
 points of view. 
 
 1st, As consisting of a permanent military force, a stand- 
 ing army, with all the paraphernalia of war ; and, if the 
 nation be maritime in its position, a naval force, somewhat 
 proportioned to its military establishment. 
 
 2d, A system of constantly increasing preparations for 
 war, — arsenals, dockyards, and manufactories. 
 
 3d, A heavy indebtedness for wars of the past, with un- 
 ceasing taxation for the payment of accruing interest and 
 the extension and perpetuation of the system. 
 
 These three items may be said to constitute the war sys- 
 tem of the civilized world at the present day. Looking at 
 war in its economical bearings only, the great feature that 
 presents itself is the immense and constantly increasing 
 expenditures it requires. 
 
 In proof of this, we first refer to the statistics of Great 
 Britain, not because they are peculiar, but that they are full 
 and reliable. Her naval and military expenditures from 1815 
 to 1865, during which period of fifty years there has been 
 no protracted war, have been £1,084,330,507, equal to 
 $5,000,000,000, or nearly twice as much as the whole present 
 debt of the United States : from 1855 to 1865 inclusive, 
 £769,612,936, of which £301,618,920 were required to pay 
 interest on the national debt; £331,887,258 for current 
 expenses of army and navy ; for the cost of collection, 
 £48,733,823 (or about six per cent of the whole reve- 
 nue) ; and only £105,472,935 for all the expenses of civil 
 government. So that,' in paying interest upon the debt 
 wholly created in war and in meeting present expenses, the 
 war system swallowed up six sevenths of the entire revenue. 
 
CHAP. VIII.J ECONOMY OF THE WAE SYSTEM. 
 
 427 
 
 The " Annuaire Bncyclop^dique " has the following state- 
 ment of the armies of Europe for 1863 : — ; 
 
 Russia . . • 
 
 France . . . 
 
 Austria . . . 
 
 Turkey . . . 
 
 Italy . . . . 
 
 Great Britain . 
 
 Prussia . . . 
 
 Spain . . . 
 
 Sweden . . . 
 
 Holland ■ . . 
 
 Denmark . . 
 
 Belgium . . . 
 
 Bomania . . 
 
 Korway . . . 
 
 Greece . . . 
 
 Roman States . 
 
 Sei-via . . . 
 
 Switzerland . 
 
 * Total. 
 
 Army. 
 
 1,000,285 
 
 613,349 
 
 467,211 
 
 429,000 
 
 314,285 
 
 300,323 
 
 214,482 
 
 120,000 
 
 67,867 
 
 69,431 
 
 50,000 
 
 40,115 
 
 20,000 
 
 18,157 
 
 10,291 
 
 8,845 
 
 2,500 
 
 3,815,217 
 
 64,000,000 
 
 37,500,000 
 
 35,019,058 
 
 39,000,000 
 
 21,920,269 
 
 29,193,319 
 
 18,600,446 
 
 15,600,000 
 
 2,856,883 
 
 3,569,486 
 
 2,606,024 
 
 4,671,183 
 
 4,000,000 
 
 1,433,764 
 
 1,096,000 
 
 684,306 
 
 985,000 
 
 299,494,195 
 
 Cost per 
 Soldier.. 
 
 $105.29 
 268.18 
 144.00 
 
 76.00 
 209.79 
 446.18 
 147.60 
 209.20 
 
 50.89 
 158.18 
 
 71.37 
 160.29 
 118.00 
 
 93.00 
 
 99.60 
 100.00 
 
 71.39 
 
 $168.87 
 
 64 
 
 73 
 
 75 
 
 91 
 
 70 
 
 97 
 
 86 
 
 129 
 
 56 
 
 60 
 
 106 
 
 117 
 
 200 
 
 79 
 
 100 
 
 77 
 
 344 
 
 77 
 
 $106,848,000 
 
 137,729,076 
 
 67,310,840 
 
 30,000,000 
 
 65,934,225 
 
 135,485,875 
 
 31,346,730 
 
 25,132,370 
 
 3,417,320 
 
 9,381,580 
 
 3,507,739 
 
 6,450,625 
 
 2,360,000 
 
 1,689,540 
 
 1,084,500 
 
 886,965 
 
 178,880 
 
 $644,283,888* 
 
 But this sum of $644,283,880 is but a part of the cost. 
 If we take the loss to production to be equal to $150 for 
 each soldier (a low estimate), we shall find the additional 
 amount to be five hundred and seventy-two millions of dol- 
 lars per annum. 
 
 The following statistics from the muster-roll of the 
 British army show its entire strength and composition : — 
 
 Pensioners 14,768 
 
 Yeomanry 16,080 
 
 Irish constabulary 12,392 
 
 Volunteers 170,000 
 
 Total number of men 
 
 820,928 
 
 Regular troops 218,971 
 
 Local and colonial 18,249 
 
 Foreign and colonial .... 218,043 
 
 Indian militaiy police . . . 79,284 
 
 Depot establishments . . . 28,141 
 
 Militia 45,000 
 
 , If from this total amount we deduct about 270,000 for the 
 constabulary, the militia, volunteers, &c., we have 550,000 
 men, as the non-productive force required by the war 
 establishment of Great Britain. 
 
 * The Report of the Secretary of the United-States Treasury for 1863 
 showed, that there was expended for the army 1747,359,828, and for the 
 navy 182,177,510; total, 1829,532,338, or about thirty-three per cent more 
 than all the war expenditures of Europe for that year. 
 
428 CONSUMPTION. [book v. 
 
 The following is a statement of the national debt of each 
 of the nations mentioned : — 
 
 Great Britain (1862) £ 800,000,000, equal to $4,000,000,000 
 
 France (1865) Franca, 11,902,000,000, „ „ 2,380,000,000 
 
 Austria (1860) Florins, 2,360,000,000, „ „ 1,120,000,000 
 
 Spain (1864) Reals, 14,531,000,000, „ „ 726,000,000 
 
 Russia (1861) Roubles, 418,000,000, „ „ 300,000,000 
 
 Prussia (1862) ThaJers, 301,000,000, „ „ 215,000,000 
 
 Portugal (1862) Milreis, 149,000,000, „ „ 168,000,000 
 
 Turkey (1864) £, 31,000,000, „ „ 165,000,000 
 
 Belgium Francs, 655,000,000, „ „ 131,000,000 
 
 Denmark Eix-dollars, 95,000,000, „ „ 53,000,000 
 
 $9,248,000,000 
 If the debts of all other European powers may be estimated at . . 752,000,000 
 
 We have a total of $10,000,000,000 
 
 To this we add the debt of the United States (say) 2,750,000,000 
 
 Grand war total $12,750,000,000 
 
 The following table, which we take from the " Financial 
 Reformer" (British), is more impressive than any statements 
 we could make in regard to the expenses of the war system 
 in England, and the small proportion required for the civil 
 department of the government : — 
 
 From 1834 to 1861 inclusive (mneteen years) the 
 
 total expenditure was £1,125,689,474 
 
 For army £226,084,027 
 
 Fornavy 177,654,537 
 
 Operations .... 16,164,290 
 
 ■ £419,902,854 
 
 Interest and charges on the debt . . 546,400,540 
 
 Total for jSghting purposes and debt 966,303,394 
 
 TuesiYUigtoT all other purposes £159,386,080 
 
 Hence it appears that there was ex- 
 pended during this period for war, 
 preparations for war, and debt, a con- 
 sequence of war, an average, every 
 year, of £50,858,073 
 
 And for civil government 8,388,741 
 
 Difference £42,469,832 per annum. 
 
CHAP. VIII.] ECONOMY OP THE WAR SYSTEM. 429 
 
 Another important point to be noticed in relation to the 
 war expenditures of European nations is, that they have 
 been constantly increasing, and at a fearful rate. 
 
 The increase of taxation in England between 1863 and 
 1865 was fifteen millions sterling per annum over the 
 previous decade. 
 
 The cost of the army, navy, and ordnance combined, 
 in 1835, was less than twelve millions ; in 1850, it was fif- 
 teen millions ; in 1861, it had increased to thirty millions 
 sterling. Mr. Gladstone stated in 1861, that "the total 
 expenditure (imperial and local) had grown nearly twenty 
 million pounds in the space of seven years ; and that, taking 
 the annual savings of the country of <£50,000,000, the 
 whole interest of eight years' accumulation was absorbed 
 and swallowed up in this expenditure." 
 
 " Mx. Laing, Ex-Finance-Minister of India, in a late lecture, 
 said that " the national debt of France had, in ten years, 
 increased £150,000,000, while that of Austria and Italy 
 had increased ,£68,000,000. Spain was at its wits' end to 
 make both ends meet ; while Turkey was knocking at the 
 doors of every banker in Europe, ready to accept any thing 
 from any body who was ready to lend them, on any terms. 
 . . . During the last ten years, there had been an extra 
 expenditure of £300,000,000, incurred by two great Euro- 
 pean wars ; £300,000,000 more added by minor wars and 
 an armed peace." 
 
 Mr. Gladstone has made the following statement, — " that^ 
 between the years 1842 and 1853, the income of the wealth 
 of this coimtry (Great Britain) was at the rate of twelve, 
 and that her expenditures were at the rate of 8|, per cent ; 
 while, between 1853 and 1859, the national wealth grew at 
 the rate of 16J, while the national expenditure was at the 
 rate of 58, per cent." 
 
 Such, then, is the condition, not only of England, but of 
 all the European powers ; and the United States of America 
 are now to be placed on the same level. All have an im- 
 
430 CONSUMPTION. [book v. 
 
 mense indebtedness, the interest upon which consumes a 
 large part of their current revenue. Eacli finds its annual 
 budget increasing at a fearful rate ; each finds itself obliged, 
 under the present competition in armaments, to expend an 
 increasing sum, from year to year, for warlike preparations 
 by land and sea. 
 
 These facts should be kept distinctly in mind, when we 
 look at the economic bearings of the war system of the 
 present day ; and it should, moreover, be remembered, that 
 they apply generally to that system as it existed prior to 
 the civil war between the American States. But that con- 
 flict greatly changed the war system of the world : it per- 
 haps would not be extravagant to say, that it revolutionized 
 naval warfare. In November, 1861, the British Government 
 had, in process of building, fifty-four steamships of war, 
 with a tonnage 95,865, with 10,930-horse power, and 1,264 
 guns. On the 8th of March following, the Confederate 
 i"am " Merrimack" appeared in Hampton Roads, and in a few 
 minutes, with its formidable prow, sent to the bottom the 
 " Congress" and the " Cumberland," two of the finest vessels 
 in the navy of the United States, and demonstrated that, in 
 the future, no reliance could be made upon wooden vessels 
 in naval warfare. This great fact disposed of " wooden 
 walls." On the next day, the " Monitor," with her turret, en- 
 tered the Roads, engaged the " Merrimack," and she, in her 
 turn, fell before a new and still more powerful enginery. 
 Iron sides were no sufficient protection against the turret. 
 This was the second important fact; and, together, they 
 turned the whole current of preparation for naval warfare 
 in a new, ay and much more costly, direction. 
 
 These considerations have most important economic bear- 
 ings ; but their political significance is still greater. In the 
 first place, they destroyed the vast supremacy which Eng 
 land had held up to that time. Her previous preparations 
 and accumulations of war-ships were almost annihilated at a 
 blow ; and the nations were thus left to commence together 
 
CHAP. VIII.J ECONOMY OF THE WAR SYSTEM- 431 
 
 a new race of competition. In the second place, the im- 
 mense appropriations hitherto made for naval purposes must, 
 if the competition is to be kept up, be increased tenfold ; 
 and since, as we have just shown, all the principal nations 
 of the civilized world are deeply involved in debt, it becomes 
 a very grave and embarrassing question, by what means, 
 and out of what resources, all these new expenditures are 
 to be met. Besides, the question may well be started, 
 whether mvention and discovery in regard to military and 
 naval engineering and architecture have arrived at their 
 ne plus, so that there is no danger that all these now ex- 
 traordinary means of destruction will not be superseded by 
 others as much in advance of these as Enfield rifles are 
 in advance of the old flint firelocks. Such, fortunately or 
 unfortunately, is the condition and aspect of the war system 
 to-day. To the political economist, as well as the practical 
 statesman and financier, it must be a matter of serious 
 consideration whether the time has not come when new and 
 improved ideas of international intercourse are not quite as 
 desirable as new engines of human destruction ; whether 
 the important events to which we have referred, do not sug- 
 gest a different policy from that which has prevailed in the 
 past. 
 
 To take the United States as an example : The national 
 debt, when consolidated, will not be less than three billions, 
 the interest of which will be at least one hundred and eighty 
 millions. To this must be added the vast pension list which 
 a four-years' war has created. To this still is to be added 
 the immense amount which is sure to be awarded for claims 
 on the government for spoliations and damages occasioned 
 by the operations of war. And if we are to enter into com- 
 petition, under the present policy, for iron-clads, monitors, 
 land fortifications, and standing armies, we must, have an 
 enormous addition to our current expenses. Of necessity 
 there must be a very heavy and constant taxation to meet 
 all this, and that, too, with no prospect of paying off the debt. 
 
432 CONSUMPTION. [book v. 
 
 The war debts of modern times are not paid off, and never 
 will be, until the policy of increasing preparations for war 
 is discontinued. But the condition of the United States 
 in this regard, as we have already shown, is the condition 
 of Christendom ; and therefore, if a change is to be brought 
 about, all are alike interested, and must unite in effecting it. 
 
 We have said, that, under existing circumstances, war 
 may be a political necessity ; but is it a moral necessity ? 
 Is there any thing in the nature of man which makes the 
 destruction of his fellow-men in war unavoidable? Is it 
 not as feasible and as consistent with his nature to dispense 
 with appeals to brute force amongst different communities, 
 as between different individuals in those communities ? 
 Would not the same principle, the same common sense, 
 which establishes a court of justice for the settlement of 
 private disputes, establish a similar tribunal for the settle- 
 ment of international differences ? 
 
 If it is indispensable to the preservation of peace amongst 
 individuals, that there be a well-defined code of laws, which 
 all may understand, and all must be required to obey, is it 
 not equally indispensable amongst different communities ? 
 
 At present, as we have said, there is no established code 
 of international law, or any common tribunal for the settle- 
 ment of international disputes. Is the attainment of these 
 admittedly important objects practicable ? In what manner 
 can they be secured ? Evidently in the same way in which 
 all social institutions are formed ; viz., by tlie voluntary, 
 harmonious action of those who are directly concerned. 
 And this can only be secured by concerted and concentrated 
 effort. " Concentration," says M. Guizot, " is the highest 
 element of civilization." The parties must come volunta- 
 rily together ; must consult upon their mutual interests ; in 
 short, there must first be a general international convention, 
 or congress. This is a necessary preliminary. Is it feasi- 
 ble ? Can the human mind achieve this advanced step to a 
 higher condition ? 
 
CHAP. Till.] ECONOMY OP THE WAR SYSTEM. 433 
 
 We answer these questions, without hesitation, in the 
 afBrmatiTe, and for the following reasons : — 
 
 Mrst, Because the present system is at war with the 
 plainest dictates of common sense, and the highest interests 
 of mankind. 
 
 It may be safely assumed, that any system, policy, or prac- 
 tice, which, in the course of events and the lapse of time, 
 has become, not only absolutely useless, but positively per- 
 nicious and absurd, cannot long continue ; that the advan- 
 cing tide of intelligence will sweep it away as the rubbish of 
 the past. 
 
 POLLY OP EIVAL ARMAMENTS. 
 
 Each nation, as we have seen, has its standing army, its 
 navy, fortifications, dockyards, arsenals, &c., &c. ; and, 
 consequently, each is endangered by the military and naval 
 ■ preparations of every other, and they live in constant 
 mutual jealousy. Hence, if it is known or suspected that 
 France is making an addition to her navy, England at once 
 makes as large or larger one to hers. And, having done 
 this, is either any safer than before ? Are not both as rela- 
 tively defenceless as ever ? But France lays down still other 
 keels, and the dockyards of England are again in motion, 
 until the fleets of both are yet further enlarged ; but has 
 the' relative condition of either, as to security, been im- 
 proved ? Has not each increased its means of aggression as 
 well as defence? 
 
 That which is true of Prance and England is true of all 
 the nations of Christendom. Russia does her utmost to 
 create a vast navy. Austria, Prussia, Turkey, Sweden, do 
 all in their power to prepare for war, however great the bur- 
 den and sacrifice. And yet does this general system of 
 mutual armaments make them any more safe, respectively, 
 than if no such preparations were made by either ? If this 
 question must be answered in the negative, is not the arrant 
 folly of the system fully demonstrated ? 
 
 28 
 
CONSUMPTION. [book V. 
 
 CHANGES IN WAS ARMAMENTS. 
 
 Secondly/, Because the changes to which we have already 
 referred, that are continually taking place in the machinery 
 of war, are so great and frequent as to forbid all hope that 
 nations can ever be fully prepared for war. We need not 
 dwell upon this point ; for its importance is obvious to any 
 one who looks for a moment at the subject. What terrible 
 enguies of destruction, what unheard-of forces, are yet to be 
 brought into use for the destruction of mankind ? 
 
 The mind stands aghast at the awful possibilities of the 
 fature, if the present senseless and inhuman competition 
 in war preparations is to be continued. The moral sense 
 of the world revolts at the thought of such stupendous folly 
 and crime. 
 
 INFLUENCES ADVERSE TO WAR. 
 
 A third consideration which leads us to expect that the 
 present war system will be superseded by a general confed- 
 eration for the preservation of peace, is, that all the influ- 
 ences of the age are against its barbarities. 
 
 (a) Commerce, as well as common sense, makes a strong 
 plea in favor of peace. Extending with almost inconceiva- 
 ble rapidity, its influence is every day advancing, and its 
 interests becoming more identified with the harmony of na- 
 tions. No stronger illustration of this was ever afforded 
 than that presented by the war of the Rebellion in the 
 United States. Although a civil war, confined, of course, 
 within the territories of our government, it deranged, to a 
 wonderful extent, the commerce of the world. How tre- 
 mendous its effect upon European industry ! How rapidly 
 did it transfer the wealth of Europe to India and other 
 Eastern nations ! How severely did it affect the commerce 
 
CHAP. VIII.] ECONOMY OP THE WAR SYSTEM. 435 
 
 of the United States, driving nearly half of it from the 
 ocean in the short period of three years ! 
 
 But how circumscribed were the effects of that conflict to 
 what would be felt, should a war arise between Great Britain 
 and the United States ! In such an event, how painful and 
 wide-spread would be the devastation to the commerce of 
 the two most commercial nations on the face of the globe ! 
 How terrible the results to trade and industry in every part 
 of the earth ! Yet no preparation is being made to prevent 
 the occurrence of such a calamity ; but every thing is done 
 to make it as destructive and ruinous as possible, should it 
 take place. It does not seem reasonable to suppose that 
 such a state of things can be permanent ; that all the great 
 social, moral, and material interests of mankind can, in the 
 present advanced period of intelligence, be allowed much 
 longer to be thus imperilled. 
 
