A Treatise on Political Economy

Transcript

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2 A TREATISE ON POLITICAL ECONOMY OR THE PRODUCTION, DISTRIBUTION AND CONSUMPTION OF WEALTH BY JEAN - BAPTISTE SAY AUGUSTUS M. KELLEY * PUBLISHERS N EW YORK i 97 i

3 First American Edition 1821 Reprint of 1880 & Haffelfinger, ( Philadelphia: Claxton, Remsen 624, 626 & 628 Market Street, 1880 ) Reprinted 1964, 1971 by AUGUSTUS M. KELLEY • PUBLISHERS REPRINTS OF ECONOMIC CLASSICS New York New York 10001 ISBN 0 678 00028 X L C N 63 23524 OP IN THB UNITED STATES PRINTED AMERICA by SENTRY PRESS, NEW YORK, N. Y. 10019

4 A TREATISE POLITICAL ECONOMY, AND PRODUCTION, DISTRIBUTION, CONSUMPTION WEALTH. BY JEAN-BAPTISTE SAV THE FOURTH EDITION OF THE TRANSLATED FROM FRENCH, BY C. R. PRINSEP, M. A. WITH NOTES BY THE TRANSLATOR. NEW AMERICAN EDITION. OOHTAINING A TRANSLATION OF THE INTRODUCTION, AND ADDITIONAL NOTE* BY CLEMENT BIDDLE, LL. D C. MEMBER OK THE AMERICAN PHILOSOPHICAL BOCIETY. PHILADELPHIA: CLAXTON, KEMSEN & HAFFELFINGEE, 624, 626 & 628 MARKET STREET. 1880.

5 Entered according to the act of Cong-ess, in the year 18.°*i. by JOHN GRIOO, m tne office of the clerk of the district court of the easttri district of Penn- •yivunia.

6 ADVERTISEMENT BY THE AMERICAN EDITOR, TO THE SIXTH EDITION. edition of this translation of the popular treatise of M. Say having A NEW of called for, the five previous American editions being entirely out print, the editor has endeavoured to render the work more deserving of the favour it has received, by subjecting every part of it to a careful re- vision. As the translation of Mr. Prinsep was made in the year 1821, from an earlier edition of the original treatise, namely, the fourth, which had not received the last corrections and improvements of the author, wherever an essential principle had been involved in obscurity, or an error had crept in, which had been subsequently cleared up and removed, the American editor in this impression, reconciled the language of the has, fifth text and notes to the 1826, the last which improved edition, published in M. Say lived to give to the world. It has not, however, been deemed necessary to extend these alterations in the translation any further than to the correction of such discrepancies and errors as are here alluded to; and the editor has not ventured to recast the translation, as given by Mr. Prinsep, merely with a view to accommodate its phraseology, in point of neatness of expression or diction, to the last touches of the author. The translation of Mr. Prinsep, the editor must again be permitted to observe, has been executed with sufficient fidelity, and with considerable spirit and elegance; and in his opinion it could not be much improved by even remoulding it after the last edition. The translation of the introduc- tion, given by the present ecUtor, has received various verbal corrections; and such alterations and additions as were introduced by the author into his fifth edition, will now be found translated. It is, moreover, proper to state, that at the suggestion of the American work, the French moneys, this edition of the proprietors and publishers of weights and measures, throughout the text and notes, have been convert- ed into the current coins, weights and measures of the United States, wnen the context strictly required it by a rigorous reduction, and when merely assumed as a politico-arithmetical illustration, by a simple approx- imation to a nearly equivalent quantity of our own coins, woignts or

7 IV ADVERTISEMENT TO THE SIXTH EDITION. measures. This has been done to render the work as extensively useful as possible, and will, no doubt, make the author's general principles and reasonings more easily comprehended, as well as more readily remem- bered, by the American student of political economy. Many new notes, it will be seen, have been added by the American editor, in further illustration or correction of those portions of the text which still required elucidation. The statistical data now incorporated in these notes, have been brought down to the most recent period, both in this country and in Europe. No pains have been spared in getting access to authentic channels of information, and the American editor trusts that the present edition will be found much improved throughout. The death of M. Say took place, in Paris, during the third week of No- vember, 1832, on which occasion, according to the statements in the French journals, such funeral honours were paid to his memory as are due to eminent personages, and Odilon-Barrot, de Sacy, de Laborde, Blanqui, and Charles Dupin, his distinguished countrymen and admirers, pro* nounced discourses at the interment in the cemetery of P£re Lachaise. The account of his decease, here subjoined, is taken from the London Political Examiner of the 25th of November, 1832, and is from the pen of its able editor, Mr. Fonblanque, one of the most powerful political writers in England. Mr. Fonblanque, it appears, was the personal friend, as well as the warm admirer, of the genius and writings of M. Say, and was well qualified to appreciate his high intellectual endowments, his profound knowledge and political wisdom, his manly independence, his mild yet dignified consistency of character, and above all, his rare and shining private virtues. There hardly could be a more interesting and instructive task assigned to the philosophical biographer, than a faithful portraiture of the life and labours of this illustrious man, which were so ardently and efficiently devoted to the advancement of the happiness and prosperity of his fellow-men. Perhaps the writings of no authors, how- ever great their celebrity may be, are exerting a more powerful and en- during influence on the well-being of the people of Europe and America, than those of Adam Smith, and John Baptiste Say. " France has this week lost another of her most distinguished writers and citizens, the celebrated political economist, M. Say. The invaluable branch of knowledge to which the greatest of his intellectual exertions were devoted, is indebted to him, amongst others, for those great and all-pervading truths which have elevated it to the rank of a science; and to him, far more than to any others, for its popularization and diffusion. Nor was M. Say a political economist; else had he been necessarily mere a bad one. He knew that a subject so * immersed in matter,' (to use the fine expression of Lord Bacon,) as a nation's prosperity, must be looked at on many sides, in order to be seen rightly even on one. M. Say was one of the most accomplished minds of his age and country. Though he had given his chief attention to one particular aspect of human affairs, till their aspects were interesting to him; not one was excluded from his

8 ADVERTISEMENT TO THE SIXTH EDITION. •» survey. His private life was a model of the domestic virtues. Frorr the Decade Philo- time when, with Cnamfort and Ginguen , he founded the the first work which attempted to revive literary and scientific sophique, pursuits during the storms of the French Revolution—alike when courted by Napoleon, and when persecuted by him (he was expelled from the for presuming to have an independent opinion); unchanged T-Hbunat eauaily during the sixteen years of the Bourbons, and the two of Louis Philippe—he passed unsullied through all the trials and temptations which have left a stain on every man of feeble virtue among his conspicuous contemporaries. Pie kept aloof from public life, but was the friend and trusted adviser of some of its brightest ornaments; and few have contri- buted more, though in a private station, to keep alive in the hearts and in the contemplation of men, a lofty standard of public virtue. If this feeble testimony, from one not wholly unknown to him, should meet the eye of any one who loved him, may it, in so far as such things can, afford tnat comfort under the loss, which can be derived from the knowledge that others know and feel all its irreparableness!" c. c. a PHILADELPHIA, /><"*<> m/>er, 1834.

9 ADVERTISEMENT BY THE AMERICAN EDITOR TO THP: FIFTH EDITION. No work upon political economy, since the publication of Di Auam Smith's profound and original Inquiry into the Nature and Causes of the Wealth of Nations, has attracted such general attention, and received such distinguished marks of approbation from competent judges, as the " Traite D'Economie Politique," of M. Say. It was first printed in Paris in the year 1803; and, subsequently, has passed through five large editions, that have received various corrections and improvements from the author. Translations of the work have been made into the German, Spanish, Italian, and other languages; and it has been adopted as a text- book in all the universities of the continent of Europe, in which this new but essential branch of liberal education is now taught. The four former American editions of this translation have also been introduced into many of the most respectable of our own seminaries of learning. It is unquestionably the most methodical, comprehensive and best digested treatise on the elements of political economy, that has yet been presented to the world. It exhibits a clear and systematical view of all the solid and important doctrines of this very extensive and difficult science, unfolded in their proper order and connexion. In the establish- ment of his principles, the author's reasonings, witn but few exceptions, are logical and accurate, delivered with distinctness and perspicuity, and generally supported by the fullest and most satisfactory illustrations. A rigid adherence to the inductive method of investigation, in the prosecu* tion of almost every part of his inquiry, has enabled M. Say to effect a nearly complete analysis of the numerous and complicated phenomena of wealth, and to enunciate and establish, with all the evidence of de- monstration, the simple and general laws on which its production, dis- tribution, and consumption depend. The few slight and inconsiderable errors into which the author has fallen, do not affect the general sound- ness and consistency of his text, although, it is true, they are blemishes that thus far darken and disfigure it. But these are of rare occurrence, and the false conclusions involved in them may be easily detected and refuted by recurrence to the fundamental principles of the work, with *rhioh they manifestly are at variance, and contradict.

10 ADVERTISEMENT TO THE FIFTH EDITION. vil The foundation of the science of political economy was firmly laid, and the only successful method of conducting our inquiries in it pointed out and exemplified by the illustrious author of the Wealth of Nations ; a number of its leading doctrines were also developed and explained by other eminent writers on the continent of Europe, who, about the same were engaged in investigating the nature and causes of social time, riches. But neither the scientific genius and penetrating sagacity of the former, nor the profound acuteness and extensive research of many of the latter, enabled them to obtain a complete discovery of all the actua. phenomena of wealth, and thus to effect an entire solution of the most abstruse and difficult problems in political economy; those, namely, which demonstrate the true theory of value, and unfold the real sources of production. Aided, however, by the valuable materials collected and arranged by the labours of his distinguished predecessors, here referred to, and proceeding in the same path, our author, with the closeness and minutenes of attention due to this important study, has succeeded in examining under all their aspects, the general facts which the ground- work of the science presents, and by rejecting and excluding the acci- dental circumstances connected with them, has thus established its ulti- mate laws or principles. Accordingly, by pursuing the inductive method of investigation, M. Say, in the most strict and philosophical manner, has deduced the true nature of value, traced up its origin, and presented a clear and accurate explanation of its theory. His definition of wealth, therefore, is more precise and correct than that of any of his predecessors in this inquiry. The agency of human industry, which Dr. Adam Smith, not with the strictest propriety, denominated labour, the important operation of natu- ral powers, especially land, and the functions of capital, as well as the relative services of these three instruments, and the modes in which they all concur in the business of production, were first distinctly and fully pointed out and illustrated by our author. In this way he successfully on, and imparts value unfolded the manner in which production is carried to the products of agriculture, manufactures, and commerce. By, also, distinguishing reproductive from unproductive consumption, M. Say haa exhibited the exact nature of capital, and its consequent important agency in production, and thus has shown why economy is a source of national wealth. Such are this author's peculiar and original specula- tions, the fruits of deep and patient meditation on the phenomena ob- served. The elementary principles derived from them, with others pre- viously ascertained, he has combined into one harmonious, consistent, and beautiful system. But a few of these solid and well-established positions have been criti eised and objected to as inconclusive and inadmissible, by Mr. Ricardo and by Mr. Malthus, two of the ablest and most distinguished DoliticaJ economists among our author's contemporaries. Other doctrines in rela- tion to the nature and origin of value have been advanced by them, and

11 viiv ADVERTISEMENT TO THE FIFTH EDITION. with so much plausibility too, that some of the most acute reasoners of the present day have not been sufficiently on their guard against the fallacies involved in them. The mathematical cast given to their reason* ings by these writers, has captivated and led astray the understandings of intelligent and sagacious readers, and induced them to adopt, as scientific truths, what, when properly investigated and analyzed, are found to be merely specious hypotheses. Hence it is that a theory of value, purely gratuitous, has been extolled in one of principal literary the journals of Great Britain, as being " no less logical and conclusive than it was profound and important." Our author, accordingly, deemed it necessary to examine the arguments brought forward in support of these views of his opponents, in order to test their soundness and accuracy, and to submit his own principles to a further review, that he might be- come satisfied that the conclusions he had deduced from them had not been in any manner invalidated. In the notes appended by M. Say to the French translation of Mr. Ricardo's Principles of Political Economy and Taxation, the reader will find what the editor deems a masterly and conclusive refutation of the theoretical errors of this author. M. Say's strictures upon the twentieth chapter of the work, entitled, " Value and Riches, their Distinctive Pro- perties," are in his opinion decisive and unanswerable. The fallacies con- tained in Mr. Ricardo's theory of value, which, the editor thinks, may be traced to an anxiety to give consistency to the loose and inaccurate proposition of Dr. Adam Smith, that exchangeable value is entirely de- rived from human labour, are there fully exposed, and his whole train of reasoning, in connection with it, shown to rest upon an unwarrantable assumption. It must, however, be conceded that Mr. Ricardo was an intrepid and uncompromising reasoner, who always proceeded in the most direct and fearless manner from his premises to the conclusion. But not uniting with the strongest powers of reasoning, a capacity for ana- lytical subtilty, he sometimes did not perceive verbal ambiguities in the formation of his premises, and transitions in the signification of his terms in the conduct of his argument, which, in these instances, vitiated his conclusions. The fundamental errors into which he has fallen, accord- ingly, do not arise from any want of strictness in his deductions, but from undue generalizations and perversions of language. In M. Say's Letters to Mr. Malthus, which have been translated by Mr. Richter, the points at issue between these two eminent political economists are dis- cussed in the most luminous, impartial, and satisfactory manner; and by all candid and unprejudiced critics must be considered as bringing the controversy to a close. It is not his intention, nor would it be proper on this occasion, for the editor to enter further into the merits of the controversial writings of our author. Any dispassionate inquirer, who will take the pains carefully to icview the whole ground in dispute, will, he thinks, find that the disqui- sitions referred to contain a triumphant vindication of suph of the author's

12 ADVERTISEMENT TO THE FIFTH EDITION. 1X genera principles as had been assailed by his ingenious opponents. Wnenever the study of the science of political economy shall be more generally cultivated as an essential branch of early education, most of the abstruse questions involved in the controversies which now divide the writers on this subject will be brought to a conclusion; the accession of useful knowledge it will occasion will more effectually eradicate the prejudices which have given birth to these disputes and misconceptions, than any direct argumentative refutation. The great merits of this treatise on political economy are now begin- ning to be well known and properly estimated by that class of readers who take a deep interest in the progress of a science, which " aims at society," as DUGALD STEWART the improvement of truly remarks, " not SO by delineating plans of new constitutions, but by enlightening the policy of actual legislators;" a science, therefore, with the right understanding of whose principles, the welfare and happiness of mankind are intimately connected. In alluding to this admirable work of M. Say, Mr. Ricardo remarks, that its author not only was the first, or among the first, of continental •' writers, who justly appreciated and applied the principles of Smith, and who has done more than all other continental writers taken together, to recommend the principles of that enlightened and beneficial system to the nations of Europe; but who has succeeded in placing the science in a more logical, and more instructive order; and has enriched it by seve- ral discussions, original, accurate, and profound." The English public has for some time been in possession of the present excellent translation of this treatise by Mr. Prinsep; the first edition of which was published in London in the spring of 1821. It is executed with spirit, elegance, and general fidelity, and is a performance, in every respect, worthy of the original. It is here given to the American reader without any material alteration. In various notes which the English translator has thought proper to subjoin to his edition of the text, he has wasted much ingenuity in en- deavouring to overthrow some of the author's leading principles, which, notwithstanding these attacks, are as fixed and immutable as the truths which constitute their basis. Had Mr. Prinsep more thoroughly studied M. Say's profound theoretical views on the subject of value, and had he, also, made himself acquainted, which it nowhere appears that he has done, with the powerful and victorious defence of these doctrines, con- tained in the notes on Mr. Ricardo's work, and in the letters to Mr. Malthus, already referred to, he perhaps might have discovered, that they are the ultimate generalizations of facts, which, agreeably to the most legitimate rules of philosophizing, the author was entitled to lay down as general laws or principles. At all events, Mr. Prinsep should not have ventured upon an attack on these first principles of the science of politi- cal e-conomy, without this previous examination. Such, therefore, of these notes of the English translator as are in oppo- sition to the well-established elements of the science, and have no other

13 ADVERTISEMENT TO THE FIFTH EDITION. x support than the hypothesis of Mr. Ricardo and Mr. Malthus, hare been entirely omitted; the American editor not deeming himself under ar.yr obligation to give currency to errors, which would perpetually interrupt and distract the attention of the reader in a most abstruse and difficult inquiry. Other notes of the translator, which contain interesting and valuable illustrations of other general principles of the work, drawn from the actual state of Great Britain and her colonies, have been retain- ed in this edition, as appropriate and useful. The translator's remarks on the pernicious character and tendency of the restrictive and prohibi- tive policy, are particularly worthy of regard, confirming as they most author. The the fully do, on this subject, all the important conclusions of folly of attempting, either by extraordinary encouragements, to attract towards some branches of production a larger share of capital and in- dustry than would be naturally employed in them, or by uncommon restraints forcibly to divert from others a portion of the capital and in- dustry that would otherwise be invested in them, is at last beginning to be understood. The restrictive system, or that which by means of legislative enact ments endeavours to give a particular direction to national capital and industry, derived its whole support from the assumption of positions now generally admitted to be gratuitous and unfounded, namely, that in trade whatever is gained by one nation must necessarily be lost by another, that wealth consists exclusively of the precious metals, and con- sequently, that in all sales of commodities, the great object should be to obtain returns in gold and silver. In Europe these erroneous opinions have now, for some time, been relinquished by political economists of all the various schools, some of whom yet differ and dispute respecting a few of the more recondite and ultimate elements of the science. In the whole range of inquiry in political economy, perhaps there is not a single proposition better established, or one that has obtained a more universal sanction from its enlightened cultivators in every country, than the libe* ral doctrine, that the most active, general, and profitable employments are given to the industry and capital of every people, by allowing to their direction and application the most perfect freedom, compatible with the security of property. This fundamental position of political economy, and the various principles that flow from it as corollaries, were first sys- tematically developed, explained, and taught by the great father of the science, Dr. Adam Smith ; although glimpses of the same important truth had previously, and about the same time, reached the minds of a few eminent individuals in other parts of the world. " The most effectual plan for advancing a people to greatness," says Dr. Smith, " is to main- tain that order of things which nature pointed out; by allowing every man, as long as he observes the rules of justice, to pursue his own inter- est in his own way, and to bring both his industry and his capital into the freest competition with those of his fellow-citizens." Animated by a .ike desire to promote the improvement and happiness of mankind, with that which actuated the author of the Wealth of Nations, *Y+ most ore;

14 ADVERTISEMENT TO THE FIFTH EDITION. xi tour d inquiries among his successors embraced his enlarged and benevo- views, as the only certain means of increasing the general prosperity, lent and eloquently maintained and enforced them. The doctrines of the freedom of trade and the rights of industry, were vindicated and taught by all the distinguished British political economists; namely, by Dugalrf Stewart, Ricardo, Malthus, Torrens, Horner, Huskisson, Lauderdale, Bentham, Mills, Craig, Lowe, Tooke, Senior, Bo wring, M'Culloch, and Whatley; and, on the continent of Europe, by authors as celebrated, by Say, Droz, Sismondi, Storch, Gamier, Destutt-Tracy, Ganilh, Jovella- nos, Sartorius, Queypo, Leider, Von Schlozer, Kraus, Weber, Muller, Scarbeck, Pechio, and Gioja. " Under a system of perfectly free commerce," says Mr. Ricardo, «* each country naturally devotes its capital and labour to such employ- ments as are most beneficial to each. This pursuit of individual advan- tage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most effica- ciously the powers bestowed by nature, it distributes labour most effec- : tively and most economically while by increasing the general mass of productions, it diffuses general benefit, and binds together by one com mon tie of interest and intercourse, the universal society of nations throughout the civilized world. It is this principle which determines that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manu factured in England." Our own celebrated countryman, Franklin, too, with a sagacity and force which always characterized his intellect, maintained and exempli' fied in his " Essay on the Principles of Trade," what he therein repeat- edly called " the great principle of freedom in trade." Even before the appearance of the Wealth of Nations, he had with almost intuition anti- cipated some of the most profound conclusions of the science of political economy, which other inquirers had arrived at only after a patient and laborious analysis of its phenomena. The new and generous commer- cial policy is not more beholden for support and currency to the argu- ments and illustrations of any of its early expositors, than to the clear and vigorous pen of the highly gifted American philosopher. " The ex- Laissez nous faire, and pas trop gouverner" which, to use pressions, DUGALD STEWART, the highest of all authorities, •• com- the language of prise in a few words two of the most important lessons of political wis- dom, are indebted chiefly for their extensive circulation, to the short and luminous comments of Franklin, which had so extraordinary an influence y> on public opinion, both in the Old and New World. Nevertheless, strange as it may seem, by a perversion or misconception of a few of his incidental opinions, the name of the first of practical statesmen has been invoked, and its authority employed among us, in aid of a system of restraints and prohibitions on commerce, which it was the chief aim of his politico-economical writings to refute and condemn, as awkn repug- nant to sound theory and destructive to national prosperity. W henever American Statesmen and legislators shall have as clear and steady per

15 Xit ADVERTISEMENT TO THE FIFTH EDITION. ceptons as Franklin of the truth and wisdom of the doctrine of commw cial freedom, we may expect that our national and state codes will ra» longer exhibit so many traces of that empirical spirit of tampering regu lation which, instead of invigorating and quickening the development o\ national wealth, only cramps and retards its natural growth. " Where should we expect," says M. Say, in a letter to the editor, " sound doc- trine to be better received than amongst a nation that supports and illus- trates the value of free principles, by the most striking examples. The old states of Europe are cankered with prejudices and bad habits; it is America who will teach them the height of prosperity which may be reached when governments follow the counsels of reason, and do not cost too much." The preliminary discourse has been translated by the American editor, and in his editions of the work restored to its place. The editor must confess that he is at a loss to account for the omission by the English translator of so material a part of the author's treatise as this introduc- tion to his whole inquiry. In itself it is a performance of uncommon merit, has immediate reference to, and sheds much light over, the gene- ral views unfolded in the body of the work. The nature and object of the science of political economy, the only certain method of conducting any of our inquiries in it with success, and the causes which have hither- to so much retarded its advancement, are all considered and pointed out with great clearness and ability. The author has also connected with it a highly interesting and instructive historical sketch of the progress of this science during the last and present century, interspersed with nu- merous judicious and acute criticisms upon the writings and opinions of his predecessors. Moreover, this discourse, throughout every part, Is deeply philosophical, and well calculated to prepare the reader for the study on which he is about to enter. The editor has, therefore, he trusts, performed an acceptable service in putting the American student in pos ; on of so important a part of the original work.* sess Notes have also been subjoined by the American editor, for the pur pose of marking a few inconsiderable errors and inconsistencies into which the author has inadvertently fallen, and of supplying an occasional illustration, drawn from other authors, of such passages of the texl as seemed to require further elucidation or correction. C. C. B. PHILADELPHIA, April, 1832. • The following extract of a letter from M. Say, to the American editor, it may not be improper to subjoin, as it contains the author's opinion of the value he attaches to the preliminary discourse. "Your translation and restoration of the preliminary discourse adds, in my eyes, a new value to your edition. It could only have been from a narrow calculation of the English publisher, that it was omitted in Mr. Prinsep's translation. Ought that portion of the work to be deemed unuseful, whose aim is to unfold the real object of the science, to present a rapid sketch of its history, and to point out the only true method of inves- tigating it with success? Mr. George Pryme, professor of political economy in the 'liiiversity of Cambridge, in England, makes this very discourse ths principal topic of several of his first lectures."