 (6) The rapidly increasing intercourse by travel between 
 the different peoples is making them more acquainted with 
 each other, and dissipating much of that ignorance and prej- 
 udice which, in times past, has been a prolific source of 
 jealousy and distrust. 
 
 (e) The education of the masses, their gradual progress 
 in knowledge, and their growing influence in public affairs, 
 is another very hopeful indication. The people are being 
 enlightened, and are becoming too " wise " to be made the 
 dupes of a system of which they are the greatest victims.* 
 
 (cf) The neutralization of the Black Sea, by the treaty 
 
 * It may perhaps be expected, that we should mention " the onward pro- 
 gress of the gospel" as one of the influences adverse to war : but we are 
 indisposed to enter upon the theological question, whether Christianity 
 condemns war as sinful; and, consequently, as we cannot assume that it 
 does so, can malie no argument as to its influence in preventing war. 
 Christianity, certainly, has no direct tendency to abolish any system which 
 it does not positively condemn, still less any practice which it openly sanc- 
 tions and approves. We have our individual opinion, that war is not in 
 accordance with the teaching and example of the great Founder of Christian- 
 ity, but shall not moot the question here. We prefer to look only at the 
 economical, political, and social bearings of the subject. 
 
4B6 CONSUMPTION. [book v. 
 
 made at Paris, 1856, at the conclusioii of the war of the 
 Crimea, is a very significant fact, as connected with dis- 
 armament and the permanent peace of the world. By that 
 treaty, tlie parties agreed that no ships of war should enter 
 the Black Sea, but that its waters should be sacred to peace- 
 fill commerce. This was the introduction of a new princi- 
 ple into European diplomacy, although the idea had before 
 been adopted in the Treaty of Ghent, made, in 1815, between 
 Great Britain and the United States, which contained a 
 provision, that the great lakes, lying between the territories 
 of the contracting parties, should be neutralized, and neither 
 party build fortifications or maintain a naval force upon 
 them. This treaty has been observed down to the present 
 time, upwards of fifty years, to the great advantage of both 
 parties. 
 
 The argument suggested by these two facts is, that, if the 
 neutralization of the American lakes and the Black Sea is 
 found so feasible and beneficial, the same principle might, 
 with still greater advantage, be extended to all the seas 
 and oceans on the globe. 
 
 A CONGEESS OF NATIONS PROBABLE. 
 
 But our fourth reason for expecting that the great object 
 of disarmament will be accomplished, arises from the con- 
 sideration that public sentiment has been evidently turned 
 in that direction for the last fifty years, and much has 
 actually been done towards bringing the subject directly 
 before the different nations. 
 
 (a) Associations have existed for a long time, whose 
 object has been to bring about permanent and universal 
 peace ; and one of the prominent measures insisted upon 
 as necessary to this end, has been a congress of nations. 
 To bring this idea distinctly before the public mind, an 
 international Peace Congress was held in London, in 1843 ; 
 in Brussels, in 1848 ; in Paris, in 1849 ; in Frankfort, in 
 
CHAP. Vni.] ECONOMY OP THE WAR SYSTEM. 437 
 
 1850 ; in London, in 1861 ; besides several other general 
 convocations in regard to the same subject. At all these, 
 the prominent idea has been the establishment of a general 
 congress, organized by the representatives of all the states 
 of Christendom. 
 
 The result of these movements has been to awaken an 
 interest in the public mind in relation to this subject. 
 
 (J) In addition to these voluntary and merely philan- 
 thropic efforts, the question was distinctly presented in the 
 British House of Commons by the late Mr. Cobden, who 
 took great interest in the movement, and had perfect faith 
 in its ultimate success. 
 
 So far back as June, 1851, this distinguished member of 
 Parliament moved, " That an humble address be presented 
 to Her Majesty, praying that she will direct the Secretary 
 of State for Foreign Afiairs to enter into communication 
 with the government of France, and to endeavor in future 
 to prevent that rivalry of warlike preparations in time of 
 peace which has hitherto been the avowed policy of the two 
 nations ; and to promote, if possible, a mutual reduction 
 of armaments." 
 
 Lord Palmerston expressed his high approval of the 
 motion, and said, " I am glad the honorable member has 
 taken advantage of the meeting of the world (the Great 
 Exhibition), to declare in his place in Parliament those 
 principles of universal peace which do honor to him and 
 the country in which they are proclaimed." Yet his lord- 
 ship objected to being " bound into negotiations ; " and, of 
 course, nothing was ever done. 
 
 (c) A still more encouraging fact is found in the action 
 of the French emperor in relation to this matter. Placed 
 at the head of the most military nation in Europe, he pro- 
 posed a congress to devise, amongst other measures, the 
 means of reducing those enormous standing armaments 
 which are the curse and peril of the world. 
 
 This proposal England alone, of all the governments of 
 
488 CONSUMPTION. [book v. 
 
 Europe, declined. The Emperor of Russia, in his reply 
 to the invitation of the French Emperor, said: "A loyal 
 understanding between the sovereigns has always appeared 
 to me desirable. I should be happy if the proposition issued 
 by your majesty should lead to it." The King of Prussia 
 replied, " In such a work I will join with all my heart, 
 and in perfect liberty only to consult my own solicitude for 
 the general interest of Europe." The King of Italy said : 
 " I adhere with pleasure to the proposal of your imperial 
 majesty. My concurrence and that of my people are as- 
 sured to the realization of this project, which will mark a 
 great progress in the history of mankind." 
 
 The King of Norway and Sweden, the King of Denmark, 
 the King of the Netherlands, the King of the Belgians, the 
 Queen of Spain, the King of Bavaria, the King of Hanover, 
 the Pope, the Germanic Confederation, the Kings of Sax- 
 ony, Wurtemburg, and Greece, all replied to those pacific 
 proposals of the French Emperor in terms of high and 
 cordial approbation. 
 
 (c?) The public press in Europe has also spoken very 
 strongly in favor of disarmament. 
 
 The subject is thus referred to in the Paris journal, 
 " La Prance : " — " Now let us for a moment suppose, that 
 by an understanding with the great powers, a disarming 
 in the proportion of one-half was effected. Immediately, 
 1,907,924 men of twenty to thirty-five years of age, consti- 
 tuting the flower of the population of that age, are restored 
 to the labors of peace, and at once a saving of three hundred 
 and twenty million dollars is effected in the totality of the 
 annual European budgets ; with that sum Europe might 
 add, each year, to the railways at present existing, six 
 thousand two hundred and fifty miles. She might estab- 
 lish in every commune, and even in each section of the 
 communes, a primary school. These great improvements 
 once realized, she might, if she decided in maintaining the 
 same sum in her budget, apply it to the payment of the pub- 
 
CHAP. TIII.J ECONOMY OP THE WAR SYSTEM. 439 
 
 lie debt. The annual interest upon the debts of the different 
 European states being about four hundred and sixty-five 
 millions of dollars, they might be paid off in about thirty- 
 six years. If, on the contrary, the countries interested 
 preferred applying the four hundred and sixty-five millions 
 thus saved, to the reduction of those taxes which weigh 
 most heavily on the production or consumption of articles 
 of necessity, what an alleviation to the people, and what a 
 stimulus it would give to business! The labor of these 
 1,907,924 men, at only two francs (about forty cents United- 
 States currency) per day, would amount to about |1,500,- 
 000,000 per annum." 
 
 The "Journal des Debats," of Dec. 14, 1864, says: — 
 " The immense majority of the intelligent inhabitants of 
 Europe have pronounced a preference for peace rather than 
 war, for economy rather than enormous budgets, for pro- 
 ductive rather than unproductive outlays ; and yet the 
 attitude of nations would lead one to believe that war is 
 possible and imminent, for on every side the system of 
 great armaments devouring so much capital is persisted 
 in." — " La Presse " says : " Disarming is the order of the 
 day in Italy, is in course of realization in Austria, and, 
 being proposed by the Palmerston ministry, has formed the 
 subject of discussion in the English journals. Spain is 
 thinking of reducing the number of men in her army and 
 navy, thanks to the still-increasing probability of a Euro- 
 pean congress, the present necessities for which begin to 
 popularize the Utopian character of the scheme. . . . "We 
 are pleased with the transformation : it is the outset of a 
 prosperous career ; it is the triumph of a truly great policy. 
 It is not the congress itself, but, as a Spanish journal said 
 a few days since, it is the preface to the congress." 
 
 In view of the encouraging facts we have presented, 
 does it not seem highly probable that a general congress of 
 nations will not be delayed much longer ? The necessity 
 for such an institution, in an economical and commercial 
 
440 CONSUMPTION. [book V. 
 
 point of view, is becoming every day more apparent and 
 pressing. The matter rests entirely with the three princi- 
 pal nations of the world, — Great Britain, Prance, and the 
 United States of America. They have the power to, do as 
 they will. Acting in concert, their influence is irresistible, 
 and they can achieve any object that commends itself to the 
 common sense of mankind. There is no adverse interest 
 in the case, and it is only requisite that some one of the 
 great powers should take the initiative. True, the French 
 Emperor's proposal failed ; but the condition of the world 
 has greatly changed since it was made. The American 
 Union has been restored, republicanism has been vindicated, 
 the barbarism of slavery abolished, and the civilization of 
 the world has received a powerful impetus. 
 
 CHAPTER IX. 
 
 ON THE ECONOMY OP PUBLIC EDUCATION. 
 
 It is difficult for Americans to sympathize in the least with 
 the objection which is made in England, even by those dis- 
 tinguished for liberal sentiments, that compulsory education 
 is a breach of the liberty 'of the subject. Our incapacity for 
 understanding or even respecting that sentiment arises from 
 the fact that such education was early made one of the 
 foundations of our social and political organization, and we 
 have grown up to regard it as an accepted principle of good 
 government. Our intolerance of the English theory, how- 
 ever, is not helped by the consideration that their own state 
 makes the support of a particular religion compulsory on 
 all inhabitants. 
 
 This is not the place to discuss whether legal provision 
 for the instruction of youth is an invasion of that field 
 which is recognized, in all governments moderately free, as 
 
CHAP. IX.] ECONOMY OP PUBLIC EDUCATION. 441 
 
 belonging to personal rights ; but it may not be inappro- 
 priate to remark, in passing, that the period to which 
 compulsion is applied in this matter is that which cannot, 
 for a moment, by any rational philosophy, be contemplated 
 as capable of liberty. It is the period of youth to which 
 restraint always attaches. Nor can it be urged that such 
 compulsory instruction is a breach of the rights of parents ; 
 for their rights are not perfect and primary, but depending 
 on the gift of the state, which can resume the functions of 
 control in any degree for the public good. 
 
 The economic results of public education are manifestly 
 in two directions. 
 
 1st, It is intended to effect the prevention of paiiperism 
 and crime. To use a popular American phrase, " It's 
 cheaper to build schoolhouses than jails." In looking at 
 this matter, we need to take a view between that of the 
 optimist who expects the extinguisliment of sin and vice by 
 the advance of knowledge, and that of certain grossly 
 material philosophers who compose statistical tables to prove 
 that general enlightenment rather encourages crime. The 
 first notion is refuted all too quickly by sad experience. We 
 may fairly decline to consider the latter till it receives the 
 sanction of one practical statesman. Such is the theory of 
 our government on public education. We will not argue 
 this. We will say that it is an Americanism to rely on 
 general instruction to check the grosser inclinations of 
 society, refine its manners, foster its self-respect, and multi- 
 ply its restraints. 
 
 2d, Public education is intended to bring about, posi- 
 tively, a higher economical condition. 
 
 It is mind that gives man power over the brute creation ; 
 and it is by enlarging and instructing the mental power that 
 the greatest possible factor is introduced into his effort. 
 
 We do not speak now of the education of the laborer in 
 art or science for their own sake, but solely for his advance- 
 ment as an individual being; nor do we refer, now to the 
 
442 CONSUMPTION. [book v. 
 
 indirect influence on social order and national power, en- 
 larging the desires, stimulating the activities, and promoting 
 the frugality of a people. We allude only to the education 
 of all who labor, whether as masters or apprentices, inventors 
 or drudges, governors or soldiers, in order that they may 
 more intelligently and efficiently discharge their parts in 
 production. 
 
 It pays to do so. A few years of boyhood spent in prac- 
 tical studies has taken many a man out of the class of day 
 laborers, and placed him among those who superintend 
 the work of hundreds, or by scientific discovery multiply 
 the power of industry manifold. Nor is it alone in these 
 marked cases that a fortunate result has appeared. It is 
 perfectly practicable in any country to raise the whole body 
 of the people one distinct grade in industrial character ; to 
 make every hand and every eye more strong and accurate, 
 while giving to each the repeating power of mind. 
 
 The two modern communities which earliest connected 
 a general education with the agencies of government were 
 Scotland and New England. In each, the advance of local 
 industry, and consequently of wealth and social power, has 
 exhibited most strikingly the economical advantages of such 
 a system. But it was when the inhabitants of these regions 
 went abroad to engage in the industry of foreign countries 
 that the triumph of public education became complete and 
 conspicuous. For more than a century, their intelligent labor 
 has reaped the richest harvests of the world. Not to speak 
 of social and civil honors, the Yankee and the Scot has 
 everywhere risen, by virtue of early and thorough training, 
 general information, and ready resource, to the mastership 
 of all enterprises, all sciences, all arts. He never remains 
 on the lowest plane of labor ; for he always finds enough who 
 are condemned to it by ignorance and that want of self- 
 respect and social confidence which results from ignorance. 
 He becomes " boss," overseer, master, employer, contractor, 
 projector, fcom the force of that character which was im- 
 
CHAP. IX.] ECONOMY OF PUBLIC EDUCATION. 443 
 
 pressed by early education, and those accomplishments 
 ■which it bestows ; nor only this. Although we may remem- 
 ber that for the greatest inventions we are indebted to inborn 
 genius or fortunate accident, we cannot but admit that ge- 
 nius is more likely to be born in men of such a stock, and 
 that accidents are more likely to be fortunate under this 
 mental training and industrial activity ; and accordingly we 
 find, tliat beneficent discoveries, whether in comprehensive 
 laws or little useful " knacks'," have repaid a million-fold all 
 that education ever cost Scotland or New England, let alone 
 morality, honors in scholarship, happy homes, and civil 
 peace. In plain speech and literal truth, no miner, who at 
 the first blow broke into one of nature's sub-treasuries and 
 fomid gold rolling out upon his feet, ever by miracle of 
 fortune hit upon a richer reward than every people may 
 secure, beyond the slightest peradventure, by the public, 
 thorough education of its labor. 
 
 It is not alone demanded in the interest of a greater 
 production, but also to secure a more just and uniform dis- 
 tribution of wealth. The more highly educated, industrially, 
 the workman is, the firmer and apter resistance will he 
 offer to the aggressions of capital or competing labor ; the 
 higher will become his necessary wages, the more reasonable 
 his remuneration. It is the poor man's share of wealth 
 which, after all (while we respect the rights of capital 
 for its own sake no more than for the welfare of labor), 
 is the object of humane science and legislation. To rob 
 the rich, or to make them objects of invidious enactments, is 
 not to help the poor ; it is only to make their misery com- 
 plete and hopeless : but, while wealth is sacred and luxury 
 is unrebuked, to elevate and strengthen the humbler classes 
 by all moral and educational influences, — this is to bring 
 comfort and leisure to every cottage, frugality and temper- 
 ance to every home, to attain the perfection of the industrial 
 state, almost to realize the dreams of Locke and Sidney. 
 
444 CONSUMPTION. [book v. 
 
 CHAPTER X. 
 
 IT. KEPRODUCTITE CONSUMPTION — ITS CHAEACTEB AND 
 ORIGIN. 
 
 Reproductive consumption is the use of wealth as capital. 
 Only a portion of the wealth of the world is applied to the 
 office of creating new wealth. That portion is called " capi- 
 tal : " that application is reproductive consumption. 
 
 It has been shown that mankind are continually wearing 
 out their wealth; indeed, that it wears out by natural 
 causes, independently of use ; and that therefore, if men 
 would not become destitute, they must make constant, un- 
 ceasing efforts after fresh production. 
 
 But it is a principle of our nature to do what we have to 
 do with as little labor as possible ; that is, with as much 
 help as possible- Now, it is found true, that, by employing 
 present wealth, production is easier and larger, even after 
 the amount so used has been replaced. For this reason, 
 men take freely of what they have, and destroy it to-day 
 that they may get a greater good to-morrow. This is the 
 only reason why capital is used. The first capital was 
 created without capital. Why should not all succeeding 
 creations be brought about likewise ? Because it is found 
 to save human labor and multiply human enjoyments to 
 devote the present to the future. 
 
 But this application of capital presupposes the constancy 
 of nature. Men would not put grain into the ground unless 
 they had the assurance of a return. Every act of this kind 
 requires faith, — is an act of faith. 
 
 But even yet we have not secured reproductive consump- 
 tion. Every article of value, either in itself, or in that it 
 will exchange for other things, is fitted to gratify some 
 craving of the human appetites, tastes, or passions ; and, if 
 
CHAP,. X.J REPRODUCTIVE CONSUMPTION. 445 
 
 nothing withstands these, they will certainly prevail. Here 
 is an object of value. A positive force operates on the pos- 
 sessor to consume it at once ; and he will do so as surely as 
 a hungry lion will tear his prey, unless something more than 
 brutal instinct of immediate self-gratification is found in the 
 man. What is that which can stand up against the craving 
 of immediate wants, and keep them away from wealth, that 
 it may be devoted to other uses ? It is not necessarily a 
 high moral quality. It may be purely selfish. It may look 
 on to the gratification of personal desires only. It may 
 entertain no benevolent designs, nor be capable of any sacri- 
 fice for others. All its denial may be in its own interest. 
 Yet we say that it is wise and brave and commendable. It 
 is the principle of frugality. Only as this is found can the 
 reproduction of wealth be secured. Here, then, we have 
 the conditions complete. The process is as follows : — 
 
 1st, The certainty that present wealth will fail in time. 
 
 2d, The willingness to anticipate such destitution by 
 labor. 
 
 3d, The fact that capital can greatly assist labor in this 
 matter. 
 
 4th, Such a constancy in nature as secures the return of 
 capital. 
 
 5th, Such a capacity of self-denial as will resist the 
 impulse of immediate gratification, and devote wealth to 
 reproduction. 
 
 But we find we have omitted one condition. Here is 
 wealth. If nothing intervenes, it will certainly be devoted 
 to luxurious consumption, because the desires of man in 
 that direction are a positive and constantly operating force. 
 Frugality comes in with wise forecast and strong restraint, 
 and wrests a share from the grasp of the appetites. Seem- 
 ingly all that is necessary has been attained. But it is yet 
 to be decided whether this share shall go into the province of 
 mistaken, or into that of reproductive consumption. There 
 is a very considerable chance yet before it. We have not. 
 
446 CONSUMPTION. [book v. 
 
 however, regarded this as of great practical importance, 
 inasmuch as it is generally admitted that the intelligence of 
 mankind is, on the whole, sufficient to direct its own indus- 
 try ; and that this intelligence resides not in the major will 
 of the mass, but in each individual, or voluntary association. 
 It has often been proposed to take wealth away from luxu- 
 rious consumption, by force of law, for the good of the 
 whole ; but legislators and philosophers have usually agreed 
 to leave it to the intelligence and self-interests of capitalists 
 and laborers how the wealth so saved from luxury shall be 
 applied. To be sure, we have found in certain specific 
 matters, and under the confusion of political forms, that 
 laws have been enacted to instruct industry as to its own 
 wants and behoofs ; but such can never be reasonably de- 
 fended on general grounds, and have to hide themselves 
 under pleas of state policy, or find " protection " under the 
 banners of party. It will not be necessary to discuss, as a 
 principle, the superiority of government over individual and 
 associated intelligence and interest in the direction of labor. 
 
 We have now shown how it is that wealth becomes capi- 
 tal ; for what reasons and by what forces it is taken out of 
 the province of enjoyment or of waste, and devoted to the 
 office of reproduction. 
 
 I. Wliat amount of reproductive consumption is neces- 
 sary ? 
 
 What should be the proportion of capital to the entire 
 mass of wealth, to secure the industrial well-being of any 
 people ? This question will be best answered by an exami- 
 nation of the several offices which capital is to perform. 
 
 1st, Capital must support labor. 
 
 To all industry there is an entrance fee. Not only must 
 the child be supported through years of helplessness until he 
 becomes an able-bodied laborer ; but even then every day's 
 work requires a previous supply of food, clothing, and shel- 
 ter. These form, at the least, no inconsiderable share of 
 capital, though varying greatly with climates and habits. 
 
GHAP. X.] EEPEODUCTIVE CONSUMPTION. 447 
 
 A country which turns its crops three or four times a year 
 will not need so large a stock of provisions for the mainte- 
 nance of its labor as one that has a short season, and is locked 
 up in frost and ice the rest of the time. The same diversity 
 exists in respect to shelter and clothing. All degrees of dif- 
 ference will be found among the countries of tiie world. 
 
 Here, then, is the first duty of capital. It must siipport 
 labor. Out of its products enough must be regularly laid 
 by to subsist the laborers and those dependent on them till 
 the next yield. The necessity is so plain and absolute as to 
 be generally recognized. Pew, indeed, are the peoples or 
 persons who have not forethought enough to prepare for 
 their bodily maintenance from year to year ; while, yet, there 
 are found individuals in every community, and even large 
 communities are found in the world, which make so scanty 
 provision, that, at the least accident or delay of the coming 
 crop, tliey are caught in great physical distress, and are often 
 -educed to suffering and beggary. What a light Alkman 
 throws on early economy when he calls spring " the season 
 of short fare " ! 
 
 2d, Capital must provide for the increase of population. 
 This is not because capital wants population to increase, 
 but because population decides so. It is elsewhere shown 
 what caiises operate in limitation. But, so far as this in- 
 crease takes place, capital evidently must furnish support 
 either in pauperism or in labor. It is needless to say that 
 the latter is the cheapest and best, under any condition, for 
 capital. And this may be continued until the limits of cap- 
 ital are filled. If subsistence can be had, propagation will 
 naturally go forward. This, of course, increasing the indus- 
 trial power, tends, in a healthy state, to augment capital ; 
 and so, by mutual interaction, an advancing condition of 
 society is secured. It is only by false and vicious laws that 
 misery and crime are multiplied in this way, rather than 
 power and happiness. 
 
 3d, Capital must supply its own waste. 
 
448 CONSUMPTION. [book v. 
 
 Nothing else will. Labor only 'wears out capital. What- 
 ever is wanted to renew and keep up the present stock of 
 machinery and. material, must be got out of wealth. 
 
 4th, Capital must keep up with economic improvements. 
 Individuals and commtinities are affected in this respect just 
 as they are by the introduction of new implements of war. 
 All were on a level before ; but, if new and deadlier arts are 
 introduced into one, all others are at once forced to adopt 
 them, or be at a disadvantage. So while a people might be 
 getting along very well, and feel no need of any discovery 
 to shorten or supplement its labor, yet, if such a discovery is 
 made, it must use it, or be thrown out in the competitions 
 of commerce. The operations of this cause may sometimes 
 soon reduce the amount of capital required for a specific 
 purpose ; but, generally, its effect is, while multiplying pro- 
 digiously the results of labor, to increase the actual amount 
 of tools and materials which labor employs. Irrespective of 
 this, a great deal is also wasted by falling out of fashion and 
 use, in the change of business, or of location. 
 
 6th, Capital must support government. 
 
 This is not the place to show the economical merits of 
 government, or to dwell on its necessity. It does and will 
 exist, and capital will be charged with its maintenance. At 
 the last resort, and after all the complaints capital may 
 make of the burden, it would never consent to be deprived 
 of the protection of the public force. Capital can only live 
 under law, and for law it must pay, — no matter what the 
 price. 
 
 II. What amount of reproductive consumption is desira- 
 ble? 
 
 We have been able to develop with precision those abso- 
 lute necessities which take wealth off to capital. Wealth 
 must support population, provide for its increase, furnish 
 labor with tools and material, and meet the demands of 
 government. In this it has no liberty. It must do so, or 
 cease to be. But when these first gross demands have been 
 
CHAP. X.] BEPEODUCTIVE CONSUMPTION. 449 
 
 met, shall wealth go further in the direction of reproduc- 
 tion. Shall the energies of the people still be bent on 
 acquisition ? shall greater wealth be set always in front, as 
 the goal of universal effort ? Shall the products of the past 
 be scrupulously employed as the seed of still more abound- 
 ing harvests ? or shall the energies relax, when nature is 
 satisfied in her simplest wants ? Shall leisure or culture 
 or pleasure now become the objects of life ? Shall the 
 fruit of to-day be enjoyed in itself, and the passing hour be 
 spent in its own duties and amusements ? 
 
 It cannot be denied that these are vital questions, and 
 that as they are answered will the economical character of 
 each people be taken on. But we here enter rather the field 
 of the statesman, the moralist, and the philosopher, than of 
 the economist. The science of wealth, of course, cannot 
 reasonably object to the pursuit and acquisition of wealth 
 in any degree ; yet it may also recognize that, as man has 
 other than economical relations, so he may have other obli- 
 ligations, and may rightfully yield to them. These, while 
 it does not discuss, it respects. It is for the philosopher, 
 the moralist, the statesman, to decide, if they can, how far 
 the public or individual welfare, looking at all interests and 
 duties, will be subserved by the increasing production of 
 wealth, by heaping store on store, gathered from the bounty 
 of nature ; by pushing up the fabric of industry to its might- 
 iest proportions ; or, on the other hand, by resting satisfied 
 with a moderate and primitive competence, and working for 
 quite other objects than wealth. 
 
 So that we have no great occasion here to discuss these 
 questions, while yet two or three observations may set them 
 in their proper relation to our science. 
 
 (1) In a normal and healthful condition of society, there 
 will be as little reason to ask such questions, for practical 
 purposes, as to inquire how much centrifugal or centripetal 
 force the universe needs. All that is determined in the con- 
 stitution of things. The desire to gain and the desire to 
 
 29 
 
450 CONSUMPTION. [book t. 
 
 spend are both manifestly in the original appointment of 
 our minds ; constant, abiding forces ; and no more benefit 
 can be derived from destroying or weakening either, than 
 from loosening or tightening the bands of the universe. It 
 is just right as it is. The two forces, by their antagonism, 
 bring out the best order. 
 
 But human uistitutions and human actions can affect 
 these forces in wealth. The course of things may be such 
 that the possession of property shall be made undesirable by 
 violence ; or the springs of industry fail, in the loss of am- 
 bition and hope ; or bodily and mental vigor be sapped by 
 vice or self-indulgence. On the other hand, the tendencies 
 of personal character and social condition may bring out 
 the desires of gain in such a degree as no moralist, no lover 
 of his kind, can approve ; all arts, all interests, all duties, 
 may be forgotten in the universal haste to be rich ; avarice 
 may grow into a passion, may spring into crimes ; all that 
 is good or holy, all benevolent ministries, all noble aspirar 
 tions, may be drowned in the fast-rising waters of greed. 
 
 These are the limits, on the one hand and the other, of 
 our economical condition. It will not be denied that the 
 subject has all the interest that belongs to human welfare. 
 But, we repeat, this is the province of other sciences than 
 that of wealth. Let the statesman, the moralist, the reli- 
 gious teacher, instruct and persuade men to the true wis- 
 dom of life. Political economy can only regard them as the 
 producers of wealth. 
 
 (2) We may be permitted to remark, however, that the 
 degree of reproductive consumption which is desirable wiU 
 be determined somewhat by the geographical position and 
 political relations of a people. A nation that has, or aspires 
 to have, international power and influence, has need of 
 greater resources than one which is content with the simple 
 pursuits of internal comfort and tranquillity. There is a 
 marked difference in the degrees of wealth necessary, as a 
 people thrusts itself into the arena where commercial advan- 
 
CHAP. X.] EEPRODUCTIVE CONSUMPTION. 451 
 
 tages, colonial acquisition, territorial conquests, military 
 glory, and continental supremacy, are contended for ; or re- 
 tires to the development of its own soil, and the care of its 
 domestic happiness. 
 
 But, still further, we find that one controlling reason for 
 production, even in the least ambitious nations, has been the 
 general and distant apprehension that it may at some time 
 be called on to defend itself. The world over, statesmen, in 
 all ages, have felt the necessity of securing economical power 
 as the means of national security. Here, again, we see 
 that as a country is isolated or open to attack, is naturally 
 fortified or easy to be overrun, so the reasoijis for obtaining 
 a large prodiAition will be less or more urgent. Many such 
 considerations will influence the founder or governor of a 
 state, in determining whether the reproductive agencies 
 shall be pressed to their extreme, and the influence of law 
 be thrown on the side of acquisition and accumulation, or 
 all shall be left to individual taste or caprice. 
 
 (3) It is unquestionably true, that, all other things equal, 
 the desires to spend or to gain will be difierently developed in 
 different people, according to the individual genius. Peace 
 and liberty will not inspire some races with a high economical 
 ambition ; nor can the utmost violence of persecution, dis- 
 order, and corruption wholly suppress the mighty instincts 
 of acquisition in others. And between these extremes every 
 degree will be met. Just as some plants are born for beauty, 
 grace, and fragrance ; others with homely virtues and for un- 
 romantic uses, — so men bring with them impulses, ideal or 
 practical, that determine them to their several courses, all 
 the way from the serenest speculations in ontology to the 
 maddest speculations in oil. 
 
452 CONSUMPTION. [book t. 
 
 CHAPTER XI. 
 
 POPULATION. 
 
 The questioii of population has been invested, by the treat- 
 ment of British writers, with a great mystery and terror. 
 The glut, famine, and death theories of Malthus have done 
 much to impress upon political economy the shape it has to- 
 day in the world's estimation. Rightly enough, if they are 
 correct, is it called a dismal science. Malthus exhausted the 
 direct horrors of the subject; but the effect was greatly 
 heightened by the benevolent efforts of many subsequent 
 writers to provide some way of escape from this fatal conclu- 
 sion, — efforts which, as they resulted in palpable failure, only 
 made the outlook of humanity more dreary and hopeless. 
 
 The fact is, all this British philosophy of popillation is 
 perverted and diseased from its root. It comes out of social 
 wrongs and false political institutions. It strives to apply, 
 as a universal condition of human being, the miserable re- 
 sults of local misrule. Prior to all consideration of such 
 arguments, there is reason to suspect theories of subsistence 
 and population that come from an island where holdings of 
 land are only as one to six hundred or seven hundred inhab- 
 itants: 
 
 These principles are intended to apply to the entire sur- 
 face of the earth, and have no merit unless capable of such 
 extension ; but, to give them their most favorable conditions, 
 we will first consider a single district of limited area, — say, 
 England itself. 
 
 Two postulates are often assumed, — 1st, That subsistence 
 is stationary or retrogressive ; 2d, That propagation is a 
 constantly operating force, enlarging population in some 
 assignable ratio. The inference is, that the relation of these 
 two must bring out destitution and famine. 
 
CHAP. XI.J POPULATION. 453 
 
 There are here three fallacies : 1st, That subsistence is 
 not progressive ; 2d, That population necessarily increases ; 
 3d, That, even if these were granted, there would exist be- 
 tween them any such melancholy relation as is assumed. 
 
 1st, Subsistence. — The fertility of the earth, instead of 
 diminishing, is, under intelligent culture and with, the aids 
 of science and machinery, constantly increasing. The ad- 
 vance of industrial power, in commerce and manufactures, 
 not only furnishes direct assistance in agriculture, but re- 
 leases, if required, a great amount of labor for the latter 
 pursuit. As is the amount of labor applied to land, so is 
 the yield, the world over. The England of to-day is vastly 
 more fertile than that of the Heptarchy, the Norman con- 
 quests, or the civil wars. Nor are all its capacities of pro- 
 duction exhausted. It has now millions of acres unre- 
 claimed, which are susceptible of cultivation. It is no an- 
 swer to this to say that they will not pay for reclaiming. 
 That meMy shows that English labor has now a more prof- 
 itable employment. We are discussing only the absolute 
 capabilities of the soil. With the known laws of agricul- 
 ture, prudently followed, the produce of any country should 
 advance in a certain and considerable ratio. Besides, we 
 know not what new agents of fertilization may be discov- 
 ered, or what shorter methods may be devised for applying 
 power. Certainly, the mechanical and chemical discoveries , 
 of the last fifty years justify almost any degree of expecta- 
 tion. 
 
 2d, Propagation. — The rule of geometric increase is a 
 favorite weapon in the defence of certain theories ; but it is 
 wonderfully far from the truth of nature. Boys have fre- 
 quently exhibited, on the blackboard, the immense wealth 
 they could acquire if they should lay by a penny a day, at 
 interest, for so many years; and the result seems very 
 alarming, as if that particular school would eventually be- 
 come the owners of by far the greater part of the earth's 
 surface. So much for mathematics. But, in fact, some 
 
454 CONSUMPTION. [book t. 
 
 days the boys don't earn their pennies, and some days they 
 don't lay them by, and some of the boys die ; and perhaps 
 the bank unfortunately breaks, or, after a few months of 
 continence, a juvenile rush is made upon it, and all hopes 
 of fortune disappear in a saturnalia of candy and ginger- 
 pop. The illilstration is plain and humble ; but it involves 
 all the elements that limit the theoretic advance of wealth 
 or population. 
 
 To argue from abstract and individual possibilities of 
 propagation to the fiiture actual increase of the race, would 
 be like a philosopher's predicting an infinite flight for his 
 arrow, because of his ascertained law of impulse and con- 
 tinued motion, disregarding the opposition of the atmos- 
 phere and the constant subtraction of gravitation. 
 
 Indeed, contempla^ng certain posit^e unquestionable 
 facts in history, great instances of depopulation, ages of 
 decline, the slow advances of reviving production, we may 
 fairly begin to doubt whether, propagation is a permanent 
 force irrespective of conditions. We may not unreasonably 
 inquire whether it ever appears without a special reason in 
 the case; whether the rule is not the other way; viz., not 
 that population does not proceed in spite of adverse influ- 
 ences, but that it is never called out except by physical 
 circumstances, which, in all their contradiction and bewil- 
 , derment to us, really form the condition precedent of human 
 reproduction. Why not ? We do not say, that individual 
 growth, either vegetable or animal, is a constantly operating 
 force, irrespective of circumstances. We recognize the ne- 
 cessity of heat, moisture, and special properties of soil to 
 educe the latent powers of expansion. Similar, though 
 more remote and perplexed, are the influences which bring 
 out reproduction in the animal or vegetable. It is there- 
 fore more correct to say, that population, instead of being 
 limited by adverse, is only developed by favorable, condi- 
 tions. We are deceived in this matter, because propagation 
 acts almost universally. That happens simply because the 
 favorable conditions are almost, universal. 
 
CHAP. XI.] POPULATION, 455 
 
 This argument is not affected by exhibiting a great deal 
 of misery, the result of want. The laws of reproduction 
 are not responsible for subsequent mismanagement and 
 abuse. Nor does this obstruction to propagation, coming 
 out of circumstances, operate to the degree of preventing 
 deformity or suffering. But it does apply its check before 
 the limits of destruction are reached. Speaking generally, 
 nothing is born where it cannot live. 
 
 In reference to general use, however, we shall speak of 
 adverse circumstances limiting population. 
 
 This whole matter may be perfectly exhibited by an illus- 
 tration from vegetable life. The forests have a constant 
 tendency to enlarge their bounds, and thicken their growth. 
 The rate of individual increase is prodigious in the family 
 of trees. And so forests may, when there is no opposing 
 force, spread over all adjacent country, and may grow closer 
 and closer till the perfectness and beauty of the solitary oak 
 are lost in the maze of interlacing boughs. But just as it 
 would be absurd to suppose that the trees would ever grow 
 so thickly as to require the woodman's axe or a vegetable 
 pestilence, so it is unphilosophical to anticipate an increase 
 of population which will require war or plague to reduce it 
 to the limits of food. The shoots of human life will no 
 more crowd their soil than will the children of the forest. 
 As well might a benevolent botanist, lamenting the natural 
 logical increase of the trees, predict internecine arborial 
 war or sylvan infanticide, as Malthus, from abstract princi- 
 ples of human increase, possible in individual cases, forecast 
 his dreadful tables of starvation and crime. The spread of 
 the human race, as of the sylvan, limits itself by the chemi- 
 cal resources of the soil, the fostering influences of the air, 
 the superficial capacities of the ground. The agencies of 
 animal as of floral propagation are possessed of a delicate 
 discrimination, a prudent forecast, and a virtuous conti- 
 nence, which shame the most cautious calculations of the 
 reason. They may err somewhat, and that, too, within lim- 
 
456 CONSUMPTION. [book v. 
 
 its which allow much deterioration of the species, and much 
 local misery ; but their conditions restrict them within the 
 bounds of life. 
 
 What these circumstances are which control the increase 
 of population, we shall not discuss at this point. 
 
 3d, The third fallacy we detect is, that, granted the two 
 postulates of stationary subsistence and advancing popula- 
 tion in any country, there is any necessary relation of dis- 
 tress and deterioration between them. Such a view puts 
 commerce out of the question. In the present state of the 
 world, the only matter of interest to determine in regard 
 to the supply of any people is, whether they are able to 
 produce values sufficient to command in exchange the com- 
 modities they must consume. It is of no consequence 
 whether Manchester or Birmingham can rais^ their own 
 breadstuffs within their corporate limits, if they can create 
 values which will lay all the markets of the world under 
 contribution. Labor, if law does not hinder, is self-sup- 
 porting. The powers of industry are commensurate with 
 their wants. But, if legal aftd social institutions interrupt 
 or burden exchanges, in one way or another, distress will 
 result. There is no fault in human* propagation, but in 
 what is subsequent. To illustrate: thirty years ago, there 
 was great suffering among the poor of England. This gave 
 rise to the very theory of population we are considering. 
 It became a matter of common belief, that starvation was 
 inevitable in human society. 
 