16 CONTENTS. BOOK I. OF THE PRODUCTION OF WEALTH. ADVERTISEMENT by the American Editor, to the Sixth Edition Page ni Advertiser lent by the American Editor, to the Fifth Edition vi ntroducticn x* ] I. Of what in to be understood by the term production 61 CHAP. II. Of the different kinds of industry, and the mode in which they concur in pro- duction 61 Of the nature of capital, and the mode in which it concurs in the business A III. production 71 IV. Of natural agents, that assist in the production of wealth, and specially of land . 74 V. On the mode in which industry, capital, and natural agents unite in production. 77 Of operations alike common to all branches of industry ... \ 79 VI. Of the labour of mankind, of nature, and of machinery respectively 85 VII. VIII. Of the advantages and disadvantages resulting from division of labour; and of the extent to which it may be carried 90 IX. Of the different methods of employing commercial industry, and the mode in which they concur in production 99 X. Of the transformations undergone by capital, in the progress of production ... 105 XI. Of the formation and multiplication of capital 109 XII. Of unproductive capital 118 XIII. Of immaterial products, or values consumed at the moment of production 119 XIV. Of the right of property 127 XiV. Of the demand or market for products .., 132 XVI. Of the benefits resulting from the quick circulation of money and commodities. 140 XVII. Of the effect of governments, intended to influence production , 143 Sect. 1. Effect of regulations prescribing the nature of products 143 Digression—Upon what is called the balance of trade 148 2. Of the effect of regulations, fixing the manner of production 175 3. Of privileged trading companies 183 4. Of regulations affecting the corn trade 189 XVIII. Of the effect upon national wealth, resulting from the productive efforts of pub- lic authority 199 \ 203 XIX. Of colonies and their products XX. Of temporary and permanent emigration, considered in reference to national wealth 213 XXI. Of the nature and uses of money : Sect 1. General remarks 217 2. Of the material of money 220 3. Of the accession of value a commodity receives, by being vested with the character of money 224 4. Of the utility of coinage; and of the charge of its execution 228 5. Of alterations of the standard-money 234 6. Of the reason why money is neither a sign nor a measure 240 7. Of a peculiarity, that should be attended to, in estimating the sam? mentioned in history 248 8. Of the absence of any fixed ratio of value between one metal and another 254 9. Of money as it ought to be 256 10. Of a copper and brass metal coinage 261 11. Of the preferable form of coined money 262 12. Of the party on whom the loss of coin by wear should properly fall... 263 XXII Of signs or representatives of money : Sect. 1. Of bills of exchange and letters of credit 26& 2. Of banks of deposite 268 3. Of banks of circulation or discount, and of bank notes, or con rertible jmper 27U 4. Of paper-money 280

17 CONTENTS. BOOK II. OF THE DISTRIBUTION OF WEALTH. I. Of the basis of value, and of supply and demand 284 II. Of the sources of revenue ... 292 III. Of real and relative variation of price 297 IV. Of nominal variation of price, and of the peculiar value of bullion and of coin 306 V. Of the manner in which revenue is distributed amongst society 314 VI. Of what branches of production yield the most liberal recompense to productive agency 321 VII Of the revenue of industry: Sect. 1. Of the profits of industry in general 324 2- Of the profits of the man of science 228 3. Of the profits of the master-agent or adventurer in industry 229 4. Of the profits of the operative labourer 332 5. Of the independence accruing to the moderns from the advancement of industry". 340 VIII. Of the revenue of capital: Sect. 1. Of loans at interest 343 2. Of the profit of capital 354 3. Of the employments of capital most beneficial to society 357 IX. Of the revenue land: of Sect. 1. Of the profit of landed property 359 2. Of rent 365 X. Of the effect of revenue derived by one nation from another 368 XJ Of the mode in which the quantity of the product affects population: Sect. 1. Of population, as connected with political economy 371 2. Of the influence of the quality of a national product upon the local dis- 38] tribution of the population BOOK III. OF THE CONSUMPTION OF WEALTH. I. 01 tiie different kinds of consumption 387 II. Of the effect of consumption in general 391 Of the effect.of productive consumption 393 III. IV. Of the effect of unproductive consumption in general 3% V. Of individual consumption, its motives and its effects 401 VI. On public consumption: Sect 1. Of the nature and general effect of public consumption 412 Of the principal objects of national expenditure 421 Of the charge of civil and judicious administration 425 Of charges, military and naval 429 Of the charges of public instruction 432 Of the charges of public benevolent institutions 438 Of the charges of public edifices and works 441 VII. Of the actual contributors to public consumption 444 VIII. Of taxation : Sect 1. Of the effect of all kinds of taxation in general 446 2. Of the different modes of assessment, and the classes they press upon respectively 468 3. Of taxation in kind 473 4. Of the territorial or land-tax of England 476 IX Of national debt: Sect. 1. Of the contracting debt by national authority, and of its general effect 477 2. Df public credit, its basis, and the circumstances that endanger its solidity 482 Appendix 488

18 INTRODUCTION. A s onty advances with certainty, when the plan scrEN* and the object researches have beep of inquiry of our small number truths are a clearly defined; otherwise of loosely laid hold of, without their connexion being per- de- ceived, and numerous errors, without being enabled to tect their fallacy. a of politics, in strictness lim- For long time the science investigation of the principles which lay the ited to the the social order, was confounded with foundation of political economy, is pro- which unfolds the manner in which wealth duced, distributed, and consumed. Wealth, nevertheless, is essentially independent of political organization. Under government, a state, whose affairs are well every form of opu- administered, may prosper. Nations have risen to lence under absolute monarchs, and have been ruined by If political liberty popular councils. more favourable to is he development wealth, it is indirectly, in of the same manner that it is more favourable to general education. In confounding in the same researches the essential ele» ments of good government with the principles on which the growth of wealth, either public or private, depends, it is by no means surprising that authors should have involved these subjects obscurity, instead of elucidating them. in Stewart, who has entitled his first chapter "Of the Govern- ment is liable to this reproach: the sect of Mankind," of last century, throughout all theii of the " Economists" writings, and J. J. Rousseau, in the article " Political Eco nomy" in the Encyclopedie, lie under the same imputation Since the time of Adam Smith, appears to me, these it two very distinct inquiries have been uniformly separated the term political being now confined to the sci- economy* ence which treats of wealth, and that of politics, to desig • From oncost house, and vofws a law; economy, the law which regulates the househola. 1 Household, all the goods in possession of the according to the Greeks, comprehending political, from n6hs, civitas, extending its application to society or the na family ; and tion at large. Political economy is the best expression that can be used to designate the science di*. of natural wealth, or that cussed in the following treatise, which is not the investigation which nature supplies us with gratuitously and without limitation, but of social wealth exclusively, which is founded on exchange and the recognition of the right of property both social regulations.

19 INTRODUCTION. nate the relations existing between government and its a people, and the relations of different states to each other. The wide range taken into of pure politics, the field whilst investigating the subject of political economy, seem- a ed to furnish much stronger reason for including in the same inquiry agriculture, commerce and the arts, the true sources of wealth, and upon which laws have but an acci- dental and indirect influence. Thence what interminable digressions! example, commerce constitutes a If, for branch of political economy, all the various kinds of com- a part; and as a merce form consequence, maritime com- merce, navigation, geography—where shall we stop All ? it is human knowledge is connected. Accordingly, neces- sary to ascertain the points of contact, or the articulations by which the different branches are united ; by this means, of whatever is a more exact knowledge will be obtained peculiar to each, and where they run into one another. In the science of political economy, agriculture, com- merce and manufactures are considered only in relation to the increase or diminution of wealth, and not in reference to their processes of execution. This science indicates the cases in which commerce is truly productive, where what- ever is gained by one is it is lost by another, and where profitable to all; it also teaches us to appreciate its several processes, simply in their results, at which it stops. but Besides this knowledge, the merchant must also understand the processes of his art. He must be acquainted with the commodities in which he deals, their qualities and defects, the countries from which they are derived, their markets, the means of their transportation, the values to be given for them in exchange, and the method of keeping accounts. The same remark is applicable to the agriculturist, to the manufacturer, and the practical man of business; to to acquire a thorough knowledge of the causes and conse- quences of each phenomenon, the study of political econo- my is essentially necessary to them all; and to become ex- pert in his particular pursuit, each one must add thereto a knowledge of its processes. These different subjects of in- vestigation were not, however, confounded by Dr. Smith; but neither he, nor the writeis who succeeded him, have guarded themselves against another source of confusion, here important to be noticed, inasmuch as the develop-

20 INTRODUCTION. mcnts resulting from it, may not be altogether unuseful in of knowledge general, as well as in the the progress in our own particular inquiry. of prosecution in In political economy, as in natural philosophy, and every other study, systems have been formed before facts have been established; the place of the latter being sup- plied by purely gratuitous assertions. More recently, the inductive method of philosophizing, which, since the time of Bacon, has so much contributed to the advancement of every other science, has been applied of to the conduct in of this method our researches this. The excellence consists in only admitting facts carefully observed, and the consequences rigorously deduced from them thereby effec- ; tually excluding those prejudices and authorities which, in of literature and science, have so often every department been interposed between man and truth. But, is the whole of the meaning of the term, facts, often made extent so use of, perfectly understood ? It appears to me, that this word once designates oi- at jects that exist, and events that take place ; thus presenting facts : two classes of is, for example, one fact, that such it an object exists; another fact, that such an event takes place in such a manner. Objects that exist, in order to serve as the basis of certain reasoning, must be seen ex- actly as they are, under every point of view, with all their qualities. Otherwise, whilst supposing ourselves to be reasoning respecting the same thing, we may, under the same name, be treating of two different things. of facts, namely, events that take place, The second class of consists the phenomena exhibited, when we observe It is, for instance, the manner in which things take place. to a certain degree of a fact, that metals, when exposed heat, become fluid. The manner in wh . h things exist and take place, con- stitutes what is called the nature of things ; and a careful observation of the nature of things is the sole foundation of all truth. Hence, a twofold classification of sciences; namely, those which may be styled descriptive, which arrange and accurately designate the properties of certain objects, as botany and natural history ; and those which may be styled experimental, which unfold the reciprocal action of sub-

21 XvLi INTRODUCTION. stances on each other, or in other words, the connexion between cause and effect, as chemistry and natural philo- sophy. Both departments are founded on facts, and con- stitute an equally solid and useful* portion of knowledge. Political economy belongs to the latter; in showing the manner in which events take place in relation to wealth, it forms a part of experimental science.* But facts that take place may be considered in two points general or constant, or as particular or of view; either as General variable. are the results of the nature of facts particular as truly re- things in all analogous cases; facts sult from the nature of things, but they are the result of several operations modified by each other in a particular The former are not less incontrovertible than the case. latter, even when apparently they contradict each other. In natural philosophy, it is a general fact, that heavy bo- dies fall to the earth ; the water in a fountain, neverthe- less, rises above it. The particular fact of the fountain is a result wherein the laws of equilibrium are combined with those of gravity* but without destroying them. In our present inquiry, the knowledge of these two classes of facts, namely, of that exist and of events objects place, that take embraces two distinct sciences, political Economy and statistics. Political economy, from facts always carefully observed, makes known to us the nature of wealth ; from the know- ledge of its nature deduces the means of its creation, un- folds the order of its distribution, and the phenomena at tending its destruction. It is, in other words, an exposi- tion of the general facts observed in relation to this sub- ject. With respect to wealth, it is a knowledge of effects and of their causes. It shows what facts are constantly conjoined with ; so that one is always the sequence of the other. But it does not resort for any further explanations to hypothesis: from the nature of particular events their concatenations must be perceived; the science must con- duct us from one link to another, so that every intelligent * Experimental science, in order to establish why events take place in a certain man. rier, or to be able to assign a particular cause for a particular effect, to a certain extent »nust be descriptive. Astronomy, in order to explain the eclipses of the sun, must de- monstrate the opacity of the moon. Political economy, in like manner, in order to ghow that money is a means of the production of wealth, but not the end, must exhibit «t« true nature.