 Now it used to be a generally accepted principle of phys- 
 ics, that " nature abhors a vacuum ; " and much machinery 
 was constructed on that principle. On one occasion, an 
 experimenter happened to apply it to a tube longer than 
 usual, when it failed to work. Rushing in great excitement 
 to the office of a distinguished philosopher, he announced 
 the catastrophe. " Perhaps," was the quiet response, — " per- 
 haps nature does not abhor a vacuum higher than thirty-four 
 feet." 
 
CHAP. XI.J POPULATION. 457 
 
 Just sucli a discovery was made at this time in England. 
 The corn-laws were repealed, and half the misery of the 
 laboring class sank out of sight for ever. This it was 
 which first led men to suspect that " nature did not abhor 
 a vacuum higher than thirty-four feet; " that is, to drop the 
 anecdote, that nature creates no human labor to be starved 
 out of existence, but that whatever misery and suffering 
 there is, comes of man's folly and sin. 
 
 In England, bad laws, passed by class legislation ; oppres- 
 sive institutions, the relics of feudalism ; onerous taxation, 
 inciirred by the senseless war system ; and unjust monopo- 
 lies, created for selfish purposes, — have combined to cause 
 the ignorance, poverty, and degradation of the people, and 
 to make the beneficent agencies of reproduction a partial 
 curse. The laborers of England suffer for the commonest 
 necessaries of life, while England is the richest nation on 
 the face of the globe. Unquestionably, the value of the 
 total production of English industry amounts to five times 
 the value of the simple necessaries of life for her whole 
 population. Now, if labor starves, is it the fault of nature ? 
 The density of population has nothing to do with it. It is 
 because the common people have so little influence on the 
 government ; because the land is held for the pleasures and 
 dignity of the lordly few ; and because the national majority 
 is borne down by a powerful, selfish, and grasping aristoc- 
 racy. Though the people suffer, it is because of nothing in 
 the extent or fertility of their soil. But for a complicated, 
 legalized system of robbery and wrong, every man, woman, 
 and child in the United Kingdom might be as well fed, 
 clothed, and educated, as are the inhabitants of the United 
 States, and as much more so as England is to-day richer. 
 Any man and any people that can create value can com- 
 mand subsistence in God's way. 
 
 If now we extend our inquiry from England to the whole 
 industrial world, we shall bring another element into the 
 calculation, not to increase the chances of distress by over- 
 
458 CONSUMPTION. [book v. 
 
 population, but to diminish them. Whatever may be true 
 of individual peoples at any particular time, the general 
 advance of population all over the earth has not been very 
 clearly proved. But, whether it has taken place from cen- 
 tury to century or not, it certainly has not progressed in 
 the last five centuries at so rapid a rate as the means of 
 subsistence ; nor is there any ground for believing, that 
 the present advance will, the world over, continue when the 
 means of subsistence shall become stationary. There never 
 has occurred a case of starvation in the history of the world 
 which resulted solely from a deficiency in the natural means 
 of procuring food ; and there is no reason to believe tliat 
 there ever will be one. There have been countless millions 
 of deaths from hunger occasioned by the destructiveness, 
 envy, or heedlessness of man, through war, commercial 
 restrictions, or personal neglect. 
 
 We have spoken of the forces which limit population. 
 We shall not assume to express them all, or to give an 
 exact measurement of them ; yet we shall be able to state 
 enough to show what is the course of nature in this matter. 
 
 1st, Subsistence. — We do not mean any thing so common- 
 place as that there can be no more population than there is 
 subsistence to maintain in life. That, of course, could not 
 be. But it might be avoided in two ways, — by death operat- 
 ing on population, or prevention operating on propagation. 
 We mean that the ultimate bounds of food are the bounds 
 also of reproduction. At the last resort, and after its own 
 extreme limit has been reached, subsistence limits growth. 
 This, however, is only because to the impulse of the latter 
 is opposed an unyielding prohibition in the former ; and 
 even this may only be effected (so far as the operation of 
 this principle is concerned), the springs of population may 
 only finally be dried, after a long and painful process: 
 after the comfort and health of the laboring classes have 
 been greatly, it may be permanently, reduced by contin- 
 uous privation and hardship. So long as population can, 
 
CHAP. XI.J POPULATION. 459 
 
 SO to speak, induce subsistence to increase, so long it may 
 itself increase ; and it is only when the latter returns a 
 positive refusal that the former begins to check itself. In 
 the interval of adapting itself, i.e. before it can hold up, 
 there may result much misery and crime. So long as the 
 increase of capital, i.e. food, clothes, and shelter, for the 
 laboring class, is possible, the natural advance in the wants 
 of the community, coming out of growing numbers, will 
 determine a still larger share to reproductive consumption ; 
 will call off more and more from play to work. The causes 
 that increase population, all other things being propitious, 
 are positive and powerful, and will not yield to any feeble 
 or distant objection from subsistence. So long as more 
 capital can be taken up, they will continue to operate, and 
 wealth must conform itself accordingly. But, when capital 
 can go no further, propagation must stop, or population will 
 starve. The former will be found to occur. It does not 
 matter by what degrees of cold, hunger, feebleness, over- 
 work, this is effected. Nature secures the result. We 
 are no more bound to show how it is brought about than 
 how it is that lions and elephants are not found on islands. 
 Nature has discrimination and proportion in her work, and 
 it takes all the recklessness and folly of man to bring about 
 the least degree of distortion. 
 
 Destitution is, of course, a relative term. Perhaps, as a 
 general condition, it is found mainly among savage tribes, 
 which subsist on spontaneous productions or the captures of 
 the chase. This is the limited state, and here the increase 
 of population is very slow. Such has been the case with the 
 North-American Indians, who, as we are told by Dr. Eobert- 
 son and others, rear seldom more than two children to a 
 family, and often none. We must not confound individual 
 with general destitution. It is not claimed, that the former, 
 when abruptly occasioned, is sufiBcient to check propagation. 
 That would be against nature and reason. Such is the first 
 gross cause which limits population. 
 
460 CONSUMPTION. [book t. 
 
 It only applies to peoples in the lowest condition of life 
 and of the least moral endowment. Upon those of a higher 
 scale of being other influences will be found to operate. 
 
 2d, The second cause which we shall cite is directly the 
 reverse of the first. It is luxury. How any one could ever 
 have held the view that the forces of propagation are con- 
 stantly operative, in the face of the experience of the Roman 
 state, extending over many generations, destroying even the 
 name of nearly all its great families, calling for the earnest 
 remonstrances of its rulers, censors and emperors alike, and 
 forming the subject of repeated legislation both in premiums 
 and penalties, we cannot understand. 
 
 Luxury commences when trade and arts have been car- 
 ried to a considerable degree of perfection. It is even a 
 stronger check on population than destitution, though acting 
 on a smaller class. Its artificial habits, its irregular occu- 
 pations, its indolence, its self-indulgence, all combine to 
 weaken the forces of reproduction. Rarely indeed would' 
 pateiits of nobility and entailed estates fall in, if committed 
 to the inhabitants of the cottage rather than of the castle. 
 
 3d, We have that class of influences which are found in 
 vicious habits and unwholesome occupations. The sure 
 results of these are to check propagation, a most beneficent 
 provision of nature. In a marked degree is this true of 
 those occupations which, by heated air, by poisonous exhala- 
 tions, by cramping postures or excessive labor, dwarf and 
 distort the functions of the body. The same causes most 
 mercifully defeat the powers of reproduction. It is weU 
 that it should be so ; that, if these places must be filled, 
 fresh life may be poured into them from the hillsides, 
 rather than that the course of health and strength should 
 be downward without relief, falling faster every generation. 
 For the effects of vicious courses, we need only cite those 
 savage nations which, in every quarter of the globe, are dis- 
 appearing so fast, not more by the pressure of civilization 
 than by their own destructive habits. 
 
CHAP. Xr.] POPULATION. 46] 
 
 4th, "We have also that class of influences which come 
 from misgovernment and war. These serve to retard the 
 progress of population, though not necessarily to throw it 
 backward. France UAder the old regime, England through 
 her most sangumary civil conflicts, still held on their way in 
 wealth and numbers ; but Campania by excessive taxation, 
 Belgium by religious persecution, Germany in the Thirty 
 Years' "War, Prussia under the great struggles of Frederick, 
 fell off widely in both respects. It really seems too bad to 
 quote, but many writers have ventured to suppose that war 
 was God's own method of restraining population ! The 
 money spent in any war would, ten times over, support all 
 the men killed in it ; if, indeed, the destruction of the able- 
 bodied couJd be supposed to take any thing from the difficulty 
 of subsistence, especially when their helpless dependants 
 remain. How the war-system affects population may be 
 shown in an instance. Nearly half a million of young men 
 in France are required to serve in the army from the ages 
 of eighteen to twenty-five. This embraces the period at 
 which the occupations of life are usually chosen, marriage 
 contracted, and domestic habits formed. At the end of their 
 service, they are thrown out on society with the vices of the 
 camp and the restlessness of military life, with no position 
 in life secured, and no occupation learned. The results have 
 been plainly visible in diminishing from year to year the 
 ratio of increase in population. 
 
 5th, The fifth cause which we shall notice is altogether 
 different in its origin and character. The others have all 
 been on the brutal side of man, operating by misery and 
 want. This works in aUiance with the nobler part of his 
 being, and is of a kind with reason. It is self-restraint. 
 In a degree, indeed, a great part of the world exercises 
 this. The Chinaman will rear as many children as he can 
 find vermin for as food ; but the Hindoo, through his reli- 
 gious faith, stops short of all animal food, and limits 
 population by vegetable subsistence. And so almost all 
 
462 CONSUMPTION. [book v. 
 
 nations have a point of decency below which they will not 
 go. But the self-restraint of which we speak is of a higher 
 kind, and begins to operate before the senses revolt in dis- 
 gust or pinch in hunger. It is found wherever there is 
 self-respect and social consideration. Hence the moderate 
 increase of many countries where popxilation maintains a 
 just proportion to the general wealth, taste, and customs. 
 As this is a subject to which belongs illustration rather 
 than analysis, we give at length a remarkable example, 
 which will also enable us to set in contrast the operation of 
 the other causes. We take the State of Massachusetts, 
 of which, let it be observed, only a very small class is 
 influenced by luxury, and a smaller class even affected by 
 destitution. Vice, war, and misgovernment certainly work 
 as little injury here as in any portion of the world. 
 
 The annual registration, made with much care, shows the 
 foUdwing result in regard to births among the native and 
 foreign population in 1860 : — 
 
 Native population, whole number of persons .... 970,952 
 
 Foreign „ „ „ „ • • • • 260,114* 
 
 Number of births in native population 16,672 
 
 „ „ foreign „ 16,138 
 
 The number of births in the native population, to be in 
 proportion to the foreign, should have been 60,239, or nearly 
 four times the actual number. The difference is very strik- 
 ing and suggestive. It may be accounted for in part by 
 the following considerations: — 
 
 (1) A very considerable share of the foreign population 
 consists of those under fifty years of age, and so generally 
 able to contribute to the increase of population. How far 
 this fact is operative may be seen in the statement, that, if 
 all persons above fifty were removed from the native popular 
 tion, it would be diminished somewhat over one-sixth ; that 
 is, brought so much nearer the numbers of the foreign. 
 * Of these, 185,434 are from Ireland. 
 
CHAP. XI.J POPULATION. 463 
 
 (2) The foreign population is engaged somewhat less 
 than the native at in-door and sedentary employments, and 
 in so far are likely to be more vigorous. 
 
 (3) But the grand cause for the remarkable difference we 
 have observed is found in the fact, that the foreign popula- 
 tion are far less infliienced by prudential considerations and 
 social restraint. They therefore enter the marriage state 
 with less regard to their ability to support a family respect- 
 ably. Destitution, in the sense which restricts propagation, 
 hai'dly exists among them. Indeed, it may be said that they 
 are actually richer, according to the standard of living they 
 were accustomed to at home, than are our native popula- 
 tion. Consequently, they do not for a moment hesitate to 
 marry from any fear of want or of losing caste by poverty. 
 
 On the other hand, the resistance to marriage from a more 
 costly style of living, is constantly increasing with the native 
 population, among whom the standard of family expendi- 
 tures rises rapidly with the finer culture, the more elegant 
 arts, and the greater social vivacity of each new year. The 
 foreign population can get food, shelter, and clothing of some 
 kind. That is their idea of life. Why, then, should they 
 not marry, and rear families? To show how this cause 
 operates to produce marriage among them, we refer to the 
 same statistics: — 
 
 American marriages 7,381 
 
 Foreign „ ' 4,057 
 
 One party foreign ,943 
 
 Nativity not stated ,447 
 
 Total 12,828* 
 
 * Of deaths in Massacliusetts the same year, we find that the whole 
 
 number was 23,068 
 
 Of which were American 19,404 
 
 Foreign 3,381 
 
 Natiritv not stated 283 
 
 23,068 
 
 Here we see that the mortality of the native population exceeds that of 
 the foreign, comparing their respective numbers. So that, wliile we attribute 
 
464 CONSUMPTION. [book V, 
 
 According to population, the purely American marriages 
 should have been about 18,000, or considerably more than 
 twice the actual number. Here we find the force of social 
 restraint acting on the native population. 
 
 Such, then, are the principal causes which limit popula- 
 tion. The course of propagation, as affected by subsistence 
 alone, may be described as follows : From a given point des 
 titution will bear it down by the most painful pressure, 
 involving social and individual misery and degradation. 
 Under a scant and difficult livelihood it wUl bear upward 
 by its inherent forces, but slowly and with constant opposi- 
 tion. Competence gives it an assured and regular course ; 
 relieving from all considerations of physical maintenance, 
 but substituting therefor healthful and harmonious re- 
 straints, hardly less powerful. Under these influences, 
 society gains in wealth, leisure, and comfort, and is able to 
 organize, educate, and control its population. Every child 
 born into this condition may be born to health and happi- 
 ness, and to be a strength and ornament to the state. 
 Luxury may now enter as an element (though luxury, in 
 the degree to affect population, is not a necessary concomi- 
 tant of wealth and culture), and, as such, will either reduce 
 the rate of increase from that of a condition of competence, 
 or, by becoming excessive, it may bring population down 
 with great rapidity. We have, then, these three grand condi- 
 tions which limit the propagation of the race, of which two 
 can only operate, by debasing and perverting the bodily 
 powers of man ; the third adds to his dignity, secures his 
 physical well-being, promotes industrial activity, and estab- 
 lishes the state. There can be no question towards which 
 the effort of the moralist and teacher, or the sanctions of 
 the statesman and jurist, should be directed. 
 
 to the latter a greater proportion of marriages and births, we find them falling 
 off ixi mortality. And what is true of Massachusetts probably holds true 
 throughout the United States. Of course, this diminished mortaUty is in part 
 accoimted for by the fact before remarked upon, that their aged and feeble 
 members were left at home when the emigration took place. 
 
CHAP. XII.] EIGHT CONSUMPTION. 465 
 
 We have thus far spoken of the reproductive forces with- 
 out recognizing the differences originating in diversities of 
 climate and ethnical stock. These unquestionably exist, 
 and greatly modify the facts of propagation ; but, as they are 
 local and peculiar, we shall enter upon no discussion of 
 them. 
 
 CHAPTER XII. 
 
 IMPORTANCE OP A EIGHT CONSUMPTION. 
 
 This has been already shown by the light of our definition 
 of consumption. It has all the importance which belongs 
 to the science itself. 
 
 Consumption makes use of the wealth which production 
 has brought about with all the world's industrial energy. 
 It determines how each appreciable atom shall be applied : 
 whether to degrade, or to elevate ; whether, like fruitful 
 seed, to re-appear in harvest, or, like a virulent acid, to 
 destroy the very vessel in which it is placed ; whether to 
 set forth the humble household of the laborer, or to gleam 
 a moment in the halls of revelry ; whether to feed a thou- 
 sand workmen on the temple of national industry, or to 
 melt out of sight, like Cleopatra's jewel, in wanton luxury. 
 
 All the moral and social interest that belongs to wealth, 
 belongs to its use ; for as that is right or wrong, healthful 
 or hurtful, so wealth itself is a blessing or a curse ; so sci- 
 ence should strive after it with earnest efforts, or guard 
 against with the same wise precaution and thorough research 
 which keep out the plague. 
 
 There is a right consumption of wealth that would bring 
 comfort, health, and education within the reach of every 
 human being not born incapable of receiving them ; that 
 would make poverty impossible on the earth ; that would 
 
 80 
 
466 CONSUMPTION. [book v. 
 
 dispense with half the inducements to crime ; that would 
 beautify every home, and lighten every work. It may not 
 be wise to expect the quick attainment of such a result, or 
 worth while to prepare our robes for such an ascension of 
 humanity ; but just as far as the consumption of wealth can 
 be affected by human laws, or customs and agreements, in 
 so far may this end be approached in every day of time. It 
 is only one part of this possibility at which the poet looked, 
 when he said : — 
 
 "Were half the power that fills the world with terror, 
 Were half the wealth bestowed on camps and courts, 
 Giyen to redeem the human mind from error, 
 There were no need of arsenals and forts." 
 
 The mind can hardly lift itself to see — 
 
 " What might be done, if men were wise.'' 
 
 Yet political economy is a " dismal science," . indeed, if 
 we cannot look on to the gradual amelioration of our human 
 condition, not by miracle from the earth or the air, but by 
 a wiser use of wealth, for kind purposes created and be- 
 stowed, — 
 
 " All slavery, warfare, lies and wrongs. 
 All vice and crime might die together ; 
 
 And wine and corn. 
 
 To each man born; 
 Be free as warmth in summer weather." 
 
 Not only does all the advantage of present or accumulated 
 wealth depend on the use made of it in consumption, but 
 the very existence of future wealth is decided on the same 
 ground. 
 
 We have said that wealth has its generations. The life 
 of man is brief, but he outlives property. A few articles of 
 value may endure for centuries ; but, in the average, their 
 term is very short. Simply by wear and tear, the earth 
 would be left destitute in a few years, if no provision were 
 made for reproduction. Our kind is placed on the verge of 
 such a chance, and can never go away from it. The dreary 
 
CHAP. XII.] BIGHT CONSUMPTION. 467 
 
 desolation of many nations illustrates the tremendous pos- 
 sibilities that lie in the wse made of wealth. 
 
 We are accustomed to things as they have been. It is 
 difficult to appreciate even that which we know might be. 
 There is no economical reason why every people on the face 
 of the earth should not be rich, prosperous, and independ- 
 ent ; every person free, comfortable, ambitious, with plenty 
 at hand, and every thing to hope for. As it is, the homes 
 of competence or decency are, the world over, hardly more 
 than islands struggling up from the ocean ; a few spots re- 
 deemed from misery and ruin. 
 
 This advance 'towards economic good is not a piece of 
 work to be paid for only when finished. If the grand result 
 seems hopelessly distant, every step towards it does yet re- 
 ceive its reward ; every effort brings something of fruition. 
 No government or individual conforms, for a single act, to 
 right principles of consumption ; but the commimity gains 
 palpably by it : perhaps the " last straw " of taxation is re- 
 moved, or a capitalist offers employment to a starving work- 
 man. 
 
 There have been efforts to restrict political economy, so 
 that it should have no occasion to ask these questions ; to 
 cut off all that view which looks out on the field of repro- 
 duction ; to shut up our inquiries to the immediate, present 
 creation of wealth, its exchange, distribution, and consump- 
 tion, without regard to ultimate effects, and considering 
 one article of value as equally commendable with any for 
 which it wiU exchange. Such a mode of treatment prac- 
 tically detaches the department of consun^ption from the 
 science. 
 
 A sagacious and generally correct writer* has even gone 
 so far as to announce, " if a laborer is willing to work 
 all day for a quart of whiskey to get drunk upon, political 
 economy does not question his wisdom." 
 
 It is, of course, within the discretion of any author to 
 * Mr. Newcombe, in his "Financial Policy." 
 
CONSUMPTION. [book V. 
 
 confine his inquiries so narrowly, and to erect them into a 
 consistent system ; but such a system will have little of that 
 interest which attaches to a scheme that considers the in- 
 dustrial interests of man as a whole, and for all time. It 
 may be a science of political economy, but not the science, 
 as we choose to regard it. 
 
 If the laborer expends his day's earnings on a quart of 
 whiskey, he will, most likely, be disabled one day after. The 
 account with society will stand, at the close of the second 
 day, as follows : one day's work done, of which the employer, 
 and consequently society, has the advantage ; no wages laid 
 up ; something taken off the health of the laborer, and the 
 order of the community. But if the earnings are spent on 
 tools or the education of self and family, or on personal 
 support, the account will read quite otherwise : two days' 
 work done, of which the employer and society obtain the 
 advantage ; two days' wages in the hands of the laborer, to 
 be applied to the rearing of a usefal and self-respecting 
 family, to the maintenance of government, to the increase 
 or perfection of tools, or to wholesome enjoyment and cul- 
 ture. 
 
 It is not, of course, possible, that, from a moral stand- 
 point, there can be any question as to the importance of a 
 right consiunption ; but does not the same interest attach 
 to it in the light of political economy, considered merely as 
 seeking to effect the largest production, and the most bene- 
 ficent distribution of wealth ? We do not ask whether such 
 inquiries cannot properly be received into the science, but 
 whether any scheme can be respectably complete which does 
 not embrace them. It must not, of course, look at any 
 question in a purely moral light. Yet the two interests will 
 not be found widely and permanently apart. Political 
 economy has for its end the economic good of society on the 
 whole, and in the long-run. It does not limit itself to 
 taking a section of the trunk. It is content with notlung 
 but the whole tree, and alive at that. 
 
CHAP. XII.] EIGHT CONSUMPTION. 469 
 
 We have used a phrase which explains itselfj and which 
 has already received various illustrations in what has gone 
 before. But it may be worth while to fix and detain in 
 positive shape the general impression we have of it. 
 
 WHAT IS THE ECONOMIC GOOD? , 
 
 It is that application of the industrial faculties to the 
 agencies of matter which will bring out, easiest and fullest, 
 the satisfaction of those desires which are healthful and 
 harmonious in the nature of man. 
 
 Does this imply the satisfaction of the greatest amount 
 of desires, if, indeed, they can be thus spoken of in aggre- 
 gation ? Not necessarily, by the terms of our definition ; 
 yet practically we believe it is true, that, taking in all of 
 life and the whole of society, a greater satisfaction will be 
 obtained by ministering to those desires which are natural 
 and reasonable, than by catering to artificial tastes, depraved 
 appetites, and violent passions. 
 
 Does it imply the greatest possible creation of values ? 
 
 Again we say, not necessarily ; and yet it is undoubtedly 
 true, that there is no surer way of securing the lest satis- 
 faction of the greatest amount of desires, than by striving 
 for the accumulation of the largest possible' wealth. There 
 may be, will certainly be, a portion of such wealth that does 
 not tend to improve its possessor, either as to character or 
 condition ; there will be a portion that wiU not receive its 
 best application, either morally or economically, just as the 
 nourishing rain falls not less on the streams that do not 
 need it, and on the stony ground that will not profit by it, 
 than upon the grass and the grains that are thirsty for it, 
 and will repay it in a plentiful harvest. But this is the way 
 of earth. If human laws and institutions do not interfere 
 to prevent, the natural order of things will be sure to bring 
 out the best physical condition of mankind, through the 
 greatest creation, of values. 
 
470 CONSUMPTION, [book V. 
 
 It will be observed, that this definition of the economic 
 good requires an equitable distribution of wealth, since the 
 desires of one can be but poorly satisfied out of the posses- 
 sions of another. We should therefore regard with more 
 complacency a certain amount of values, fairly divided, than 
 a much greater amount heaped in wasteful and unjust ag- 
 gregations, or bestowed on those that can neither employ 
 nor enjoy it. But this, again, we leave to the operation of 
 natural laws, when undisturbed by legislation and prescrip- 
 tion, confident that a better state of things will result than 
 can be brought about by man's wisdom. ' 
 
 To sum up, then : Although much may be produced that 
 does not satisfy any wholesome or lawful desire of man's 
 being ; although much inequality and injustice may take 
 place in distribution, which shall so far neutralize the bounty 
 of nature, and the industry of man ; and although the 
 greatest wealth is not logically coincident with the highest 
 economic good, — we can yet accept the former as the end 
 and aim of our science, satisfied it is 'in this shape that the 
 latter is to come to us. 
 
APPENDIX. 
 
APPENDIX. 
 
 GOLD. 
 
 As a commodity. — California as a gold-producing State. — Rise and 
 progress of the gold premium in the United States. — Tables and 
 diagram. — Causes of fluctuations in the premium. — Influence of 
 gold on prices. — Effects of gold discoveries on trade with India and 
 China. — Tables. — Oold mining in relation to national indebted- 
 ness. — Gmeral production as influenced by an increased production 
 of gold. — Conclusions. 
 
 AS A COMMODITY. 
 
 Gold has often been referred to in the preceding work. Its use as 
 currency, and its position in the commerce of the world, have been de- 
 scribed ; but its importance in both these relations is so great, and the 
 changes that have taken place in regard to its production and use are so 
 remarkable, that a farther and more critical examination of the subject 
 seems desirable. 
 
 Under the term " gold," in the following discussion, we shall, lohen 
 speaking of its connection with the currency, include silver, its less valu- 
 able, but not less useful companion. Both are subject to the same laws ; 
 and, though they may differ in value in relation to each other, yet, as 
 forming together the medium of circulation, and the standard of value 
 amongst the nations of the earth, they can be placed in the same category. 
 
 We propose first to speak of gold as a commodity, like lead or iron. 
 
 The value of gold is determined by the established law of supply and 
 demand ; its cost, by the labor required to produce it. 
 
 No more interest attaches to gold than to iron, regarded merely as a 
 merchantable commodity, nor, in fact, so much, in the economy of pro- 
 duction, since the latter has ten utilities to where gold has one ; and, as 
 necessary to human progress and welfare, iron may be regarded as a 
 hundred times more indispensable than gold. Each has its proper place 
 in the economy of the world. 
 
 Gold has no price, because it is price itself. 
 
 In the constitutional currency of the United States, gold of standard 
 fineness always has one price. It can have no other ; Congress having or- 
 dained, that 263*^ grains of gold, nine-tenths fine, shall be a coin called 
 a dollar, and the people having accepted that as the unit of value. Sup- 
 pose, therefore, that the California miner produces one hundred pounds 
 weight of gold : is there any question as to what the price of his gold will 
 
474 APPENDIX. 
 
 be? Not at all. It is worth as many dollars as 25^^ grains, of standard 
 fineness, are contained in the hundred pounds weight. Its value is fixed 
 beyond any possibility of change. It measures its own value. The 
 miner can get just so many dollars, and no more. 
 
 If the currency of the United States consisted exclusively of coin, — 
 that is, gold notes, or certificates for coin deposited, — the producer of 
 gold would be absolutely certain of obtaining the full value of his com- 
 modity, because all other commodities would he measured iy Ms own. 
 There could be no chance for any mistake in the case. He would be 
 certain of justice in exchanging his gold for any article he might wish to 
 purchase. 
 
 If instead of this, however, the government should authorize the issue 
 of promises to pay gold, instead of the gold itself, and allowed these 
 promises to be issued beyond the amount of specie held for their redemp- 
 tion, the case would at once be greatly changed ; and, when the miner 
 came to exchange his gold for commodities measured by this vitiated 
 standard, he would receive a less quantity than was rightfully his due. 
 
 POSITION OP CAIIFOKNIA AS A GOLD-PEODUCING STATE. 
 
 We perceive, from what has been said, how disadvantageous to Cali- 
 fornia must have been the mixed-currency system of the United States, 
 even prior to the war. Her gold, which cost labor and had actual value 
 was placed upon a par with the paper currency of the banks of other 
 States, which cost no appreciable labor, and whose value, in consequence 
 of its redundancy, was less than it would have been if it only equalled 
 the specie held for its redemption. 
 
 How great ^er cent this loss was, it is difficult to calculate with precis- 
 ion ; but it must have been considerable, — sufficient to make an impor- 
 tant difference to a State whose great staple was gold. 
 
 Prior to the Rebellion, the actual loss to the people of the gold-pro- 
 ducing State was not so striking as to attract general attention. A few 
 ■ persons, who bestowed careful attention upon the subject, discovered 
 very clearly the unfavorable influence of a mixed currency upon the 
 pecuniary interests of California ; but the masses were unconscious of 
 the extent of the injuries they suffered. 
 
 The war, however, brought the whole matter out in bold relief, after 
 the suspension of specie payments by the government and banks, and 
 the simultaneous act of Congress, by which treasury-notes were made a 
 legal tender. 
 
 California, in accordance with a provision in her Constitution) had an 
 exclusively metallic currency. The 35th section of that instrument pro- 
 vides that "the Legislature of this State shall prohibit by law any per- 
 son or persons, association, company, or corporation from exercising the 
 privilege of banking, or creating paper to circulate as money.'' 
 
APPENDIX. 475 
 
 To protect herself against the depreciated currency of the United 
 States (the greenbacks), the Legislature of California enacted, April 
 27, 1863, a Special Contract Law, one section of which provided, that, 
 " in an action on a contract or obligation in writing for the direct pay- 
 ment of money, made payable in a specified kind of money or currency, 
 judgment for the plaintiff, whether the same be by default or after ver- 
 dict, may follow the contract or obligation, and be made payable in the 
 kind of money or currency specified therein." 
 
 Under this law, the business of the State has been conducted to the 
 present time (1867), and doubtless will continue to be so, until the legal- 
 tender notes of the national government are restored to their par value 
 in gold. 
 
 Greenbacks, up to this time, have been sold in California at their 
 value in gold; while, in other States, the gold has been sold at its value 
 in greenbacks. 
 
 By this arrangement, a great part of the injustice and wrong to which 
 the people of other States have been exposed, has been saved to the 
 people of California. 
 
 But the State has still suifered very great injustice in her connection 
 with the general government as one of the States of the Union ; because, 
 although, as between her own citizens, justice was secured, yet, as be- 
 tween them and the citizens of other States, she had no remedy. She 
 must purchase commodities which were manufactured or created in 
 other States, under an inflated currency, at prices double their true 
 value. She must receive all her imported goods, whether brought di- 
 rectly to her own market or through the ports of other States, subject 
 to the duties imposed by the general government, and saddled with the 
 premium on gold, and the profits charged on that premium, by the im- 
 porters and others, through whose hands the goods miglft pass. The 
 aggregate loss to this gold-producing State is undoubtedly very great. 
 If the State has produced, up to this time (October, 1867), one thousand 
 millions in gold, as is nearly the fact, and has lost upon the whole, in 
 consequence of the use of mixed currency in the Union with which she is 
 connected, but fifteen per cent, the aggregate would be one hundred 
 and fifty millions ; a heavy loss for a young State encountering all the ex- 
 pense and hardships incident to the first settlement of a country. This 
 loss has been estimated at a much greater sum by one of her own citi- 
 zens, John Alexander Ferris, Esq., in his "Financial Economy of the 
 United States Elustrated," published in San Francisco and New York, 
 1867 ; • to which able work we would refer our readers for a full view of 
 the subject in its various bearings. 
 
 From the foregoing statement, it will be seen, that an antagonistic 
 interest has been created between the gold-producing and non-gold-pro- 
 ducing States which will be likely to terminate in a struggle between the 
 
476 
 
 APPENDIX. 
 
 parties. The antagonism is absolute and irreconcilable, and must con- 
 tinue until the difficulty is removed ; and that only can be done by the 
 withdrawal of the false curoency. 
 
 KISB AND PROGKESS OF THB GOU) EEEMIDM. 
 
 The national treasury and the State banks having suspended specie 
 payment on the 31st day of December, 1861, a premium was immediately 
 demanded upon gold. It was slight at first, — the highest point for some 
 months but about five per cent. After the 1st of July following, it began 
 to rise rapidly, until, before the close of the year, it had advanced to 374 
 per cent. From that time forward, the fluctuations were rapid, and often 
 violent. We give below, from the " Bankers' Magazine" of April, 1867, 
 a table showing the monthly prices for five years. 
 
 The Monthly Sange of Premium on Gold, from January, 1862, to December, 1866, 
 hoA been as follows: — 
 
 Januarj' 
 
 February 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September .... 
 
 October 
 
 November .... 
 December .... 
 
 Average 
 
 „ for 5 years 
 
 1862. 
 
 Par® 5 
 2i@ 4| 
 H@ H 
 1J@ 2i 
 2J@ 4i 
 3i@ 9i 
 9 @20i 
 12i@16i 
 16i @ 24 
 22 @37 
 
 29 @ 33i 
 
 30 @34 
 13i 
 
 1863. 
 
 34 @60| 
 53 @72i 
 39 @71| 
 
 46 @59 
 43| @ 55 
 40i @ 48J 
 23^ @ 45 
 22^ @ 29| 
 27 @i3i 
 40f @ 56| 
 43 @54 
 
 47 @52| 
 46| 
 
 1864. 
 
 51i@ 60 
 
 5Ti@ 61 
 
 59 @ 694 
 
 66i@ 87 
 
 68 @ 90 
 
 89 @ 151 
 
 122 @ 185 
 
 131i @ 162 
 
 85 @155 
 
 89 @129 
 
 109 @160 
 
 111 @144 
 
 1031 
 
 1865. 
 
 97i @ 134J 
 96f @ 116| 
 48^ @ 101 
 44 @ 60 
 28|@ 45i 
 35i@ 471 
 38 @ 46i 
 
 42|@ 45 
 44 @ 49 
 45i@ 48| 
 44i@ 46i 
 68 
 
 1866. 
 
 38| @ 44| 
 355 @ 41i 
 25 @ 36| 
 25 @29i 
 26^ @ 41^ 
 37|@67i 
 48i @ 55| 
 46J @ 52i 
 44 @46| 
 45| @ 54| 
 37i @ 48| 
 31i @ 41i 
 
 411 
 
 52^ 
 
 The average, ftom July 1, 1862, to 1865, the three years when the war expen- 
 ditures were largest, was 68| per cent. 
 
 T(^le sJiowing the extreme Quarterly FluctuaHons of the Gold Premium, as exhib- 
 ited in annexed Diagram. 
 
 Years. 
 
 Currency. 
 
 Premium. 
 
 Average. 
 
 
 
 Ist Qr. 
 
 2a Qr. 
 
 3d Qr. 
 
 4th Qr. 
 
 
 1862 
 
 470 Millions. 
 
 4| 
 
 If 
 
 20S 
 
 37i 
 
 ISJperan. 
 
 1863 
 
 850 „ 
 
 72i 
 
 40i 
 
 23J 
 
 57 
 
 m „ 
 
 1864 
 
 1070 „ 
 
 70 
 
 66i 
 
 185 
 
 89 
 
 102J „ 
 
 1865 
 
 1159 „ 
 
 134i 
 
 28i 
 
 m 
 
 49 
 
 64 „ 
 
 1866 
 
 ■ 1358 „ 
 
 25 
 
 67 
 
 44 
 
 54i 
 
 m , 
 
 1867 
 
 1300 „ 
 
 40 
 
 35 
 
 46i 
 
 
 
 General quarterly average of premium, from 1862 to 1865 inclusive, aa per the 
 above table, 55^.* 
 
 An illustration of this table is given m the annexed diagram. 
 
 * For a complete view of the daily fluctuations in gold premium, we refer the 
 reader to Gold Chart, issued by Ernest L. Meyer, published in New York in 1866. 
 
N^9. 
 
 Showitiy i/w exlrp/iie qiutrhr/y /hiclfUffio/iS' in fjo/e/ 
 /roiii Jmt./S.JSea 7o 0ctl86T. 
 
 o 
 
 1861 
 
 JT-J 
 
 >,/rojM/. 
 
 186* 
 
 470MII. 
 
 18 6-3 
 
 186 
 
 Ci'riTJU'Y- 
 
APPENDIX. 477 
 
 THE CAUSES OE ELUCTUATIONS IN THE GOLD PREMIUM. 
 
 Gold, when measured by itself, — that is, by the universal commercial 
 standard of value, — can never command a premium. It is always pre- 
 cisely at par. Premium, as a term applied to gold, simply expresses the 
 depreciation of the standard by which it is measured, and is more prop- 
 erly a discount on the latter than a premium on the former. It is 
 customary, however, to speak of the premium on gold, without reference 
 to the standard by which it is measured. 
 
 The gold premium, as it has existed in the United States since 1862, 
 may be said to have been influenced by six diiFerent causes : — 
 
 1. The Inconvertibility and Redundancy of the Currency. — The moment 
 a currency becomes inconvertible on demand, gold will command a pre- 
 mium. The banks and national treasury having suspended on the 31st 
 December, 1861, for the first four months of 1862 the premium on gold 
 averaged only about three per cent ; and, had there actually been at that 
 time no larger amount of currency than would have existed if the cur- 
 rency were a wholly metallic or certified one, the premium would not 
 have gone beyond three to five per cent : but the currency was at this 
 time somewhat redundant, and was rapidly augmented, until 200 per 
 cent above its natural volume. 
 
 2. A second cause, or element, was the discredit of the Oovemment. — 
 From the first, there was some fear that the Rebellion might succeed. In 
 that case, the Union would be broken up ; and whether the loyal States 
 would go on together, or separate into several diiFerent confederacies or 
 nationalities, was a matter of great uncertainty. Therefore a large 
 degree of suspicion attached to the promises of the government, and the 
 public credit fluctuated with the fortunes of the war. 
 