22 INTRODUCTION. \ y x understanding may clearly comprehend in what manner the chain is united. It is this which constitutes the excel- lence of the modern method of philosophizing. Statistics exhibit the amount of production and of con 6umption of a particular country, at a designated period, its population, military force, wealth, and whatever else is susceptible of valuation. It is a description in detail. Between political economy and statistics there is the same difference as between the science of politics and history. The study of statistics may gratify curiosity, but it can never be productive of advantage when it does not indi- cate the origin and consequences of the facts it has collect- ed ; and by indicating their origin and consequences, it at once becomes the science of political economy This doubtless is the reason why these two distinct sciences have hitherto been confounded. The celebrated work of Dr. Adam Smith can only be considered as animmethodical assemblage of the soundest principles of political econo- my, supported by luminous illustrations; of highly inge- nious researches in statistics, blended with instructive re- flections ; it is not, however, a complete treatise of either science, but an irregular mass of curious and original speculations, and of known demonstrated truths. A perfect knowledge of the principles of political econo- my may be obtained, inasmuch as all the general facts which compose this science may be discovered. In statis- tics this never can be the case; this latter science, like history, being a recital of facts, more or less uncertain, and necessarily incomplete. Of the statistics of former periods and distant countries, only detached and very im- perfect accounts can be furnished. With respect to the present time, there are few persons who unite the qualifi- cations of good observers with a situation favourable for accurate observation. The inaccuracy of the statements we are compelled to have recourse to, the restless suspi- cions of particular governments, and even of individuals, their ill-will and indifference, present obstacles often in surmountable, notwithstanding the toil and care of in- quirers tc collect minute details with exactness; and which, after all, when in their possession, are only true for an in- stant. Dr. Smith accordingly avows, that he puts no

23 xx INTRODUCTION great faith in political arithmetic; which is nothing more than the arrangement of numerous statistical data. Political economy, on the other hand, whenever the principles which constitute its basis are the rigorous de- ductions of undeniable general facts, rests upon an im- moveable foundation. General facts undoubtedly are found- ed upon the observation of particular facts; but upon such particular facts as have been selected from those most carefully observed* best established, and witnessed by ourselves. When the results of these facts have uni- formly been the same, the cause of their having been so satisfactorily demonstrated, and the exceptions to them even confirming other principles equally well established, we are authorised to give them as ultimate general facts, and to submit them with confidence to the examination of all competent inquirers, who,may be again desirous of subjecting them to experiment. A new particular fact, when insulated, and the connexion between its antecedents and consequents not established by reasoning, is not suffi- cient to shake our confidence in a general fact; for who can say that some unknown circumstance has not produced the difference noticed in their several results? Alight feather is seen to mount in the air, and sometimes remain 'here for a long time before it falls back to the ground. Would it not, nevertheless, be erroneous to conclude that this feather is not affected by the universal law of gravi- tation ? In political economy it is a general fact, that the interest of money rises in proportion to the risk run by the lender of not being repaid. Shall it be inferred that this principle is false, from having seen money lent at a low rate of interest upon hazardous occasions ? The lend- er may have been ignorant of the risk, gratitude or fear may have induced sacrifices, and the general law, disturbed in this particular case, will resume its entire force the mo- ment the causes of its interruption have ceased to operate. Finally, how small a number of particular facts are com- pletely examined, and how few among them are observed under all their aspects? And in supposing them well ex- amined, well observed, and well described, how many of them either prove nothing, or directly the reverse of what 8 intended to be established by them. Hence, there is not an absurd theory, or an extravagant

24 INTRODUCTION. XXI not been supported appeal to facts;* opinion that has by an facts also that public authorities have been so and it is by of a know- often misled. facts, without knowledge But a to show of ledge their mutual relations, without being able cause, and the other a consequence, is why the one is a no better than crude information of an office- really the whom most intelligent seldom becomes ac- of clerk, the particular series, which only quainted with more than one to a question in a single point of view. enables him examine can be more idle than the opposition Nothing theory of to ! What is theory, if it be not a knowledge of practice or facts the laws which connect effects with their causes, And who can be with facts better acquainted with facts ? theorist who surveys them under all their aspects, than the each other? And what to and comprehends their relation but the employment of means is practicet without theory, how or why act without knowing ? In any investi- they to as if they were analogous, gation, treat dissimilar cases but a dangerous kind of empiricism, leading is conclu- to sions never foreseen. Hence it is, that after having seen the exclusive or re- strictive system of commerce, a system founded on the opinion that one can only gain what another loses, nation the almost universally adopted throughout Europe after arts and letters; after having seen taxation revival of some and in without intermission perpetually increasing, most enormous amount; to a countries extending itself and after having seen these same countries become more and opulent, more populous, at the more powerful, than time they carried on an unrestricted trade, and were almost of man- entirely exempt from public burdens, the generality kind have concluded that national wealth and power were to the on the application attributable restraints imposed and to the taxes levied from the incomes of of industry, individuals. Shallow thinkers have even pretended that this opinion was founded on facts, and that every different one was the offspring of a wild and disordered imagination. * In France, the minister of the interior, in his exposd of 1813, a most disastrous pe. ibd, when foreign commerce was destroyed, and the of every descrip- national resources 1 that of having proved by indubitable calculatiojis, tion rapidly declining the , boasted was in a higher state of prosperity than it ever before had been. country t By the term practice, is not here meant the manual skill which enables the artificer i clerk execute with greater celerity and precision whatever he performs daily, and to which constitutes his peculiar talent; but the method pursued in superintending and administering public or private affairs.

25 XXll INTRODUCTION. It is, however, on the contrary, evident that the support ers of the opposite opinion embraced a wider circle ol and understood them much better than their oppo- facts, nents. The very remarkable impulse given, during the middle ages, to the industry of the free states of Italy and of the Hanse towns of the north of Europe, the spectacle of riches it exhibited in both, the shock of opinions occa- sioned by the crusades, the progress of the arts and sciences, the improvement of navigation and consequent discovery of the route to India, and of the continent of America, as well as a succession of other less important events, were all known to them as the true causes of the increased opulence of the most ingenious nations on the globe. And although they were aware that this activity had received successive checks, they at the same time knew that it had been freed from more oppressive obstacles. In consequence of the authority of the feudal lords and barons declining, the intercourse between the different provinces and states could no longer be interrupted; roads became improved, travelling more secure, and laws less arbitrary ; the enfranchised towns, becoming immediately dependent upon the crown, found the sovereign interested in their advancement; and thisenfranchisemenVwhich the natural course of things and the progress of civilization had ex- tended to the country, secured to every class of producers the fruits of their industry. In every part of Europe per- sonal freedom became more generally respected; if not from a more improved organization of political society, at least from the influence of public sentiment. Certain prejudices, such as branding with the odious name of usury all loans upon interest, and attaching the importance of nobility to idleness, had begun to decline. Nor is this all. Enlightened individuals have not only remarked the influence of these, but of many other analogous facts; it has been perceived by them, that the decline of prejudices has been favourable to the advancement of science, or to a more exact knowledge of the immutable laws of nature ; that this improvement in the cultivation of science has itself been favourable to the progress of industry, and in- dustry to national opulence. From such an induction of facts they have been enabled to conclude, with much greater certainty than the unthinking multitude, that

26 INTRODUCTION. although many modern states in the midst of taxation and to opulence and power, is not restrictions have risen it owing to these restraints on the natural course of hurnar. affairs, but in spite of such powerful causes of discourage- ment. The prosperity the same countries would have of been much greater, had they been governed by a more liberal and enlightened policy.* knowledge of the truth, it is not then so ne- To obtain a cessary to be acquainted with a great number of facts, as with such as are essential, and have a direct and immediate influence ; and, above all, to examine them under all their aspects, to be enabled to deduce from them just conclu- to sions and be assured that the consequences ascribed them do not in reality proceed from other causes. Every other knowledge of facts, like the erudition of an almanac, is a mere compilation from which nothing results. And it may be remarked, that this sort of information is peculiar to men of clear memories and clouded judgments; men who declaim against the best established doctrines, the fruits of the most enlarged experience and profoundest reason- ing ; a^d whilst inveighing against system, whenever their own routine is departed from, are precisely those most under its influence, and who defend it with stubborn folly, fearful rather of being convinced, than desirous of arriving at certainty. Thus, 'if from all the phenomena of production, as well as from the experience of the most extensive commerce, a you demonstrate that free intercourse between nations is reciprocally advantageous, and that the mode found to be most beneficial to individuals transacting business with foreigners, must be equally so to nations, men of contracted of system views and high presumption will accuse you Ask them for their reasons, and they will immediately talk to you of the balance of trade; will tell you, it is cleai that a nation must be ruined by exchanging its money for * Hence it is that nations seldom derive any benefit from the lessons of experience. To profit by them, the community at large must be enabled to seize the connexion be- tween causes and their consequences; which at once supposes a very high degree of intelligence and a rare capacity for reflection. Whenever mankind shall be in a situa- tion to profit by experience, they will no longer require her lessons; plain sound sense will then be sufficient. This is one reason of our being subject to the necessity of con- •*ant control. All that a people can desire is thnt laws conducive to the general interest 1 of society shmilc be enacted and carried into effect; a problem which different political constitutions mure or less imperfectly solve.

27 xxiv INTRODUCTION. merchandise—in itself a system. Some will assert that circulation enriches a state, and that a sum of money, by passing through twenty different hands, is equivalent to twenty times its own value; others, that luxury is favour- able to industry, and economy ruinous to every branch of commerce—both mere systems; and all will appeal to facts in support of these opinions, like the shepherd, who, upon the faith of his eyes, affirmed that the sun, which he saw rise in the morning and set in the evening, during the day traversed the whole extent of the heavens, treating as an idle dream the laws of the planetary world. Persons, moreover, distinguished by their attainments in other branches of knowledge, but ignorant of the prin- ciples of this, are too apt to suppose that absolute truth is confined to the mathematics and to the results of careful observation and experiment in the physical sciences; ima- gining that the moral and political sciences contain no in- variable facts or indisputable truths, and therefore cannot be considered as genuiiie sciences, but merely hypothetical systems, more or less ingenious, but purely arbitrary. The opinion of this class of philosophers is founded upon the want of agreement among the writers who have investi- gated these subjects, and from the wild absurdities taught by some of them. But what science has been free from extravagant hypotheses ? How many years have elapsed since those most advanced have been altogether disen- gaged from system On the contrary, do we not still see ? men of perverted understandings attacking the best estab- lished positions ? Forty years have not elapsed since water, so essential to our very existence, and the atmo- sphere in which we perpetually breathe, have been accu- rately analyzed. The experiments and demonstrations, nevertheless, upon which this doctrine is founded, are con- tinually assailed ; although repeated a thousand times in different countries by the most acute and cautious experi- menters. A want of agreement exists in relation to a de- scription of facts much more simple and obvious than the most part of those in moral and political science. Are not natural philosophy, chemistry, botany, mineralogy, and physiology, still fields of controversy, in which opinions nrb combated with as much violence and asperity as in political economy ? The same facts are, indeed, observed