 At times the national credit was exceedingly depressed : as, for ex- 
 ample, during the first three months of 1863, subsequent to the disastrous 
 events around Fredericksburg; and again when Pennsylvania was 
 invaded, just prior to the victories of Gettysburg and Vicksburg ; and, 
 lastly, in the gloomy winter of 1864, and during General Grant's cam- 
 paign against Richmond, fighting the battles of the Wilderness, Spotsyl- 
 vania, Cold Harbor, &c. This discredit was at times so great as to 
 cause large shipments of specie to Europe, for safe keeping, by those 
 who did not dare to trust their funds at home. This may be seen in the 
 excess of exports over imports in the years of 1863 and 1864, and the large 
 amount of gold exported in those years (Financial Report, 1864, p. 273). 
 That this discredit of the national securities arose from the uncertainty 
 of the manner in which the war might terminate, is proved by the rapid 
 and permanent decline of the gold premium as soon as the rebel armies 
 had surrendered. 
 
 3. Political Movements. — The success of the party in opposition to the 
 
478 APPENDIX. 
 
 war, in the elections held in the fall of 1862, had much effect ; and the 
 gold premium went up from 37 J in October, to 72 in February following. 
 The public anxiety was increased by the dilatory action of Congress in 
 the session of 1862 and 1863, which did not pass the Appropriation, 
 Loan, and Currency Bills until the 3d day of March, or the day before 
 its expiration. 
 
 But the most instructive and remarkable fact connected with the action 
 of Congress was the passage of the Gold Bill, so called, "prohibiting 
 the sale of gold in certain cases." This law was intended to stop the 
 sale of gold as far as possible, especially to prevent speculation in gold. 
 
 The result was what all intelligent men confidently predicted. The 
 premium advanced with great rapidity, from 97 on the 17th of June, 
 1864, the day the bill was passed, to 180 on the 1st of the next mouth. 
 Although Congress soon discovered its error, and made haste to retrace 
 its steps, repealing the mischievous law on the 6th of July, great 
 damage accrued to the national credit, and the interests of the country 
 generally. 
 
 4. The Operations of Treasury Department. — We will first refer to 
 the condition of the treasury in the second quarter of 1863. Congress 
 had, during its session closing March 4 of that year, placed in the 
 hands of the Secretary of the Treasury power to issue bonds, compound- 
 interest notes, and greenbacks, — in all, with what he had on hand, 
 $1,200,000,000. This raised the credit of the government. The 5-20 
 bonds at six per cent sold with wonderful rapidity ; and the premium on 
 gold, which at the adjournment of Congress, on the 4th of March, 
 was 65, fell to 40. The victories of Gettysburg and Vieksburg carried 
 the premium down to 23^ during the month of July following. The sale 
 of the 5-20's having been made so successfully, the minister of finance 
 changed his policy, and instead of issuing his 10-40's at six per cent, as 
 he had been authorized to do, reduced the rate to five per cent. 
 
 This proved a disastrous experiment. The sale of bonds fell off at 
 once from two millions per day to only a tenth of that sum. But that 
 was not all, or the worst : for, by reducing the rate of interest from six 
 to five, the Secretary virtually depreciated his own currency by the dif- 
 ference, because it required $1.20 in greenbacks to purchase an equal 
 income or interest at five per cent, which $1.00 would purchase of bonds 
 bearing interest at six per cent ; and consequently the gold premium 
 rose 20 per cent. This falling-off in the sale of the bonds necessitated 
 the issue of legal-tender notes, which raising prices greatly increased 
 the expenses of the government. 
 
 Then, again, the Secretary had authority to issue four hundred million 
 dollars in compound-interest notes at six per cent, of such denomina- 
 tions as would be adapted to the wants of the government in paying off 
 the troops and contractors. These, if thus issued, it was believed, and 
 
APPENDIX. 479 
 
 as subsequent events proved, would be speedily hoarded; and thus, 
 while they did not expand the currency essentially, inflate prices, or in- 
 terfere with the sale of the bonds, would operate as a six per cent loan 
 to the government, payable in currency. But the Secretary took a dif- 
 ferent course from the one intended by Congress. He issued fifty mil- 
 lion dollars at five per cent on two years, in fifty-dollar notes and 
 upwards. 
 
 These, all or mostly, went directly into the banks of Philadelphia, 
 New York, and Boston, where they displaced and drove into circulation 
 fifty million dollars of greenbacks and bank-notes. This, it will be seen, 
 instead of benefiting the treasury, absolutely made matters worse, ex- 
 panding the circulation and raising prices, when government was 
 making purchases at the rate of one or two millions per day ; so that, 
 notwithstanding the brilliant successes in war just referred to, gold be- 
 fore long went up to 100. Of the six per cent compound-interest notes 
 adapted to circulation, the Secretary issued none for some fifteen months 
 after he was authorized to do so, and then only fifteen million dollars. 
 These were paid out by the government, and were immediately hoarded. 
 They disappeared at once, showing most conclusively that they answered 
 precisely the object sought to be obtained by the issue of them. More 
 of these compound-interest notes were subsequently issued by Secretary 
 Fessenden. But they were of large denominations, and went mostly 
 into the banks, where, contrary to law, they were held as a legal-tender 
 reserve ; and in so far the design of Congress in authorizing their issue 
 was utterly thwarted. Had the whole amount authorized been issued 
 promptly, as fast as they were wanted to pay the current expenses of 
 government, the necessity of issuing greenbacks would to. a great 
 extent have been avoided ; and such an enormous rise of premium and 
 prices as took place in 1863-4, in consequence of their excessive issue, 
 would have been prevented. 
 
 6. Sales of Oold by the Secretary of the Treasury. — But, as another 
 and veiy important matter, we must notice the direct operations of the 
 Secretary of the Treasury in the gold market. 
 
 Owing to the fact that the gold received for duties amounted to a 
 much larger sum than necessary to pay current interest upon the bonds 
 issued, the treasury had a large amount at its disposal; so large, that 
 if the Secretary were disposed to enter the market, in technical language, 
 as " A BEAR," he could to a great extent determine what the price of 
 gold should be at any given moment. He was authorized to sell gold, 
 and has done so ; holding, as he has oftentimes done, fifty to seventy-five 
 millions, he has been able to bear dovm the market below what it would 
 be if there were no such vast accumulation at his disposal. It would 
 seem, by his acts, that he has deemed it for the public interest to keep 
 the price of gold as low as possible. This being understood to be the 
 
480 APPENDIX. 
 
 Secretary's policy, of course no one dares operate, to any great extent, 
 " for a rise," because his movement could be easily frustrated. 
 
 Notwithstanding all this, however, the price of gold has been gradually 
 advancing from its low point of about twenty-five per cent in March, 
 April, and May, 1866, to forty-five per cent at the present time (Sep- 
 tember, 1867). And the la"st we believe to be nearly its natural value, as 
 measured by our superabundant currency. 
 
 6. Speculation. — Another cause of variations in the gold premium 
 arose from the action of speculators. 
 
 History probably affords no parallel upon so extensive a scale of op- 
 erations. Millions were made or lost in a day in New York, the great 
 centre, by fluctuations in the market, occasioned often by the acts of 
 speculators themselves, combining to raise or depress the premium by 
 starting rumors, favorable or adverse, as their particular interest might 
 dictate ; yet as the premium, with various alternations, was constantly 
 advancing, until it attained the well-known elevation of 185 per cent, it 
 is obvious there were abundant opportunities for the realization of for- 
 tunes by those shrewd enough to take advantage of passing events. But 
 it should be remembered, that speculation is to be mainly regarded as 
 one of the natural effects of an abnormal state of affairs, incident to a 
 forced credit currency, and the hazards and uncertainties of a long and 
 doubtful conflict, rather than a permanent cause of high premium. 
 There is little speculation now, because there is comparatively little 
 uncertainty in regard to national affairs. The contingencies of war have 
 passed by. 
 
 Lastly, we may remark that the price of gold, like that of any other 
 article, has been influenced by demand and supply: as, for example,, 
 when the article was especially wanted for export, or to pay duties ; or, 
 on the other hand, when large amounts were paid off for coupons, or re- 
 ceived from the mines. 
 
 All these various considerations must be taken into account, if we 
 would form a correct opinion of the causes which have had the effect to 
 raise or depress the premium on gold for the last five years. 
 
 INFLIIENCE OF THE GOLD PRBMnjM ON PRICKS. 
 
 Prices, since the suspension of specie payments, have been greatly 
 influenced by the existing premium on gold. In the years 1863 and 1864 
 especially, gold was potential in determining the price of commodities. 
 They rose and fell with it. Since the close of the war, on the other 
 hand, prices in general have been little affected by the gold premium, 
 except in regard to foreign imports, which of course have corresponded 
 in cost to the value of gold, because premium is an element of the cost". 
 But other commodities do not feel these fluctuations, as during the war. 
 
APPENDIX. 
 
 481 
 
 Why not? Evidently, because domestic products, not required for 
 export, are measured by the domestic currency alone. The reason why, 
 during the years 1863 and 1864:, all prices kept pace with the price of 
 gold was, that, the currency and securities of the government being 
 greatly discredited, gold was regarded as the really only safe investment 
 and standard of value. Greenbacks were merely ih^ promise of value, 
 the fulfilment of which was doubtful. Gold had reliable value in itself, 
 and therefore was largely hoarded, and, as we have seen, exported, in 
 the two years just mentioned, to the extent of more than one hundred 
 million of dollars. Except so far as foreign products are concerned, 
 gold does not now (1867) influence the value of commodities in general, 
 any more than flour, or any other article of merchandise ; for it is itself, 
 under present circumstances, as truly merchandise as com or cotton. 
 
 EFFECT OF GOLD DISCOVERIES ON TRADE WITH THE EAST. 
 
 The economical advantages derived from the increase in gold pro- 
 duction, if there be any of much account, accrues mostly to the people 
 of the East, — to India, China, &c. As they use coin exclusively, the 
 surplus gold production of Christendom naturally flows off to them. By 
 the unwonted influx of the precious metals, their products are advanced 
 in value ; and, for all their exports to Europe and the United States, they 
 get greater prices. As they export more commodities than they import, 
 they receive the balance in gold and silver. 
 
 From information furnished by a mercantile house in Boston, engaged 
 in the India trade, we construct the following table, showing the price 
 of seven of the chief exports of Calcutta, for the first five years after the 
 gold discovery, viz. 1850 to 1854, inclusive ; and for the last five years, 
 up to 1867. The prices are taken as they existed at the 1st of July of 
 each year. We have before us the prices for the entire period of eighteen 
 years, but give only the first and last five years, to save space. 
 
 Prices of Seven of the Chief Eoymrts of Calcutta, for five years, 18B0 to 1864 
 inclusive, and five years from 1863 to 1867 inclusive, showing the advance since 
 the new gold discoveries. 
 
 Saltpeter 
 
 Gunny Cloth. . . 
 „ Bags . . . 
 
 Linseed 
 
 Cow md'es . . . 
 EuSTalo „ .... 
 Jute 
 
 1850. 
 
 1851. 
 
 1852. 
 
 1853. 
 
 1864. 
 
 1863. 
 
 1864. 
 
 1866. 
 
 1866. 
 
 1867. 
 
 6 6 
 3 10 
 12 
 2 9 
 27 
 39 
 16 
 
 6 9 
 3 2 
 9 1i 
 2 4 
 30 
 38 
 9 8 
 
 6 3 
 2 9 
 10 
 2 4 
 27 
 37 
 10 
 
 6 6 
 3 10 
 12 2 
 2 9 
 27 8 
 39 
 16 8 
 
 6 12 
 3 10 
 12 
 3 3 
 34 
 46 
 12 8 
 
 8 8 
 2 12 
 16 8 
 4 6 
 35 
 68 
 21 
 
 7 10 
 
 3 
 19 4 
 
 4 6 
 38 
 68 
 22 
 
 6 
 
 3 18 
 
 16 8 
 
 4 8 
 36 
 55 
 
 17 8 
 
 6 
 4 6 
 16 
 4 10 
 32 
 60 
 20 
 
 5 2 
 
 3 6 
 14 4 
 
 4 6 
 32 
 60 
 21 
 
 106 9 
 
 99 5 
 
 95 
 
 107 11 
 
 118 1 
 
 166 1 
 
 162 4 
 
 138 5 
 
 132 16 
 
 140 1 
 
 The currency in the above table is annas and rupees, — 16 annas to the rupee. 
 
 31 
 
482 
 
 APPENDIX. 
 
 From this it appears, that the aggregate price from 1850 
 
 to 1854, inclusive, five years, was ' 627 2 
 
 Ditto 1863 to 1867, five years 729 9 
 
 Difference 202 7 
 
 •which is equal to a rise in price, between the first five and last five years 
 of the period, of 38.3 per cent. 
 
 The same rise of prices is shown by the Report of the British Commis- 
 sioners of Customs for 1865, as quoted by the United-States Revenue 
 Commissioners in their Report, 1865-6, page 67, from which we construct 
 the following : — 
 
 Table, shounng the Average Price of Tea in Band in London, from 1848 to 1864, 
 
 iTiciusive* 
 
 
 Average price of 
 
 
 Average price of 
 
 Year. 
 
 Tea per pound 
 
 Tear. 
 
 Tea per pound 
 
 
 in bond. 
 
 
 in bond. 
 
 
 s. d. 
 
 
 s. d. 
 
 1848 
 
 1 Oi 
 
 1857 
 
 1 5^ 
 
 a 849 
 
 1 1 
 
 ' 1858 
 
 1 4J 
 
 1850 
 
 1 3i 
 
 1859 
 
 1 6| 
 
 1861 
 
 1 2i 
 
 1860 
 
 1 6J 
 
 1852 
 1853 
 1854 
 
 1 Oi 
 1 3i 
 1 3i 
 
 1861 
 1862 
 
 1 5 
 
 1865 
 
 1 3 
 
 1863 
 
 1 ®i^ 
 
 1856 
 
 1 2i 
 
 1864 
 
 1 6i 
 
 Taking the price in 1848, viz. Is. O^d., and the price"in 1864, viz. 
 Is. '6\d., the advance is forty-nine per cent; but, if we take the first five 
 years of the time, it will average Is. X\d., and, for the last five years. 
 Is. fiid., equal to thirty-eight per cent advance. Other causes operating 
 at the same time may have caused a part of this large advance in the 
 merchandise of China and India ; but the enlargement of the currency 
 throughout the Eastern world, by the shipment of specie from Europe 
 and the United States, must have been the principal cause of such a large 
 and regular advance in prices, ^f The correspondence between the 
 rise of Indian and Chinese commodities, as given in our tables, is very 
 remarkable, and goes far to prove that both are affected by the same 
 general cause ; viz. , an increase in the volume of currency. 
 
 This process seems destined to go on for a long period to come ; until, 
 in fact, the equilibrium is restored between the hard-money countries of 
 the East, and the paper and mixed currency countries of the West. 
 The East will continue to receive bullion, and pay for it with a con- 
 stantly diminishing quantity of their products. 
 
 GOLD MINING IN RELATION TO NATIONAL INDEBTBDNBSS. 
 
 By many persons, the fact that there are within the United States 
 deposits of gold supposed to be inexhaustible is regarded as adding 
 
APPENDIX. 483 
 
 greatly to the stability of the national credit, inasmuch as these afford 
 extraordinary facilities for discharging the public debt. 
 
 But this can be true only on the supposition that gold mining is more 
 profitable than other branches of industry, and therefore increases more 
 rapidly the national wealth, and of course the ability to meet a heavy 
 taxation. 
 
 It matters not at all what kind of values are created ; it is only the 
 quantity or amount that is important : the larger the amount, the greater 
 the ability to pay off the national indebtedness. Therefore, if gold 
 mining gives a greater income than any other branch of industry, it in 
 so far increases the ability of the nation to pay off the public debt. 
 
 Whether such is the fact or otherwise is a question not readily deter- 
 mined ; but, until it is settled in the affirmative, we cannot decide that 
 gold mining adds especially to the ability of a nation to pay its indebted- 
 ness. A million dollars' worth of cotton or wheat goes just as far in 
 paying the public debt as a million dollars' worth of gold. 
 
 The vast deposits of gold in the West give to the United States, 
 virtually, a new article for export. If the production of that article 
 makes the aggregate industry of the country more profitable than it 
 would otherwise have been, then the nation, in so far as this is true, is 
 more able to discharge its public indebtedness, but not otherwise. 
 
 But there is yet another view of the relation of gold mining to 
 national indebtedness. Suppose that by the discovery of richer mines, 
 or improved methods of mining, the cost of getting gold should be 
 reduced one-half. In such a case, gold would fall to half its present 
 value ; that is, commodities would double in price ; and the farmer, for 
 example, would get two dollars per bushel for corn, instead of one 
 doUar, and could pay off his share of the national debt with one-half 
 the quantity it would otherwise cost him. So of all producers. Although 
 this is not likely to take place very soon, if at all, it is quite certain the 
 tendency of things is in that direction. This, however, is not a sufficient 
 reason for postponing the payment of a national debt to a distant and 
 uncertain future. 
 
 DOES THE nsrCEBASED PEODTJCTION OF GOLD CATJSB ANY EXTKAORDI- 
 NARY INCREASE IN THE PRODUCTION OP OTHER VALUES? 
 
 The general impression is, that the opening of new and productive 
 mines gives a great stimulus to industry, and, even more than this, that 
 it imparts new life and activity to commerce, and rapidly increases the 
 general wealth. 
 
 If so, how, and why? 
 
 Let us look at the facts of the case. As soon as the discoveries in 
 California and Australia were made, multitudes from all parts of the 
 
484 APPENDIX. 
 
 world flocked to the mining regions. An immense amount of labor was 
 at once diverted from various departments of industry to the new busi- 
 ness. Capital to an enormous amount was invested in the same en- 
 terprise. The whole trade and industry of the world was laid under 
 contribution by the great movement ; and production, in all the countries 
 from which the miners and capital were drawn, was of course, by so 
 much, diminished. Neither the men nor the capital were unemployed 
 before ; and now they only changed from one employment to another. 
 
 Perhaps it may be said, that the business of mining was vastly more 
 profitable than the ordinary occupations in which labor and capital are 
 employed, and therefore there was a greater production of value, and 
 therefore an extension of commerce by so much. But that is the point 
 to be proved. It is disbelieved by those who have examined the matter 
 most carefully, that mining has, on the whole and in the long-run, been 
 more profitable than other industry. If every thing were taken into ac- 
 count, it is uncertain whether there has been any extraordinary increase 
 of general production in consequence of the new discoveries of gold. 
 
 The question in this case really is. Has the grand total of those utilities 
 which men desire, and which contribute to their welfare and happiness, 
 been increased by the gold discoveries in California ? No doubt the 
 wealth of the world, when reckoned in dollars, has been increased by 
 these discoveries, because more dollars have been created, both metallic 
 and paper ; and those dollars have raised prices. But have the utilities 
 of the world been multiplied in consequence of the increase of gold? 
 
 About $1,500,000,000 have probably been added (from California and 
 Australia) to the currency and bullion of the world. Of this amount, 
 the United States has furnished an average of, say, about $50,000,000 
 per annum from 1849 to 1867. 
 
 The whole annual production of wealth, or values of every kind, in the 
 United States, has been estimated as high as $4,000,000,000 per annum ; 
 but, assuming it has averaged since the gold discoveries (1849) but 
 $3,000,000,000, then the gold production has been just one-sixtieth of 
 the whole production of the country, or exactly two per cent. We 
 should presume this to be a lai-ge estimate of the proportion of gold to 
 the sum total of values created in the United States annually. If so, we 
 can see what the relative importance of gold-mining, as a branch of in- 
 dustry, in the United States is. 
 
 The proportion of gold production in the British empire is still less 
 than with us. K this be so, we can make an aproximate estimate as to the 
 proportion which gold-mining in Australia and California, as a branch of 
 production, bears to the aggregate production of the world ; and we shall 
 safely conclude that it is only a fraction of one per cent. 
 
 But it may be urged in reply to all this, that gold-mining has created 
 a large and populous State on the Pacific, which would not have existed 
 
APPENDIX. 485 
 
 but for the gold discoveries, and caused a more rapid settlement of 
 Califoi-nia (and the same may be said of Australia) than would have 
 otherwise taken place ; but that does not prove that gold-mining enriches 
 a State faster than other forms of industry. 
 
 It is a pertinent fact, that the agricultural capacity of the country has 
 been found so great, that cultivation rather than mining is fast becom- 
 ing the most important industrial interest, and that the former may soon 
 become the most extensive, because the most profitable, business in Cali- 
 fornia. 
 
 But it maybe further urged, that " there has been an unwonted ex- 
 tension of commerce since the gold discoveries.'' Very true ; but so 
 there would have been, had no such discoveries taken place. Steam 
 travel and transport has been enormously enlarged within the same 
 period (say the last seventeen years) ; immense regions of the East have 
 been opened to the products and manufactures of the more civilized 
 parts of the earth ; and, of course, a rapid extension of trade has taken 
 place. 
 
 GENERAL CONCLUSIONS. 
 
 (a) Those nations that produce gold lose by all substitutes used in- 
 stead of it, either by themselves or others. 
 
 (6) Those nations that have no such substitutes gain in commerce all 
 that is thus lost by others. 
 
 (c) Every community that introduces any thing but gold or silver 
 into its currency, violates the law of value, and disturbs the commerce 
 of the world. 
 
 (d) Other things equal, the indvfstry of each country is effective 
 just in proportion to the accuracy of tlie standard by which its products 
 are measured ; that is, as it corresponds with the universal measure of 
 value. 
 
 (e) The peoples of the earth, collectively, gain little in utilities by in- 
 creasing the quantity of the precious metals, so far as used as currency ; 
 the larger quantity having no more power in exchange than the smaller 
 one. 
 
 {f) The gold-producer in any country is injured by the use of either 
 mixed or credit currency in every part of the world, since every substi- 
 tute for gold as currency diminishes the natural value of his product ; 
 but he is more especially injured by its use in his own country. 
 
 {g) When gold ceases to be the only legal currency of a country, it 
 is demonetized, and no longer measures values. 
 
 Qi) The general production of wealth cannot be essentially increased 
 by additions made to the coin and bullion of the world. 
 
 (i) Gold-mining no more increases the ability of a government to dis- 
 charge a national debt, than any other branch of industry equally pro- 
 ductive or profitable. 
 
486 APPENDIX. 
 
 APPENDIX A. 
 
 It may be objected to Table V., pages 177-8, that it does not give a 
 fair representation of prices, because one of the articles included (mess 
 pork) is so much greater in value than the rest as to decide the char- 
 acter of the general result. We have therefore selected, from the same 
 Financial Report (1863), ten other commodities, and present them in the 
 following table, which, it will be seen, corroborates Table V., in that it 
 affords the same general facts; viz., that prices rise and fall with the 
 variations in the quantity of the currency. The commodities taken are , — 
 Northern corn, per bushel ; anthracite coal, per ton ; Liverpool coal, per 
 chaldron ; fish, per quintal ; pig lead, per 100 lbs. ; sperm oil, per gall. ; 
 tallow, per 100 lbs. ; mess beef, per bbl. ; lard, per 100 lbs. ; and clover- 
 seed, per 100 lbs. These, it will be seen, present a fair average as to 
 the amount of value in each. 
 
 The result obtained from a table, constructed from all these, is as 
 follows : — 
 
 First six years, 1834 to 1839, the aggregate average 
 
 price was $72.51 Currency, $14.24. 
 
 1840 to 1845, the aggregate average price was . . 52.97. — Currency, 8.69. 
 1846 to 1861, „ „ . . 54.08. — Currency, 10.23. 
 
 1852 to 1857, „ „ . . 69.77.— Currency, 14.49. 
 
 The variations in prices, as compared with the quantity of currency, 
 do not correspond exactly, as will be observed. This is owing to what 
 has been noticed in the body of this work; viz., that, when currency is 
 redundant, a portion of it is absorbed in discharging the larger volume 
 of credit obligations, which an unnatural expansion gives rise to. 
 
 APPENDIX B. 
 
 SALARIES OP MINISTERS. 
 
 Wishing to verify, in different ways, the truth of the principle which 
 I laid down in 1854 (see "Merchants' Magazine," vol. xxxi. No. 2, 
 and also stated on page 257 of this work), that "salaries and wages 
 never rise so soon, or so much, as commodities, from an expansion of 
 the currency," an invitation was addressed to clergymen, asking them 
 what advance had been made in their salaries from 1860 to 1865. 
 Information was received, in all, from one thousand ministers, of eight 
 different denominations, residing in eighteen States, with salaries ranging 
 from three hundred to five thousand dollars. From four hundred and 
 fifty of these, the answers were so explicit as to present the following 
 precise results : — 
 
APPENDIX. 487 
 
 Average salaries in 1865 $907.28 
 
 „ „ in 1860 772.38 
 
 Average advance . . .' $134.90 
 
 „ „ in gratuities 32.77 
 
 Aggregate average advance in all $167.67 
 
 Average advance in salaries 17. B per cent. 
 
 „ „ in salaries and gratuities . . . 21.7 „ 
 
 From the remaining five hundred and fifty, the infiDrmation was suffi- 
 ciently definite to enable me to state, that the advance in the salaries of 
 the one thousand ministers of the Congregational, Methodist, Baptist, 
 Unitarian, Universalist, Episcopal, Presbyterian, and Lutheran, taken 
 together, was not over twenty per cent. 
 
 WAGES OF SCHOOL-TEACHERS. 
 
 The wages of school-teachers, in Massachusetts, Connecticut, New 
 Hampshire, and Vermont, advanced, fi-om 1860 to 1866, on an 
 average, as follows : — 
 
 Male teachers 37.6 per cent. 
 
 Female teachers 26.0 „ 
 
 Average of both sexes 81.7 „ 
 
 The greater part of this rise was undoubtedly in the last year, as the 
 returns from Massachusetts show, that, from 1860 to 1866, the advance 
 was only 8 j per cent for males ; for females, 9i per cent ; average, 8.7. 
 It is doubtful if the rise of teachers' wages, throughout New England, 
 fi-om 1860 to 1865, was equal to twenty per cent; indeed, from the ex- 
 ample of Massachusetts, it must be presumed to have been much less. 
 
 The salaries of ministers and teachers have both been advanced, I have 
 reason to believe, considerably since 1865, but not to half the extent of 
 even the present advance in prices (1867) over those of 1860. These 
 last two classes have suffered far more reduction of actual income, when 
 reckoned in commodities, than laborers ; doubtless, for the principal 
 reason that their services are not realized in vendible commodities, 
 and, therefore, not so readily affected by the rise of prices, 
 
 WAGES 01' LABOE. 
 
 An additional fact in point, in regard to the rise in wages, has been 
 furnished, in the Report of the United-States Revenue Commission of 
 1865-6, page 333: — 
 
 The cost of labor, per ton of 2,000 pounds of cast steel, delivered 
 
 at Pittsburg warehouse, in 1860, was $45.07 
 
 Cost of same in 1864-5 62.32 
 
 Enhanced cost of labor $17.25 
 
488 
 
 APPENDIX. 
 
 equal to thirty-eight per cent advance in the price of labor ; wlule we 
 know that the prices of commodities had advanced more than one hun- 
 dred per cent. , 
 
 The Report of the Massachusetts Commissioners on the Hours of 
 Labor, 1867, page 16, states that the wages of 39,216 operatives, in 102 
 establishments, had advanced 63.2 per cent between the years 1860 and 
 1865, inclusive. But they conclude, from information obtained from 
 diflferent employments, "that the average advance in wages, of all kinds 
 of labor, throughout the State, is about fifty per cent" (page 16). 
 Facts of this kind may be multiplied indefinitely, were there occasion 
 for them. 
 
 PRICES OF CEKTATN COMMODITIES. 
 
 We here annex a table of prices in the Boston market, of seventeen 
 different commodities, for four years, taken in the month of October of 
 each year, as published in the " Boston Journal " of Nov. 16, 1865 : — 
 
 Table, shomng the 'Price of Sixteen, Commodities in the Boston Market, from 1862 
 to 1865, inclusive. 
 
 Articles. 
 
 1862. 
 
 1863. 
 
 1864. 
 
 1865. 
 
 Apples, dry, per lb 
 
 Beef, per lb 
 
 Beans, per bushel 
 
 Butter, per lb 
 
 Cheese, per lb 
 
 Chickens, per lb 
 
 Corn, Northern, per bushel . . 
 Cranberries, per bushel .... 
 
 Candles, per lb 
 
 Eggs, per dozen 
 
 Flour, per bbl 
 
 Ham, per lb 
 
 Lard, per lb 
 
 Mutton, per lb 
 
 Potatoes, per bushel 
 
 Peas, per bushel 
 
 Pork, per bbl 
 
 Aggregate cost 
 
 Advance each year .... 
 
 .07 
 
 .06i 
 
 $3.00 
 
 .18 
 
 .09 
 
 .12 
 
 .85 
 
 2.50 
 
 .11 
 
 .14 
 
 8.60 
 
 .08 
 
 .Hi 
 
 .06 
 
 .35 
 
 1.00 
 
 14.50 
 
 .06 
 
 .09 
 
 $3.00 
 
 .22 
 
 .12 
 
 .14 
 
 1.00 
 
 4.00 
 
 .16 
 
 .18 
 
 10.00 
 
 .11 
 
 .13 
 
 .07 
 
 .60 
 
 1.00 
 
 17.00 
 
 .12i 
 .13i 
 
 $3.00 
 .45 
 .18 
 .20 
 1.75 
 2.75 
 .22 
 .30 
 
 13.00 
 .22 
 .23 
 .12 
 .65 
 2.00 
 
 44.00 
 
 .18 
 .14 
 
 $3.25 
 .45 
 .18 
 .30 
 1.12 
 4.00 
 .20 
 .32 
 
 17.00 
 .26 
 .30 
 .13 
 .85 
 2.00 
 
 46.00 
 
 $31.73 
 
 $37.78 
 19 per ct. 
 
 $69.33 
 83iperct. 
 
 $76.68' 
 lOiperct. 
 
 Advance in 1865 over the prices of 1862, 141 per cent. 
 
 It will be observed, that the above are articles of domestic produce, not directly 
 affected by custom or excise charges. 
 
INDEX. 
 
INDEX. 
 
 Ad-valorem duties, 812, 313. 
 
 Agriculture, a form of production, 24- 
 26; allows little division of labor, 41, 
 42, 106 ; or application of machinery, 
 61 ; products tend to increase in value, 
 14, 15, 42; affected by mixed cur- 
 rency, in America, 205-207 ; its 
 wages lowest of all, 261. 
 
 Allen, D. 0., quotation, 95. 
 
 Allotment system, English, 416. 
 
 American civil war, developed sanitaij' 
 science, 44; effect on consumers of 
 cotton, 83; encouraged cotton cul- 
 ture elsewhere, 88; influenced by 
 mixed currency, 188, 189; did not 
 encourage industry, 410. 
 
 Amsterdam, Bank of, 225, 226. 
 
 Apprenticeship, shortened by division of 
 labor, 38, 39. 
 
 Arbuthnot, quotation, 50. 
 
 Art, a form of consumption, 397-399. 
 
 Atkinson, Edward, statistics of cotton 
 culture, 330. 
 
 Balance of trade, 117-120. 
 Bankruptcies, relation to currency, 156- 
 
 160, 166-168; correspond to quality 
 
 of currency, 203, 204. 
 Banks, mixed currency, 141, et seq.; 
 
 Suffolk, 164 ; savings', 164^186 ; 
 
 mixed currency favorable to? 216- 
 
 219; English Joint Stock, 217, 218. 
 Bank of England, 142, 199, 201, 228, 
 
 247, 292, 363, et seq. 
 Barter, 121, 122. 
 
 Bascom, Professor, C[Uotation, 6, 175. 
 Bastiat, F., illustrations of value, 9-13 ; 
 
 quotations, 123, 294. 
 Bequest, laws of, 371-879. 
 Bills of exchange, 241-251. 
 Book accounts, 240, 241. 
 Bounties, compared with protective 
 
 duties, 318, 319. 
 
 Buildings, how affecting rent of land, 
 
 299-301. 
 Burke, Edmund, quotation, 28 ; law of 
 
 currency, 230. 
 
 Cairheb, Professor, quotation, 4. 
 
 California, amount of gold yielded, 214; 
 interests opposed to mixed currency, 
 237. 
 
 Capital, definition, 19; growth of, 19, 
 20,66,57; relation to labor, 21, 22; 
 office in production, 31; fuller defi- 
 nition, 65 ; distinguished from wealth, 
 55, 56 ; divided as fixed and circulat- 
 ing, 57, 68; distinction as productive 
 or unproductive rejected, 58-60; co- 
 operates with labor, 60-76; the pro- 
 portion between them, 60-62; can 
 there be a surplus? 64-66; import- 
 ance that it be sacred from violence, 
 66-68; its best distribution, 68, 69; 
 freedom from petty restraints, 69-71 ; 
 is created by the business which re- 
 quires it, 94 ; is it increased by issue 
 of paper money ? 207, 208 ; or made 
 more convenient to young men? 
 215, 216 ; loaned in two forms, 253 ; 
 its remuneration to be distinguished 
 ftom profits, 280; applied to land, 
 becomes an element of rent, 298; is 
 public debt capital? 366, 356; must 
 be reproduced, 382, 444 ; wealth un- 
 productively applied not capital, 386 ; 
 relation to population, 447, 458, 459. 
 
 Charity, its place in political economy, 
 411,412; discussed, 412, eisej.; how 
 f^r can fictitious employment be sub- 
 stituted ?. 406, 407. 
 
 Circulating capital, 67, 58. 
 
 Circulation of mixed-currency banks, 
 141, 145, 209; fluctuations, 161, 232. 
 
 Coal, importance of its proximity to 
 iron ore, 94, 95. 
 
492 
 
 INDEX. 
 
 Cobden, his French treaty, 113, 114; 
 opinion of mixed currency, 233. 
 
 Coinage, peculiar adaptation of gold 
 and silver, 127 ; discussed, 130, 181 ; 
 what government really does by it, 
 170-172. 
 
 Colwell, Stephen, his estimate of secu- 
 rities in the United States, 214. 
 
 Congress of nations, 437-440. 
 
 Consolidation of national debt, 341-345. 
 
 Consumption, place in the science, 23, 
 66, 57; mistaken consimiption, 72, 
 73, 383-386 ; how consumption comes 
 into relation with production, 75, 76 ; 
 mischievous consumption should be 
 taxed, 311, 320, 331; to what extent 
 consumption should be taxed, 313, 
 314; consumption discussed, 380, et 
 seq. 
 
 Contraction of mixed currency, how ef- 
 ftcted, 157-159; illustrated, 161, 162, 
 168. 
 
 Contracts, effects upon them of credit, 
 134, 135; of mixed currency, 166- 
 174, 181-183. 
 
 Convertibility of currency distinguished 
 from redeemableness, 140, 141; of 
 different kinds of currency, 232. 
 
 Cooke, Jay, his pamphlet on National 
 Debt, 353-362. 
 
 Co-operation of labor (see Division of 
 Labor), 54-71. 
 
 Co-operative associations, 274-279. 
 
 Corporations, not generally so effective 
 as partnerships, 69. 
 
 Corporate foreign indebtedness, 346. 
 
 Cotton, relation to gold, 128; how af- 
 fected by mixed currency, 205-207; 
 propriety of export or excise duty, 
 337-330. 
 
 Credit cun'ency, defined, 124 ; discussed, 
 131-138; is it capital? 207; riernni, 
 233. 
 
 Credits, should they be taxed? 338, 339. 
 
 Culture economic, field of this agency, 
 71-76. 
 
 Currency, defined, 124; its four kinds, 
 124, 125 ; are deposits currency ? 151 
 -163 ; are bills of exchange currency ? 
 249-251. 
 
 Customs, frauds in, 119, 120, 313; a 
 mode of taxation, 312; discussed, 
 312-318. 
 
 Debt, evidences of, 240-251; national, 
 consolidation of, 341-345; fallacies 
 respecting, 353-362, 410, 411; indi- 
 vidual, affected by credit currency, 
 133; by mixed currency, 166-174, 
 181-183. 
 
 Deferred income, 324, 325. 
 
 Deposits, 141, 146; analyzed, 148-164; 
 under mercantile currency, 231, 232; 
 increased by usury laws, 292. 
 
 Destruction of wealth, 73, 380. 
 
 Direct taxation, 312. 
 
 Discount, its limits, 97, u 
 
 Distribution, its place in the science, 23 ; 
 discussed, 252-879, 469, 470. 
 
 Dividends, how classed, 287, 288. 
 
 Division of labor, its place in produc- 
 tion, 31; illustrated, 32-34; advan- 
 tages, 34-'B9 ; limitations, 40-43 ; dis- 
 advantages, 43-52 ; the balance cast, 
 63,54; T-^SMOT^, 252. 
 
 Education, public, 402, 440-443 ; of the 
 laborer, affecting wages, 262, 443; 
 especially woman's wages, 265. 
 
 England, agricultural class, 47, 369; 
 corporations, 69 ; compared with Bra- 
 zil, 81 ; protection, 90, 360 ; value of 
 land, 95, 96; emigration caused by 
 American protection, 99 ; trade wim 
 United States, 111, 245 ; deprecianon 
 of Napoleonic money, 135 ; currency 
 described, 202-205, 226, 227; ex- 
 change with, 247-249; impoverish- 
 ment of masses, 369, 370 ; mischievous 
 consumption, 392; pauperage, 412, 
 416 - 418 ; public education, 440 ; 
 causes of '^over- population," 456, 
 457. 
 
 Entail, 375-379. 
 
 " Entrepreneur," 279. 
 