28 INTRODUCTION. xxv both parties, but are classed and explained differently by ; and it is worthy of remark, that in these contests by each philosophers are not arrayed against pretenders. genuine Leibnitz Linnaeus and Jussieu, Priestley and and Newton, Dolomieu, were all men of un- Lavoisier, Desaussure and genius, who, however, did not agree in their phi- common systems. But have not the sciences they taught losophical an existence, notwithstanding these disagreements ?* In like manner, the general facts constituting the sciences politics and morals, exist independently of all of controversy. Hence the advantage enjoyed by every one from distinct and accurate can establish who, observation, the existence of these general facts, demonstrate their con- and deduce their nexion, They as certainly consequences. proceed from the nature of things as the laws of the ma- terial world. We do not imagine them ; they are results disclosed to us by judicious observation and analysis. Sovereigns, as well as their subjects, must bow to their authority, and never can violate them with impunity; facts, or, if you please, the general laws which General prijiciples, whenever it relates to facts follow, are styled ; that is to say, the moment avail our- their application we selves of them in order to ascertain the rule of action of 4 1 Essay on the Production of Wealth, " The controversies," says Col. Torrens, in his * published in 1821, "which at present exist amongst the most celebrated masters of po litical economy, have been brought forward by a lively and ingenious author as an ob jection against the study of the science. A similar objection might have been urged, in a certain stage of its progress, against every branch of human knowledge. A few years ago, when the brilliant discoveries in chemistry began to supersede the ancient doctrine of phlogiston, controversies, analogous to those which now exist amongst polit- ical economists, divided the professors of natural knowledge; and Dr. Priestley, like Mr. Malthus, appeared as the pertinacious champion of the theories which the facts estab- lished by himself had so largely contributed to overthrow. In the progress of the human mind, a period of controversy amongst the cultivators of any branch of science must necessarily precede the period of their unanimity. But this, instead of furnishing a reason for abandoning the pursuits of science, while its first principles remain in uncer- tainty, should stimulate us to prosecute our studies with more ardour and perseverance until upon every question within the compass of the human faculties, doubt is removed and certainty attained. With respect to political economy, the period of controversy is passing away, and that of unanimity rapidly approaching. Twenty years hence there will scarcely exist a doubt respecting any of its fundamental principles " And in the preface of the third edition of his ' Essay on the External Corn Trade,* published in 1826, Col. Torrens makes these further remarks: "On a former occasion, the author ventured to predict, that at no distant period, controversy amongst the pro- fessors of political economy would cease, and unanimity prevail, iexpecting the funrfa- mental principles of the science. He thinks he can already perceive the unequivocal figns of the approaching fulfilment of this prediction. Since it was hazarded, two works have appeared, each of which, in its own peculiar line, is eminently calculated to 4 correct the errors which previously prevailed. These publications are, A Critical Dis- sertation on the Nature, Causes and Measures of Value, by an anonymous author;' and * Thoughts and Details on High and Low Prices, by Mr. Tooke.'"—AMERICAN EDITOI

29 /CXV1 INTRODUCTION. of circumstances presented us. A any combination to principles furnishes the only certain means of knowledge of uniformly conducting any inquiry with success. Political economy, in the same manner as the exact sciences, is composed of a few fundamental principles, and great number of corollaries or conclusions, drawn a of It is essential, therefore, for the from these principles. of advancement this science that these principles should be strictly deduced from observation; the number of con- clusions to be drawn from them may afterwards be either multiplied or diminished at the discretion of the inquirer, enumerate all To according to the object he proposes. their consequences, and give their proper explanations, would be a work of stupendous magnitude, and necessarily incomplete. Besides, the more this science shall become improved, and its influence extended, the less occasion will to there be its principles, as deduce consequences from these will spontaneously present themselves to every eye; and being within the reach of all, their application will be readily made. A treatise on political economy will then be confined to the enunciation of a few general principles, not requiring even the support of proofs or illustrations; because these will be but the expression of what every one will know, arranged in a form convenient for comprehend- ing them, as well in their whole scope as in their relation to each other. It would, however, be idle to imagine that greater pre- cision, or to this a more steady direction could be given mathematics to the solution study, by the application of values with which political economy of its problems. The of is concerned, admitting of the the application to them plus terms minus, are indeed within the range of ma- and thematical inquiry; but being at the same time subject to the influence of the faculties, the wants and the desires of not susceptible of any rigorous ap- mankind, they are preciation, and cannot, therefore, furnish any data for ab- solute calculations. In political as well as in physical science, all that is essential is a knowledge of the connex ion between causes and their consequences. Neither the phenomena of the moral or material world are subject to strict arithmetical computation.* # We may, for example, know that.for any given year the price of Yvme will infallibly

30 INTRODUCTION. XXVli These considerations respecting the nature and object of political economy, and the best method of obtaining a depend upon the quantity to be sold, compared with the extent of the demand. But if we are desirous of submitting these two data to mathematical calculation, their ull'mate elements must be decomposed before we can become thoroughly acquainted with them, each. or can, with any degree of precision, distinguish the separate influence of Hence, it is not only necessary to determine what will be the product of the succeeding-vintage, while yet exposed to the vicissitudes of the weather, but the quality it will possess, the quantity remaining on hand of the preceding vintage, the amount of capital that will DC at the disposal of the dealers, and require them, more or less expeditiously, to get Dack their advances. We must also ascertain the opinion that may be entertained as to the possibility of exporting the article, which will altogether depend upon our impressions a* to the stability of the laws and government, that varv from day to day, and respect- ing which no two individuals exactly agree. All these data, and probably many others besides, must be accurately appreciated, solely to determine the quantity to be put in circulation; price. To determine the quantity to be itself but one of the elements of demanded, the price at which the commodity can be sold must already be known, as the demand for it will increase in proportion to its cheapness; we must also know the former stock on hand, and the tastes and means of the consumers, as various as their persons. Their ability to purchase will vary according to the more or less prosperous condition of industry in general, and of their own in particular; their wants will Vary also in the ratio of the additional means at their command of substituting one liquor for another, such as beer, cider, &c. I suppress an infinite number of less important considerations, more or less affecting the solution of the problem ; for I question whether any individual, really accustomed to the application of mathematical analysis, would even venture to attempt this, not only on account of the numerous data, but in consequence of the difficulty of characterizing them with any thing like precision, and of combining their separate influences. Such persons as have pretended to do it, have not been able to enunciate these questions into analytical language, without divesting them of their natural complication, by means of simplifications, and arbitrary suppres- sions, of which the consequences, not properly estimated, always essentially change the condition of the problem, and pervert all its results ; so that no other inference can be deduced from such calculations than from formula arbitrarily assumed. Thus, instead of recognizing in their conclusions that harmonious agreement which constitutes the peculiar character of rigorous geometrical investigation, by whatever method they may have been obtained, we only perceive vague and uncertain inferences, whose differences are often equal to the quantities sought to be determined. What course is then to be pursued by a judicious inquirer in. the elucidation of a subject so much involved? The same whiph would be pursued by him, under circumstances equally difficult, which de- cide* the greater part of the actions of his life. He wiH examine the immediate elements of the proposed problem, and after having ascertained them with certainty, (which in political economy can be effected,) will approximately value their mutual influences with the intuitive quickness of an enlightened understanding, itself only an instrument by means of which the mean result of a crowd of probabilities can be estimated, but never calculated with exactness. Cabanis, in describing the revolutions in the science of medicine, makes a remark perfectly analogous to this. ' The vital phenomena,' says he, ' depend upon so many unknown springs, held together under such various circumstances, which observation vainly attempts to appreciate, that these problems, from not being stated with all their conditions, absolutely defy calculation. Hence whenever writers on mechanics have endeavoured to subject the laws of life to their method, they have furnished the scientific world with a remarkable spectacle, well entitled to our most serious consideration. The terms they employed were correct, the process of reasoning strictly logical, and, never- theless, all the results were erroneous. Further, although the language and the method of employing it were the same among all the calculators, each of them obtained dis- tinct and different results; and it is by the application of this method of investigation to subjects to which it is altogether inapplicable, that systems the most whimsical, fal- lacious, and contradictory, have been maintained.' D'Alembert, in his treatise on Hydrodynamics, acknowledges that the velocity oftno blood in its passage through the vessels entirely resists every kind of calculation. Sene. tier made q similar observation in his Essai sur VArt d'observer, (vol. 1, page 81.) Whatever nas been said by able teachers and judicious philosophers, in relation to our conclusions in natural science, is much more applicable to moral; and points oct

31 SXVlh" INTRODUCTION. thorough knowledge of its principles, will supply us with the means of appreciating the efforts hitherto made to- wards the advancement of this science. The literature of the ancients, their legislation, their public treaties, and their administration of the conquered provinces, all proclaim their utter ignorance of the nature and origin of wealth, of the manner in which it is distri- buted, and of the effects of its consumption. They knew, what has always been known wherever the right of pro- perty has been sanctioned by laws, that riches are in- creased by economy, and diminished by extravagance. Xenophon extols order, activity, and intelligence, as cer- tain means of obtaining prosperity; but without deducing these maxims from any general law, or without being able to show the connexion between causes and their conse- quences. He advises the Athenians to protect commerce, and to receive strangers with kindness; yet so little was he aware to what extent this advice would be proper, that, upon another occasion, he expresses doubts whether com- merce be really profitable to the republic. Plato and Aristotle, it is true, notice some invariable relations between the different modes of production, and the results obtained from them. Plato sketches with tol- erable fidelity,* the effects of the separation of social em- ployments ; but it is simply with a view to illustrate man's social character and the necessity he is in, from his multi- farious wants, of uniting in extensive societies in' which each individual may be exclusively occupied with one spe-» cies of production. His view is entirely a political one; and he has deduced from it no other conclusion. In his treatise on Politics, Aristotle goes farther. He distinguishes natural from artificial production. He styles natural, whatever creates those objects of consumption required by a family, or, at most, whatever is obtained by exchanges in kind. No other advantage, according to him, is derived from real production; artificial gain he condemns. Besides, he does not support these opinions by any reasoning founded upon accurate observation. *he cause of our always being misled in political economy, whenever we have subjected its phenomena to mathematical calculation. In such case it becomes the most dango* ous of all abstractions. • Republic, Book II.

32 INTRODUCTION. ix xx From the manner in which he expresses himself in relation to the effect of savings and loans on interest, it is evident that he knew nothing of the nature and employment of capital. What can we expect from nations still less advanced in civilization than the Greeks ? We may recollect that a law of Egypt obliged the son to adopt the profession of his father. This, in certain cases, was to require the crea- tion of a greater quantity of products than the particular state of society called for; to oblige an individual, in or- himself, der to obey the law, to ruin and to continue the exercise of his productive functions, whether in possession # The Ro- of capital or not; which is altogether absurd. mans, in treating every branch of industry, except agri- culture (and we know not why,) with contempt, tfetray the same ignorance. Their pecuniary transactions must be numbered amongst their most unskilful operations. The moderns, even after having freed themselves from the barbarism of the middle a^es, have not for a very long time been more advanced. We shall have occasion to notice the stupidity of a multitude of laws relating to the Jews, money, and to money itself. Henry to the interest of IV. granted to his favourites and mistresses, as favours him nothing, the permission to practise a thou- which cost sand petty extortions, and to collect for their own benefit, from various branches of commerce, as many petty taxes. He authorized the count of Soissons to levy a duty of fif- teen sous upon every bale of merchandise which should be exported from the kingdom/!" In every branch of knowledge, example has preceded precept. The fortunate enterprises of the Portuguese and Spaniards during the fifteenth century, the active in- dustry of Venice, Genoa, Florence, Pisa, the provinces of Flanders, and the free cities of Germany at this same epoch, gradually directed the attention of some philoso- phers to the theory of wealth. These inquiries, like almost every other in the arts and sciences, after the revival of letters, originated in Italy * When we find almost every historian, from Herodotus to Bossuet, boasting- of tin* and other similar laws, it will be seen how important it is that all who undertake to write history should have some knowledge of the science of political economy t See Sully's Memoirs, Book XVI.

33 XXX INTRODUCTION. Dotero was engaged As fai back as the sixteenth century, public prosperity. of In in investigating the real sources Serra composed a the year Antonio 1613, treatise, in which he particularly noticed the productive power of industry; his work sufficiently indicates its but the title of errors. to his of Wealth, according hypothesis, consisted only wrote upon money and upon Davanzati gold and silver.* exchange; and at the beginning of the eighteenth century Bandini of Sienna fifty years before the time of Quesnay, had shown, both from reasoning and experience, that there a scarcity never had been food, except in those coun- of tries where the government had itself interfered to supply Belloni, a at Rome, in the year 1750, the people. banker dissertation on commerce, evincing his inti- published a the nature of money and ex- mate acquaintance with at changes, although the same time infected with the the- of ory of the balance trade. His labours were rewarded of marquess. Carli, by the Pope with the title before Dr. Smith, demonstrated that the balance of trade neither taught nor proved any thing. Algarotti, whose writings on other subjects Voltaire has made known, wrote also upon the science political economy; and the little he of has left exhibits the accuracy and extent of his knowledge, as well as his acuteness. He confines himself so strictly on the to facts, and so uniformly founds his speculations nature of things, that although he did not get possession of the proof of his principles, and of their relation to each other, he has, nevertheless, guarded himself against every In 1764, Genovesi com- thing like hypothesis and system. a course of public lectures on political economy, menced at the highly of in the chair founded Naples by the care esteemed and learned In consequence of this ex- Intieri. ampie, other professorships of political economy were afterwards established at and more recently in Milan, of the universities in Germany and Russia. most Galiani, so weli known since from his In 1750, the abbe connexion with many of the French philosophers, and by his Dialogues on the Corn Trade, although at that time a very young man, published Treatise on Money, which a discovered such uncommon talents and information, as to • Breve Trattato d*U-e cause che possono far abondare li regni d'oro et d'argento dow ton son, miniere

34 INTRODUCTION. induce belief that he had been assisted in the composi- a Intieri and the Marquess tion of his work by the abbe of Rinuccini. Its merits, however, appear to be of a descrip- tion similar to those the author's writings always after- wards displayed; genius united with erudition, careful- things; and ness in uniformly ascending to the nature of an animated and elegant style. of this work, is One of the most striking peculiarities its containing some of the rudiments of the doctrine of Adam Smith ; among others, that labour is the sole crea- tor of the value of things or of wealth ;* a principle al- be though not rigorously true, as will in made manifest the course of this work, but which, pushed to its ultimate Galiani in the way dis- consequences, would have put of covering and completely unfolding the phenomena of pro- a duction. Dr. Smith, who was about the same time pro- fessor in the university of Glasgow, and then taught this doctrine, which has since acquired so much celebrity, in all probability had no knowledge of a work in the Italian lan- guage, published at Naples by young man then hardly a known, and whom he has never quoted. But even had he known it, a truth cannot with so much propriety be said to belong to its fortunate discoverer, as to the inquirer who first proves that it must be so, and demonstrates its con- sequences. Although the existence of universal gravitation had been previously conjectured by Kepler and Pascal, the discovery does not the less belong to Newton.t *" Entro ora a dire della factica, la quale, non solo in tute le opere que sono intiera nicnte dell' arte come le pitture, sculturc, intagli, etc., ma anchi in molti corpi, come minerali, i i sono sassi, le piante spontanee delle selve, etc., e Tunica che da valore alia cosa. La quantita della materia non per altro coopera in questi corpi al valore se non parche aumenta o senna la fatica." della Moneta. Lib. I, cap. 2.) (GALIANI, " In relation to labour will remark, that not only in productions which are entirely I 1 of the work , sculpture, engraving, etc., but likewise in productions art, as in painting of nature, as on metals, minerals, and plants, their value is entirely derived from the labour bestowed on their creation. The quantity of matter affects the value of thinga only so far as it requires more or less labour." In the same chapter Galiani also remarks, that man, that is to say bis labour, is the only correct measure of value. This, also, according to Dr. Smith, is a principle; al though considered by me as an error. is t This same Galiani remarks, in the same work, that whatever gained by some must necessarily be lost by others; in this way proving, that a very ingenious writer may not even know how to deduce the most simple conclusions, and may pass by the Iruih without perceiving it. For, if wealth can be created by labour, there may then be a new description of wealth in the world, not taken from anybody. Indeed, this author a long time afterwards, has in his Dialogues on the Corn Trade, published in France himself, In a very peculiar manner, pronounced his own condemnation. " A truth,"

35 XXX11 INTRODUCTION. Alvarez Osorio, and have In Spain, Martinez--de-mata, delivered discourses on political economy, the publication Campo- of which we owe to the enlightened patriotism of Ulloa, manes, Moncada, Navarette, Ustarilz, Ward, and same subject. These esteemed have written on the authors, like those of Italy, entertained many sound views, number of verified various important facts, and supplied a laborious calculations ; but from their inability to estab- lish them upon fundamental principles of the science, which were not then known, they have often been mistaken both the end as well as the means of prosecuting this to as a study; amidst variety of useless disquisitions, have only cast an uncertain and deceptive light.* first, was In France, the science of political economy, at only considered in its application to public finances. Sully remarks correctly enough, that agriculture and commerce the state; but from a vague and are the two teats of in- of the truth. The same observation distinct conception may be applied Vauban, a man of a sound practical to mind, and although in the army, a philosopher and friend of peace, who, deeply afflicted with the misery into which his country had been plunged by the vain-glory of Louis XIV., proposed a more equitable assessment of the taxes, as a means of alleviating the public burdens. Under the influence of the regent, opinions became to be an inexhaustible unsettled; bank-notes, supposed wealth, were only the means of swallowing source of up capital, of expending what had never been earned, and of a bankruptcy making all debts. Moderation and eco- of nomy were turned into ridicule. The courtiers the of by persuasion prince, either corruption, encouraged or him in every species of extravagance. At this period, the maxim that a state is enriched by luxury was reduced to system. All the talents and wit of the day were exerted a paradox in prose, or in em- in gravely maintaining such bellishing it with the more attractive charms of poetry How, is of no value; we cannot make use of it, if we are ignorant of its origin and con- sequences ; or how and by what chain of reasoning it is derived." * From my own inability of judging of the merits of such of these writers whose I have availed myself of the opinions of one of the works have not been translated, translators of this Treatise into the Spanish language, Don Jose Queypo, an individual Alike distinguished by his abilities and patriotism, whose remarks I have only id

36 INTRODUCTION. XXXU The dissipation of the national treasures was really sup- posed to merit the public gratitude. The ignorance of first principles, with the debauchery and licentiousness of the duke of Orleans, conspired to effect the ruin of the kingdom. During the long peace maintained by cardinal Fleury, France recovered a little; the insignificant ad- ministration of this weak minister at least proving, that the ruler of a nation may achieve much good by abstain- ing from the commission of evil. The steadily increasing progress of different branches of industry, the advancement of the sciences, whose in- fluence upon wealth we shall have occasion hereafter to notice, and the direction of public opinion, at length esti- mating national prosperity as being of some importance, caused the science of political economy to enter into the contemplation of a great number of writers. Its true principles were not then known; but since, according to the observation of Fontenelle, our condition is such, that we are not permitted at once to arrive at the truth, but must previously pass through various species of errors and various grades of follies, ought these false steps to be considered as altogether useless, which have taught us to advance with more steadiness and certainty ? Montesquieu, who was desirous of considering laws in all their relations, inquired into their influence on national wealth. The nature and origin of wealth he should first have ascertained ; of which, however, he did not form any opinion. We are, nevertheless, indebted to this distin- guished author for the first philosophical examination of the principles of legislation ; and, in this point of view, he, perhaps, may be considered as the master of the English writers, who are so generally esteemed as being ours; just in the same manner as Voltaire has been the master of their best historians, who now furnish us with models worthy of imitation. About the middle of the eighteenth century, certain principles in relation to the origin of wealth, advanced by Doctor Quesnay, made a great number of proselytes. The enthusiastic admiration manifested by these persons for the founder of their doctrines, the scrupulous exactness with which they have uniformly since followed the

37 INTRODUCTION. dogmas, and the energy and zeal they displayed in main- taining them, have caused them to be considered as a sect, which has received the name Instead of of economists. things, manner in of first observing the nature or the classifying these observations, which they take place, of and deducing from them general propositions, they com- menced by laying down certain abstract general proposi- which they styled axioms, from supposing them to tions, contain inherent evidence of their own truth. They then endeavoured to accommodate the particular facts to them, and to infer from them their laws; thus involving them- selves in the defence of maxims evidently at variance with common sense and universal experience,* as will appear hereafter in various parts this work. Their opponents of had not themselves formed any more correct views of the subjects in controversy. With considerable learning and by talents on both sides, they were either wrong or right chance. Points were contested that should have been conceded, and opinions, unquestionably false, acquiesced in ; in short, they combated in the clouds. Voltaire, who to so well knew how it detect the ridiculous, wherever was to be found, in his Hommeaux quarante ecus, satirised iiic system of the economists; yet, in exposing the tire- some trash of Mercer de la Riviere, and the absurdities contained in Uami des Hommes, he was him- Mirabeau's self unable to point out the errors of either. The economists, by promulgating some important truths, a more general attention to objects of public directing by exciting discussions, which, although at utility, and that time of no advantage, subsequently led to more ac- curate investigations, have unquestionably done much good.t In representing agricultural industry as produc- tive of wealth, they were not deceived ; and, perhaps, the necessity they were in unfolding the nature of produc- of tion, caused the further examination of this important phe- nomenon, which conducted their successors to its entire * When they maintain, for example, that a fall in the price of food is a public calamity. + Among the discussions they provoked, we must not forget the entertaining Dia- lOgues on the Corn Trade, by the abbe in which the science of political econo. Galiani, >iy is treated in the humorous manner of Tristram Shandy. An important truth is asscted, and when the author is called upon for its proof, he replies with some ingenious Peasant) y*

38 INTRODUCTION. XXXV development. On the other hand, the labours of the eco- nomists have been attended with serious evils; the many useful maxims they decried, their sectarian spirit, the dog matical and abstract language of the greater part of theii writings, and the tone of inspiration pervading them, gave all who were engaged in opinion, that to the currency at such studies were but idle dreamers, whose theories, best only gratifying literary curiosity, were wholly inap- plicable in practice.* of No one, however, has ever denied that the writings the economists have uniformly been favourable to the strictest morality, and to the liberty which every human being ought to possess, of disposing of his person, fortune, and talents, according to the bent of his inclination ; with- out which, indeed, individual happiness and national pros- are but empty perity unmeaning sounds. These and opinions alone entitle their authors to universal gratitude I a dishonest and esteem. do not, moreover, believe that man or bad citizen can be found among their number. This doubtless is the reason why, since the year 1760, almost all the French writers of any celebrity on subjects connected with political economy, without absolutely being enrolled under the banners of the economists, have, never- Raynal, Con- theless, been influenced by their opinions. and many others, will be found among this number. dorcet, Condillac may also be enumerated among them, notwith- standing his endeavours to found a system of his own in relation to a subject which he did not understand. Many useful hints may be collected from amidst the ingenious * The belief that moral and political science founded upon chimerical theories, is questions of right matters arises chiefly from our almost continually confounding- with Of what consequence, for instance, is the question so long agitated in the of fact. writings of the economists, whether the sovereign power in a country is, or is not, the ? The fact is, that in every country the government takes, or co-proprietor of the soil in the shape of taxes the people are compelled to furnish it with, a part of the revenue di awn from real estate. Here then is a fact, and an important one; the consequence of certain facts, which we can trace up, as the cause of other facts (such as the rise in Questions of right ar« the price of commodities) to which we are led with certainty. always more or less matters of opinion ; on the contrary, are susceptible matters of fact, of proof and demonstration. The former exercise but little influence over the fortunes of mankind ; while the latter, inasmuch as facts grow out of each other, are deeply in- teresting to them; and, as it is of importance to us that some results should take piano it is, therefore, essential to ascertain the means by which thesu in preference to others, may be obtained. The Social Contract of J. J. Rousseau, from being almost entirely founded upon questions of right, has thereby become, what I feel no hesitation in avow f ng, a work of at least but little practical utility.

39 xxxvi INTRODUCTION. trifling of his work ;* but, like the economists, he almost invariably founds a principle upon some gratuitous assump- tion. Now, an hypothesis may indeed be resorted to, in order to exemplify and elucidate the correctness of an author's general reasoning, but never can be sufficient to establish a fundamental truth. Political economy has only become a science since it has been confined to the results of inductive investigation. Turgot was himself too good a citizen, not sincerely to esteem as good citizens as the economists; and accord- ingly, when in power, he deemed it advantageous to coun- tenance them. The economists, in their turn, found their account in passing off so enlightened an individual and minister of state as one of their adepts; the opinions of Turgot, however, were not borrowed from their school, but derived from the nature of things; and although on many important points of doctrine he may have been de- ceived, the measures of his administration, either planned or executed, are amongst the most brilliant ever conceived by any statesman. There cannot, therefore, be a stronger proof of the incapacity of his sovereign, than his inability to appreciate such exertions, or if capable of appreciating them, in not knowing how to afford them support. The economists not only exercised a particular sway over French writers, but also had a very remarkable in- fluence over many Italian authors, who even went beyond them. Beccaria, in a course of public lectures at Milan,t first analysed the true functions of productive capital. The Count de Verri, the countryman and friend of Beccaria, and worthy of being so, both a man of business and an accomplished scholar, in his Meditazione suW Economia published in 1771, approached nearer than any politico,, other writer, before Dr. Smith, to the real laws which r regulate the production and consumption of w ealth. Fi- langieri, whose treatise on political and economical laws was not given to the public until the year 1780, appears not to have been acquainted with the work of Dr. Smith, * Du Commerce et du Gouverncment consideres fun relativement a Vautre. t See the syllabus of his lectures, which was printed for the first time in the year 1804, Pietro Custodi, under the title of ScriU in the valuable collection published at Milan by tori classier italiani di economia politico,. It was unknown to me until ifler the pubh. cation of the first edition of this work in 1803.