 Ethnical characteristics, affecting man- 
 ufactures, 27; trade, 81; consump- 
 tion, 451. 
 
 Europe, rent, 294 ; improvements of 
 soil, 299; financial system, 363, et 
 seq.; luxury, 391; aggregate reve- 
 nue, 405. 
 
 Exchange, its place in the science, 22, 
 23 ; a form of production, 29-31 ; ori- 
 gin, 77; principles of, 78-85; ob- 
 structions, 85-117; international bal- 
 ances, 117-120; instruments of, 121- 
 251 ; bills of, 241-249 ; are they cur- 
 rency? 249-251; fictitious (bank), 
 caused by usury laws, 291, 292. 
 
 Excise, 319, 320. 
 
 Expansion of mixed currency, how ef- 
 fected, 166, 157; illustrated, 161, 162, 
 179 ; affecting manufactures, 191, 192 ; 
 affecting wages, profits, &c., 302-306. 
 
 Exports, origin, 79, 80; relation to im- 
 ports, 117-120; taxation of, 325-830. 
 
 Export of American cotton, 328; of 
 American stocks, 347-850. 
 
 Fallacies respecting protection, 101- 
 108; mixed currency, 207-228; for- 
 eign indebtedness, 350-353 ; national 
 
 . indebtedness, 358-362. 
 
 Fawcett, Professor, quotation, 77; his 
 account of co-operative associations, 
 274-279. 
 
 Fertility, an element of rent, 297, 298. 
 
 Fisheries, a branch of agriculture, 26. 
 
 Fixed capital, 57, 68. 
 
 Foreign indebtedness, its interest in« 
 eluded in balance of trade, 120. 
 
 Foreign exchange, 243, et teq. 
 
INDEX. 
 
 493 
 
 France, conflict of capital and labor, 22; 
 injustice to capital, 67, 68; beet-root 
 culture, 102, 103; commercial treaty 
 •with England, 113, 114; revolution- 
 ary money, 135; trade with United 
 States, national debt, 356, 362; 
 growth of manufactures, 394; pri- 
 vate frugality, 394; public extrava^ 
 gance, 396; its war system, 461. 
 
 Free institutions not suited to protec- 
 tive policy, 109, 110. 
 
 Free banking, 230, 231. 
 
 Freedom essential to secure just wages, 
 255 ; just profits, 281. 
 
 Friendly societies of Great Britain, 269- 
 271, 415. 
 
 Frugality, 20, 445; affecting wages, 262, 
 263; dependent on sacredness of 
 property, 289, 450; examples of pub- 
 lic frugality, 296, 404. 
 
 Funding, its origin, 365. 
 
 Genoa, trade and decline, 64 ; bank of, 
 225. 
 
 Gibbon, quotation, 884, 895. 
 
 Gold, jjroperties, 127-130; relations to 
 credit currency, 132 ; sufficiently 
 plentiful for commerce, 213-215. 
 
 Government, influence on economic de- 
 sires, 74; claim in distribution, 254, 
 449 ; a copartner in production, 307, 
 308; necessity for, 401, 402. 
 
 Government bonds, taxation, 339-345; 
 exportation, 347-350. 
 
 Great Britain, estimated wealth, 63; 
 currency, 202-205 ; abolition of usurv 
 laws, 290 ; import of breadstuff's, ef- 
 fect on rent, 298; taxation, 313, 820, 
 821 ; consolidation of debt, 344, 347 ; 
 financial, 361-371; primacy in man- 
 ufactures threatened by France, 893 ; 
 luxurious consumption, 394; church 
 establishment, 402; public expendi- 
 ture, 405. 
 
 Health, affected by employments, 43- 
 49 ; risks to, affecting wages, 261. 
 
 Holland, reason for commercial enter- 
 prise, 28; pauperism, 412. 
 
 Immediate distinguished from ulti- 
 mate resources in bank accounts, 
 140, 145, 147; are stocks included? 
 153, 154. 
 
 Imports, origin, 79, 80 ; relation t» ex- 
 ports, 117-120; how related to pro- 
 tective duties, 198-195; to mixed 
 currency, 195, 196; to rent, 298; of 
 foreign materiel in war, 424. 
 
 Incomes, affected by credit currency, 
 183; by mixed currency, 221-231, 
 305. 
 
 Income tax, 322, 339 ; political consid- 
 erations, 333. 
 
 Indebtedness, discharged in currency, 
 165; national (United States), its 
 consolidation, 341-345; fallacies re- 
 
 specting, 353-362 ; national, relations 
 to modern financial system, 369; for- 
 eign national, interest included in 
 balance of trade, 120; economy of, 
 346-858. 
 
 India, rebellion in, affecting trade, 83; 
 affected by rebellion in the United 
 States, 88 ; distance of coal from iron 
 ore, 95 ; cotton culture, 328. 
 
 Indirect taxation, 812, 314, 365, 368, 369. 
 
 Individual opposed to public or corpo- 
 rate enterprise, 40, 50-52, 69, 403, 
 404, 407-410, 414, 419. (See Co- 
 operation and Division of Labor.) 
 
 Infancy of manufactures, argument from, 
 101, 102; sophistry of the argument, 
 103, 104. 
 
 Inheritance, laws of, 371-379. 
 
 Interest, how related to mixed currency, 
 196-201, 220, 302-306; in England, 
 204; its place in distribution, 253; 
 discussed, 288-294. 
 
 Invention facilitated by division of la- 
 bor, 35, 86; requiring increase of 
 capital, 448. 
 
 Ireland, causes of her decline, 63, 64; 
 causes of emigration, 104 ; famine of 
 1847, effect on finances, 199; cur- 
 rency, 202, 228; pauperism, 420. 
 
 Iron, manufacture in the United States, 
 93-101 ; period of its use, 129. 
 
 Jewish, only race not deterred from 
 gain by persecution, 68. 
 
 Labor, defined, 18; work of slaves not 
 labor, 18, 19; relation to capital, 21, 
 22; division of, 81-54; co-operation 
 with capital, 60-71; proportion to 
 capital, 60-66; productive or unpro- 
 ductive? 71-73; classified, 253, 254; 
 combinations, 269-71. 
 
 Land, the foundation of rent, 295 ; ap- 
 pendages, 299-801. 
 
 Learning, economic relations, 74 ; affect- 
 ing wages, 262; as a form of con 
 sumption, 397-399. 
 
 Legal tender, when unjust, 132-138; 
 how far just, 170-172; national-bank 
 currency, how far legal tender, 284. 
 
 Legislation, relations to wealth, 1, 2, 4, 
 5; when mischievous, 69-71; in a 
 free government fatal to protection, 
 109, 110 ; does not determine the 
 value of money, 181 ; cannot control 
 premium on gold, 132 ; can it restrain 
 the issue of credit currency? 184- 
 136; can it regulate mixed currency? 
 219, 220. 
 
 Levi, Professor, quotation, 63 ; estimates 
 revenues of Great Britain from dis- 
 advantageous consumption, 320, 321 ; 
 estimates, contribution of the several 
 classes, 870. 
 
 Licenses, a mode of taxation, 321. 
 
 Life, affected by employments, 43-49; 
 its risks affecting wages, 260. 
 
494 
 
 INDEX. 
 
 Location, an (ilement of rent, 296. 
 
 Luxuiy, defined, 386-388; relations to 
 wealth, 388-392; on tlie degree of, 
 392-397, 449, 460 ; relation to popu- 
 lation, 460. 
 
 Mackintosh, quotation, 84. 
 
 Malthus, Ms theory of population, 452, 
 et seq. 
 
 Manufactures, their products tend to de- 
 crease in value, 14, 15; a form of 
 production, 26-29 ; law of their diffu- 
 sion, 27, 28 ; amount of, 28, 29 ; be- 
 long to old and rich countries, 105, 
 106 ; affected by mixed currency, 190 
 -196. 
 
 Martin, J. G., reference to, 190-200. 
 
 Massachusetts, shoe trade, 104 ; cur- 
 rency, 163, 164, 185, 228, 234; rate of 
 taxation, 331 j vital statistics, 462-464. 
 
 McCuUoch, his theory of inheritance, 
 372, 373. 
 
 Mechanical employments affecting 
 health and life, 44, 45. 
 
 Medium of exchange, what, 122, 123; 
 is a mixed currency satisfactory? 
 164-168. 
 
 Mendicancy, 414, 421. 
 
 Mental power, its wages, 266-268. 
 
 Mercantile cuiTency, defined, 125; dis- 
 cussed, 224-232. 
 
 Mercantile theory, the, 54. 
 
 Mill, J. S., definition of labor, 18; states 
 law of currency, 215 ; quotation, 279, 
 n., 308. 
 
 Mining, a branch of agriculture, 57, 68. 
 
 Mistaken consumption, 72, 73 ; dis- 
 cussed, 383-386, 445. 
 
 Mixed currency, defined, 124, 125 ; dis- 
 cussed, 138-223 ; does it satisfactorily 
 perform the function of money ? 155- 
 184; its effects, 184-207; fallacies re- 
 garding it, 207-223 ; cheapness, 208- 
 212, 227 ; risumi, 232 ; effect on inter- 
 est, 292, 293 ; complicates the whole 
 • scheme of distribution, 302-306 ; neu- 
 tralizes value of government bonds 
 sold abroad, 348, 349. 
 
 Money, defined, 124, 169-172; different 
 forms, 126, 127 ; is mixed cun'ency a 
 satisfactory substitute? 155-184; is 
 money sufficiently plentiful for com- 
 merce? 213-216; its relations to a 
 state of wai-, 422-424. 
 
 Morality, relations to political economy, 
 391-393, 449-451, 461, 462. 
 
 Moral power, its wages, 266-268. 
 
 Mortgages, should tjiey be taxed? 337- 
 339. 
 
 Mortmain, 371-373. 
 
 National-bank system, compared with 
 the State-bank system, 233-240. 
 
 Kational taxation, defined, 311; dis- 
 cussed, 312-330; how supplemented 
 by State taxation, 336, 337; debt, 
 341-345, 363-362, 410. 
 
 Natural powers confer no value, 10, 12, 
 
 16. 
 Necessary wages, 255, 256 ; profits, 284, 
 
 285. 
 Newcombe, S-, his "Financial Policy," 
 
 424 ; quotation, 467. 
 New England, its natural industry, 114 ; 
 
 originally opposed to protection, 116 ; 
 
 currency, 163, 164; its agricultural 
 
 competition with the Western States, 
 
 300; public education, 442, 443. 
 New York, banks of, 142. 
 Nominal distinguished from real wages, 
 
 256, 257. 
 
 Opdtke, George, computes profits of 
 
 importers, &c., 317, 318. 
 Overstone, maintained that deposits are 
 
 not currency, 151. 
 
 Parish allowance, English, 415. 
 
 Pauperism. (See Poor iaujs.) 
 
 Peel, his Bank Act, 199, 200; quota- 
 tion, 201. 
 
 Personal estate, defined, 280, n. 
 
 Physical power, its wages, 266-268. 
 
 Political economy, defined, 1 ; a positive 
 science, 3, 4; embarrassed by legis- 
 lation, 4, 5; by prejudice and self- 
 interest, 5, 6 ; by loose phraseology, 7. 
 
 Politics, relation to political economy, 
 1, 2, 15, 16, 391, 449-451. 
 
 Poll-tax payers, political danger from, 
 332, 333. 
 
 Poor-laws, 411, et seq. (See Charity.) 
 
 Population, 447, 452, et seq. 
 
 Pnce, what, 174; distinguished from 
 value, 175, 176 ; how affected by in- 
 crease of currency, 215; is the only 
 thing gained by currency expansion, 
 223, 354. 
 
 Primogeniture, supported by Mr. Mc- 
 CuUoch, 373; discussed, 375-379. 
 
 Production, its place in the science, 22 ; 
 its forms, 24-31 ; conditions of high- 
 est production, 31; discussed, 32-76, 
 410. 
 
 Productive or unproductive capital, 58 
 -60; labor, 71-73. 
 
 Profits, place in distribution, 253, 264; 
 discussed, 279-288 ; affected by tem- 
 porary rise of wages, 286, 287; by 
 currency inflation, 302-306; of im- 
 porter, retailer, &c., 317, 318. 
 
 Property tax, discussed, 331-339. 
 
 "Protection," from physical causes, 85- 
 87; for industrial purposes, 91-108; 
 for public justice, 109, 110; for na- 
 tional security, 110-112; for retalia- 
 tion, 112-114; defeated by mixed 
 currency, 190-196; cost of "protec- 
 tion" through customs greater than 
 by bounties, 314-317; not secured 
 by national debt, 3547-860. 
 
 Publication of tax lists, rightfiilness of, 
 310, 324. 
 
 Public consumption, 401-410. 
 
INDEX. 
 
 495 
 
 Bates of interest, 196-201 ; of exchange, 
 246, 247; of profits, 283, 284. 
 
 Kent, an apparent anomaly, 17 ; how af- 
 fected by credit currency, 133 ; place 
 in distribution, 253; discussed, 294- 
 302; aifected by currency inflation, 
 802-306. 
 
 Eeproduction (human), chiefly through 
 agriculture, 25, 47-49; how afifected 
 by destitution, luxury, &c., 463. • 
 
 Eeproduction of wealth, 75, 76, 377. 
 
 Keproductive consumption, 444, et seq. 
 
 Retaliation in commercial legislation, 
 112-114. 
 
 Eevolution, American, vast transfers 
 without equivalent, 134, 135; debt 
 incurred, 363; expense to England, 
 S66. 
 
 Eicardo, his theory of rent, 398, n. 
 
 Eome, money, 126; luxury, 396; pau- 
 perage, 413. 
 
 Satiugs' banks, relations to mixed cur- 
 rency, 184-186; character of deposi- 
 tors, 358. " 
 
 Scotland, currency, 202, 203, 228; public 
 education, 442, 443. 
 
 Sex, distinction made in wages, 263- 
 265. 
 
 Shoe trade of the United States, 104. 
 
 Silver, properties of, 127-130. 
 
 Small notes, 228, 229. 
 
 Smith, Adam, pin-making in his time, 
 34 ; distinguishes between productive 
 and unproductive labor, 71-73; the- 
 ory of cheap currency, 211, 212 ; defi- 
 nition of wages, 255; principles of 
 taxation, 308-310. 
 
 Smith, J. Y., quotation, 190. 
 
 Social condition, afiecting trade, 81, 83. 
 
 Specific duties, 312, 313. 
 
 Speculation, affects wages differently 
 from other commodities, 257, 258. 
 
 Spirits, taxation of in Great Britain, 
 320, 321. 
 
 Stamps, a mode of taxation, 321. 
 
 Standard of value, what, 123, 169-72; 
 does a mixed currency act justiy as 
 such? 172-184. 
 
 State taxation (American), discussed, 
 331-339. 
 
 Stocks, held by banks, 143 ; not imme- 
 diate resources, 153, 154. 
 
 Strikes, 272, 273. 
 
 Subsistence (human), nature's provision, 
 375-377 ; relation to population, 452, 
 et seq. 
 
 Suffolk-bank system, 164. 
 
 Sumptuary laws, discussed, 399-401. 
 
 Surplus production necessary to trade, 
 83. 
 
 Suspension better than severe contrac- 
 tion with mixed currency, 168, 220, 
 221. 
 
 Tariff, history of American, 115-117, 
 192-196. 
 
 Taxation, place in distribution, 254; 
 discussed, 306-839; of government 
 bonds, 340-345. 
 
 Tea, taxation in Great Britain, 313. 
 
 Tender, legal, 132-138, 170-172, 234. 
 
 Territorial division of labor, 81-85. 
 
 Territorial endowments affecting manu- 
 factures, 28; trade, 80; government 
 expenditures, 404, 405, 450, 451; 
 amount of capital, 447. 
 
 Tobacco, once legal tender in Yirginia, 
 126; taxation in Great Britain, 320, 
 321. 
 
 Trade, relations to exchange, 77, 78 (see 
 Exchange) ; balance of, 117-120. 
 
 Trades' unions, 271, 272, 415. 
 
 United States, estimated wealth, 62, 
 63; iron manufacture, 93, 101, 103; 
 immigration, 99; shoe manufacture, 
 104; true economical interests, 114- 
 117; prosperity attributed to mixed 
 currency, 212, 218; national-bank 
 system, 233-240; rents, 294; taxa- 
 tion, 307; unnecessary losses during 
 rebellion, 137, 138; rapid depletion 
 in 1864-65, 350; railroads, 384; pub- 
 lic education, 402; public expendi- 
 ture, 405 ; pauperism, 412, 413, 419. 
 
 United-States Bank, control of interest, 
 198 ; of exchange, 247. 
 
 Usury laws, 290-293. 
 
 Utility, distinguished from value, 14^17. 
 
 VALtTE, its elements, 8; fllustrated, 9- 
 13 ; distinguished from utility, 14-17 
 (see Standard of value) ; a property 
 of gold and silver, 127, 165, 166; its 
 laws do not control mixed currency, 
 155, 156; distinguished from price, 
 175, 176. 
 
 Talue-currency, of two kinds, 124, 125 ; 
 how regulated, 180, 181; is it more 
 expensive than mixed currency ? 208 
 -212. 
 
 Venice, trade and causes of decline, 64 ; 
 hostile commercial legislation, 113. 
 
 Wages, affected by protective legisla- 
 tion, 113; classified, 253-255; dis- 
 cussed, 255-265 ; second classification, 
 266 ; discussed, 266-268 ; a temporary 
 rise in wa.ges affecting profits, 286, 
 287; how affected by mixed cur- 
 rency, 256, 257, 302-306 : variations 
 in, 897. 
 
 Wants (human), place in the science, 
 2-4; affecting wages, 255, 256; the 
 spring of wealth, 378-390. 
 
 War, affecting trade, 83; affected by 
 trade, 84, 85; how far requires pro- 
 tective legislation, 110-112; relations 
 to mixed currency, 187-189 ; to mod- 
 em financial system, 369 ; the finance 
 of, 422-424 ; economy of war system, 
 425, et seq.; affecting population, 
 461. 
 
496 
 
 INDEX. 
 
 Wealth, defined, 7, 8; forms in -which 
 created, 24 ; is debt wealth ? 353-855 ; 
 does it belong to the living or the 
 dead? 371-873. 
 
 Western States of America, mineral 
 wealth, 108; their natural industry, 
 114; how affected by mixed cur- 
 rency, 206-207; rent, 300, 301; ne- 
 cessity of taxing credits, 339. 
 
 Wheat, price, how affected by mixed 
 currency, 205-207; by export duty, 
 325, 326. 
 
 Woman, her wages, 263-265; should 
 she be taxed ? 309 ; largely depend- 
 ent for support, 411. 
 
 Yatmak, J. Y., Ms tables of currency, 
 162. 
 
 THE END. 
 
 Cambridge : StereotTped and Printed by John 'Wilson and Son. 
 
riATir O' 
 
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 HB 161.W17 1867 
 
 The science of wealth:a manual of politi 
 
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