40 INTRODUCTION. XXXVU published four years before. The principles de Verri laid down are followed by Filangieri, and even received from more complete development; but although guided him a by the torch of analysis and deduction, he did not proceed to from the most fortunate premises the immediate con sequences which confirm them, at the same time that they exhibit their application and utility. But none of these inquiries could lead to any important result. How, indeed, was it possible to become acquainted national prosperity, when no clear or with the causes of distinct notions had been formed respecting the nature of of our investigations must be wealth itself? The object thoroughly perceived before the means of attaining it are sought after. In the year 1776, Adam Smith, educated in that school in Scotland which has produced so many scho- historians, and philosophers, of the highest celebrity, lars, his Inquiry into the Nature and Causes the published of Nations, of Wealth In this work, its author demonstrated that wealth was the exchangeable value of things; that its extent was proportional to the number of things in our as possession having value; and that inasmuch value to matter, that wealth could could be given or added be created and engrafted on things previously destitute of value, and there be preserved, accumulated, or destroyed.* In inquiring into the origin of value, Dr. Smith found it to be derived from the labour of man, which he ought to industry, its being a more com- have denominated from prehensive and significant term than labour. From this he fruitful demonstration deduced numerous and impor- tant conclusions respecting the causes which, from check- ing the development of the productive powers of labour, are prejudicial to the growth of wealth; and as they are * During the same year that Dr. Smith's work appeared, and immediately before its publication, Browne Dignan published in London, written in the French language, his Essai 8ur les principes de VEconomie publique, containing the following remarkable the passage: "The class of reproducers includes all who, uniting their labour to that of vegetative power of the soil, or modifying the productions of nature in the processes of their several arts, create in some sort a of which the sum total forrnu what is new value, called the annual reproduction." This striking passage, in which reproduction is more clearly characterised than m uny part of Dr. Smiths writings, did not lead its author to any important conclusions, but merely gave birth to a few scattered hints. A want of connexion in his views, and of precision in his terms, have rendered his Essay so vague and obscure, that no m- fltructio • whatever can be derived from it.

41 INTRODUCTION. 1 rigorous deductions from an indisputable principle, the) nave only been assailed by individuals, either too careless to have thoroughly understood the principle, or of such perverted understandings as to be wholly incapable of seizing the connexion or relation between any two ideas. Whenever the Inquiry into the Wealth of Nations is perused with the attention it so well merits, it will be per- ceived that until the epoch of its publication, the science of political economy did not exist. From this period, gold and silver coins were considered as only constituting a portion, and but a small portion, of national wealth; a portion the less important, because less susceptible of increase, and because their uses can be more easily supplied than those of many other articles equally valuable; and hence it results that a community, as well as its individual members* are in no way interested in obtaining metallic money beyond the extent of this limited demand. These views, we conceive, first enabled Dr. Smith to ascertain, in their whole extent, the true functions of money, and the applications of them, which he made to bank-notes and paper money, are of the utmost impor- tance in practice. They afforded him the means of de- monstrating, that productive capital does not consist of a sum of money, but in the value of the objects made use of in production. He arranged and analyzed the ele- ments of which productive capital is composed, and pointed out their true functions.* Many principles strictly correct had often been ad* vanced prior to the time of Dr. Smith ;t he, however, was the first author who established their truth. Nor is this * This difficult and abstruse subject has not, perhaps, been treated by Dr. Smith with bufficient method and perspicuity. Owing to this circumstance, his intelligent and acute countryman, lord Lauderdale, has composed an entire treatise, in order to prove that his lordship had completely failed in comprehending this part of the Wealth of Nations. t In the article Grains, in the Encyclopedic, Quesnay had remarked, that " commo- dities which can sold, ought always to be considered without distinction, either as be oecuniary or real wealth, applicable to the purposes of whoever may make use of it." in reality, is Dr. Smith's exchangeable value. De Verri had observed, (chapter This, 3 ) that reproduction was nothing more than the reproduction of value, and that the value of things constituted Galiani, as has been already noticed, had said, that labour wealth. was the source of all value; but Dr. Smith, nevertheless, made these viows his own by exhibiting, as we see, their connexion with all the other important pht norapna» and in demonstrating them even by their consequences.

42 INTRODUCTION. XXXI* all. furnished us, also, with the true method of He has he has applied political economy the detecting errors; to scientific investigation, namely, new mode of of not look- but by ascending from principles abstractedly, for ing the most constantly observed, to the general laws facts every fact may be said to which govern them. As have it is in the of system to deter- a particular cause, spirit the it is in the spirit of analysis, to be soli- mine cause; to know why a particular cause citous produced this has effect, order to be satisfied that it could not have been in by any other cause. work of Dr. Smith is The produced demonstrations, which has elevated many of a succession to the rank of indisputable principles, and propositions a plunged still greater number into that imaginary gulph, and into which extravagant hypotheses vague opinions for a certain period struggle, before being forever swal- up. lowed has been said that Dr. Smith was under heavy obli- It gations to Stewart* an author whom he has not once quoted, even for the of refuting him. I cannot purpose in what these obligations consist. perceive In the con- subject, Dr. Smith displays elevation of his the ception his views, whilst the researches and comprehensiveness of narrow and insignificant scope. but a of Stewart exhibit has supported a system already maintained Stewart by Colbert, adopted afterwards French writers on by all the and by most European commerce, steadily followed a system which considers national wealth governments; not upon the sum total of its productions, as depending, but upon the amount of its sales to foreign countries. One of the of Dr. Smith's work most important portions to the of this theory. If he has not is devoted refutation it is from the latter not being particularly refuted Stewart, by him as the father of his school, and from considered naving deemed it of more importance to overthrow an opinion, then universally received, than confute the to doctrines of an author, which in themselves contained nothing peculiar. The economists have also pretended, that Dr. Smith •Sir James Stewart, author of a Treatise on Political Economv.

43 *1 INTRODUCTION. was under obligations to them. But to what do such pro ? tensions amount A man of genius is indebted to every- thing around him; to the scattered lights which he has concentrated, to the errors which he has overthrown, and even to the enemies by whom he has been assailed; inas- much as they all contribute to the formation of his opin- ions. But when out of these materials he afterwards em- bodies enlarged views, useful to his contemporaries and posterity, it rather behoves us to acknowledge the extent of our own obligations, than to reproach him with what he has been supplied by others. Moreover, Dr. Smith has not been backward in acknowledging the advantages he had derived from his intercourse with the most enlighten- ed men in France, and from his intimate correspondence with his friend and countryman Hume, whose essays on political economy, as well as on various other subjects, contain so many just views. After having shown, as fully as so rapid a sketch will permit, the improvement which the science of political economy owes to Dr. Smith, it will not, perhaps, be use- less to indicate, in as summary a manner, some of the points on which he has erred, and others which he has left to be elucidated. To the labour of man alone he ascribes the power of producing values. This is an error. A more exact ana- lysis demonstrates, as will be seen in the course of this work, that all values are derived from the operation of labour, or rather from the industry of man, combined with the operation of those agents which nature and capital furnish him. Dr. Smith did not, therefore, obtain a thorough knowledge of the most important phenomenon in production; this has led him into some erroneous con- clusions, such, for instance, as attributing a gigantic in- fluence to the division of labour, or rather to the separa- tion of employments. This influence, however, is by no means inappreciable or even inconsiderable; but the greatest wonders of this description, are not so much owing to any peculiar property in human labour, as to the use we make of the powers of nature. His ignorance of I his principle precluded him from establishing the true

44 INTRODUCTION. li x theory of machinery in relation to the production ot wealth. r The phenomena of production being now better know n than they were in the time of Dr. Smith, have enabled his successors to distinguish, and to assign the difference found to exist, between a real and a relative rise in prices ;* a difference which furnishes the solution of numerous problems, otherwise wholly inexplicable. Such, for exam- ple, as the following: Does a tax, or any other impost, by enhancing the price of commodities, increase the amount of ? The income of the producer arising from the cost t wealth . of production, why is not this income impaired by a diminu- tion in the cost of production? Now it is the power of re- solving these abstruse problems which, nevertheless, con- stitutes the science of political economy.^ wealth to values By the exclusive restriction of the term fixed and realized in material substances, Dr. Smith has • See Chapter third, Book second. + Dr. Smith has, in a satisfactory manner, established the difference between the real and nominal prices of things, that is to say, between the quantity of real values which must be given to obtain a commodity, and the name which is given to the sum of these values. The difference here alluded to, arises from a more perfect analysis, in which the real price itself is decomposed. t It is not, for example, until after the manner in which production takes place ia thoroughly understood, that we can say how far the circulation of money and commo- dities has contributed towards it, and consequently what circulation is useful, and what is not; otherwise, we should only talk nonsense, as is daily done, respecting the utility of a quick circulation. My being obliged to furnish a chapter on this subject (Book I, 16.) must be attributed to the inconsiderable advancement made in the science of Chap. political economy, and to the consequent necessity of directing our attention to some of its more simple applications. The same remark is applicable to the twentieth chap- ter, in the same book, on the subject of temporary and permanent emigration, considtr- td in reference to national wealth. Any person, however, well acquainted with the prin- ciples of this science, would find no difficulty in arriving at the same conclusions. The time is not distant when not only writers on finance, but on history and geogra- phy, will be required to possess a knowledge of at least the fundamental principles of political economy. A modern treatise on Universal Geography, (vol. 2, page 602,) a work in other respects denoting extensive research and information, contains the follow ing passage : " The number of inhabitants of a country is the basis of every good sys tern of finance; the more numerous is its population, the greater height will its com- merco and manufactures attain; and the extent of its military force be in proportion to the amount of its population." Unfortunately, every one of these positions may be erroneous. National revenue, necessarily consisting either of the income of the public property, or of the contributions, in the shape of taxes, drawn from the incomes of in- dividuals, does not depend upon the number, but upon the wealth, and above all, upon t incomes of the people. Now, an indigent multitude has the fewer contributions to 4 »d, the more mouths it has to feed. It is not the numerical population of a state, bu . y*t the capital and genius of its inhabitants, that most conduce to the advancement of its commerce ; these benefit population much more than they are benefited by it. Finally, f the number of troops a governme " can maintain depends still less upon the extent n( A tts» population than upon its revenues, it has been already seen that revenue is not dependent upon population.

45 tlh INTRODUCTION. narrowed the boundary of this science. He should, also, have included under its values which, although immaterial, are not less real, such as natural or acquired talents. Of two individuals equally destitute of fortune, the one in possession of a particular talent is by no means so poor as the other. Whoever has acquired a particular talent at the expense of an annual sacrifice, enjoys an accumu- lated capital; a description of wealth, notwithstanding its immateriality, so little imaginary, that, in the shape of professional services, it is daily exchanged for gold and silver. Dr. Smith, who with so much sagacity unfolds the man- ner in which production takes place, and the peculiar cir- cumstances accompanying it in agriculture and the arts, on the subject of commercial production presents us with only obscure and indistinct notions. He, accordingly, was unable to point out with precision, the reason why, and the extent to which, facilities of communication are con- ducive to production. He did not subject to a rigid analysis the different ope- rations comprehended under the general name of industry, or as he calls it, of labour, and, therefore, could not appre- ciate the peculiar importance of each in the business of production. His work does not furnish a satisfactory or well con- nected account of the manner in which wealth is distri- buted in society; a branch of political economy, it may be remarked, opening an almost new field for cultivation. The too imperfect views of economical writers respecting the production of wealth precluded them from forming any accurate notions in relation to its distribution.* Finally, although the phenomena of the consumption of wealth are but the counterpart of its production, and although Dr. Smith's doctrine leads to its correct exarni- nation, he did not himself develope it; which precluded him from establishing numerous important truths. Thus, by not characterizing the two different kinds of consump- tion, namely, unproductive and reproductive, he does not * Witness TurgoVs Reflections sur la formation et la distribution ues richesses, in which he has introduced various views on both these subjects, either entirely erroneous, r very im'»crfect.

46 INTRODUCTION. xllll satisfactorily demonstrate, that the consumption of valuer saved and accumulated in order to form capital, is as per- fect as the consumption of values which are dissipated. The better we become acquainted with political economy, the more correctly shall we appreciate the importance of the improvements this science has received from him, as well as those he left to be accomplished.* Such are the principal imperfections of the Inquiry into the Nature and Causes of the Wealth of Nations, in rela- tion to its fundamental doctrines. The plan of the work, or, in other words, the manner in which these doctrines are unfolded, is liable to no less weighty objections. In many places the author is deficient in perspicuity, and the work almost throughout is destitute of method. To understand him thoroughly, it is necessary to accus- tom one's self to collect and digest his views; a labour, at least in respect to some passages, he has placed beyond the reach of most readers; indeed, so much so, that per- sons otherwise enlightened, professing both to comprehend and admire his doctrines, have written on subjects he has discussed, namely, on taxes and bank-notes as supple- mentary to money, without having understood any part of his theory on these points, which, nevertheless, forms one of the most beautiful portions of his Inquiry. His fundamental principles, too, are not established in the chapters assigned to their development. Many of them will be found scattered through the two excellent refutations of the exclusive mercantile system and the or the economists, but in no other part of the work. system of The principles relating to the real and nominal prices of things, are introduced into a dissertation on the value of the precious metals during the course of the last four cen- turies and the author's opinions on the subject of money ; are contained in the chapter on commercial treaties. • Dr. Smith's long digressions, have, moreover, with great propriety, been much censured. An historical account of a particular law or institution as a collection of facts, is in itself, doubtless, highly interesting; but in a work devoted to the support and illustration of general princi- * Many other points of doctrine, besides those here noticed, have been either over- •ooited. or but imperfectly analyzed by Dr. Smith.

47 INTRODUCTION. pies, particular facts not exclusively applicable to these can only unnecessarily overload the attention. His ends, sketch of the progress of opulence in the different nations of Europe after the fall of the Roman empire, is but a magnificent digression. The same remark is applicable to the highly ingenious disquisition on public education, replete as it is with erudition and the soundest philosophy, at the same time that it abounds with valuable instruction. Sometimes these dissertations have but a very remote connexion with his subject. In treating of public expen- ditures, he has gone into a very curious history of the various modes in which war was carried on by different nations at different epochs; in this manner accounting for military successes which have had so decided an in- fluence on the civilization of many parts of the earth. These long digressions at times, also, are devoid of inter- est to every other people but the English. Of this descrip- tion is the long statement of the advantages Great Britain would derive from the admission of all of her colonies into the right of representation in parliament. The excellence of a literary composition as much de- pends upon what it does not, as upon what it does con- tain. So many details, although in themselves useful, unnecessarily encumber a work designed to unfold the principles of political economy. Bacon made us sensible of the emptiness of the Aristotelian philosophy; Smith, in like manner, caused us to perceive the fallaciousness of all the previous systems of political economy; but the latter no more raised the superstructure of this science, than the former created logic. To both, however, our obligations are sufficiently great, for having deprived their successors of the deplorable possibility of proceeding, for any length of time, with success on an improper route.* * Since the time of-Dr. Smith, both in England and France, a variety of publications on political economy have made their appearance; some of considerable length, but sel- dom containing anything worthy of preservation. The greater part of them are of a controversial character, in which the principles of the science are merely laid down for thu purpose of maintaining a favourite hypothesis ; but from which, nevertheless, many »mportant facts, and even sound principles, when they coincide with the views of their Essai sur les finances de la Grand-Bretagne" by authors, may be collected. The " GentZy and apology for Mr. Pitt's system of finance, is of this description; so also i« Thornton's Inquiry into the nature and effects of paper credit, written with a view to jup tify the suspension of cash payments by the bank of England ; as well as a great nun* bet of other works on the same subject, and in relation to the corn law*.

48 INTRODUCTION. xlv We are, however, not yet in possession of an establish- ed text-book on the science of political economy, in which the fruits of an enlarged and accurate observation are re- ferred to general principles, that can be admitted by every reflecting mind; a work in which these results are so complete and well arranged as to afford to each other mutual support, and that may everywhere, and at all times, be studied with advantage. To prepare myself for attempting so useful a task, I have thought it necessary attentively to peruse what had been previously written on the same subject, and afterwards to forget it; to study these authors, that I might profit by the experience of so many competent inquirers who have preceded me; to endeavour to obliterate their impressions, not to be mis- led by any system; and at all times be enabled freely to consult the nature and course of things, as actually exist- ing in society. Having no particular hypothesis to sup- port, I have been simply desirous of unfolding the manner 3n which wealth is produced, distributed, and consumed. A knowledge of these facts could only be acquired by observing them. It is the result of these observations, within the reach of every inquirer, that are here given. The correctness of the general conclusions I have deduced from them, every one can judge of. It was but reasonable to expect from the lights of the age, and from that method of philosophizing which has so powerfully contributed to the advancement of other sci- ences, that I might at all times be able to ascend to the nature of things, and never lay down an abstract princi pie that was not immediately applicable in practice; so that, always compared with well established facts, any one could easily find its confirmation by at the same time discovering its utility. Nor is this all. Solid general principles, previously laid down, must be noticed, and briefly but clearly proved, those which had not been laid down must be established, and the whole so combined, as to satisfy every one that no material omission has taken place, nor any fundamental point been overlooked. The science must be stript of many false opinions; but this labour must be confined to such errors as are generally received, and to authors of

49 ]vi INTRODUCTION. x acknowledged reputation. For what injury can an ob- scure writer or a discredited dogma effect ? The utmost precision must be given to the phraseology we employ, so as to prevent the same word from ever being understood in two different senses; and all problems be reduced to their simplest elements, in order to facilitate the detection of any errors, and above all, of our own. In fine, the doc- trines of the science must be conveyed in such a popular* form, that every man of sound understanding may be en- abled to comprehend them in their whole scope of conse- quences, and apply their principles to all the various cir- cumstances of life. The position maintained in this work, that the value of things is the measure of wealth, has been especially objected to. This, perhaps, has been my fault; I should have taken care not to be misunderstood. The only sa- tisfactory reply I can make to the objection, is to endea- vour to give more perspicuity to this doctrine. I must, therefore, apologize to the owners of the former editions, for the numerous corrections I have made in the present It became my duty in treating of a subject of such essen- tial importance to the general welfare, to give it all the perfection within my reach. Since the publications of the former editions of this work, various authors, some of whom enjoy a well merited celebrity,t have given to the world new treatises on polit- ical economy. It is not my province, either to pronounce upon the general character of these productions, or to de- cide whether they do, or do not, contain a full, clear, and well digested exposition of the fundamental principles of this science. This much I can with sincerity say, that many of these works contain truths and illustrations well calculated greatly to advance the science, and from the * By a I do not mean a treatise for the use of persons who neither popular treatise, Know how to read, nor to make any use of it. By this expression, I mean a treatise not exclusively addressed to professional or scientific cultivators of this particular branch of knowledge, but one calculated to be read by every intelligent and useful member of so i lety. i Ricardo, Sismondi, and others. The fair sex begin also to perceive that they had none themselves injustice, in supposing that they were unequal to a branch of study destined to exercise so benign an influence over domestic happiness. In England, a (ady (Mrs. Marcet) has published a work, Conversations on Political Economy" since translated into French, in which the soundest principles are explained in a familiar and pleasing style.

50 INTRODUCTION. )vi; x of which have derived important benefit. But, perusal I am entitled to re- I in common with every other inquirer, at first sight mark how far some of their principles, which plausible, are contradicted by a more cau- appear to be facts. tious and rigid induction of It is, perhaps, a well founded objection to Mr. Ricardo, that he sometimes reasons upon abstract principles to a which he gives too great generalization. When once fixed in an hypothesis which cannot be assailed, from its in being founded upon observations not called question, he pushes his reasonings to their remotest consequences, without comparing their results with those of actual expe- rience. In this respect resembling a philosophical me- the chanician, who, from undoubted proofs drawn from nature of the lever, would demonstrate the impossibility of the vaults daily executed by dancers on the stage. And ? The reasoning proceeds in a how does this happen a vital force, often unperceived, and straight line; but always inappreciable, makes the facts differ very far from our calculation. From that instant nothing in the author's work is represented as it really occurs in nature. It is not sufficient to set out from facts; they must be brought together, steadily pursued, and the consequences drawn from them constantly compared with the effects observed. The science of political economy, to be of practical utility, necessarily take place, if even should not teach, what must deduced by legitimate reasoning, and from undoubted pre- ; it must show, in what manner that which in reality mises of does take place, is the consequence other facts equally certain. must discover the chain which binds them It together, and always, from observation, establish the ex- of the two links at their point of connexion. istence With respect to the wild or antiquated theories, so often produced, reproduced by authors who possess or neither sufficiently extensive nor well digested information to entitle them to form a sound judgment, the most effec- tual method of refuting them is to display the true doc- trines the science with still greater clearness, and to of leave to time the care of disseminating them. We, other- wise, should be involved in interminable controversies, affording no instruction to the enlightened part of society.

51 |viii INTRODUCTION. f and inducing the uninformed to believe that nothing is susceptible of proof, inasmuch as everything is made the subject of argument and disputation. Disputants, infected with every kind of prejudice, have r with a sort of doctorial confidence, remarked, that both nations and individuals sufficiently well understand how to improve their fortunes without any knowledge of the nature of wealth, and that this knowledge is in itself a purely speculative and useless inquiry. This is but saying that we know perfectly well how to live and breathe, with- out any knowledge of anatomy and physiology, and that these sciences are, therefore, superfluous. Such a propo- sition would not be tenable ; but what should we say if it were maintained, and by a class of doctors, too, who, whilst decrying the science of medicine, should themselves subject you to a treatment founded upon antiquated em- piricism and the most absurd prejudices; who, rejecting all regular and systematic instruction, in spite of your remonstrances, should perform upon your own body the most bloody experiments; and whose orders should be enforced with the weight and solemnity of laws, and, finally, carried into execution by a host of clerks and ? soldiers In support of antiquated errors, it has also been said, " that there surely must be some foundations for opinions, so generally embraced by all mankind; and that we our- selves ought rather to call in question the observations and reasonings which overturn what has been hitherto so uniformly maintained and acquiesced in by so many indi- viduals, distinguished alike by their wisdom and benevo- lence." Such reasoning, it must be acknowledged, should make a profound impression on our minds, and even cast some doubts on the most incontrovertible positions, had we not alternately seen the falsest hypotheses now univer- sally recognized as such, everywhere received and taught during a long succession of ages. It is yet but a very little time, since the rudest as well as the most refined na- tions, and all mankind, from the unlettered peasant to the enlightened philosopher, believed in the existence of but four material elements. No human being had even dreamt of disputing the doctrine, which is nevertheless false ; in-

52 INTRODUCTION. somuch that a tyro in natural philosophy, who should a, present consider earth, air, fire, and water, as distinct ele- ments, would be disgraced.* How many other opinions, as universally prevailing and as much respected, will in like manner pass away. There is something epidemical in the opinions of mankind ; they are subject to be attack- ed by moral maladies which infect the whole species; Periods at length arrive when, like the plague, the disease wears itself out and loses all its malignity ; but it still has required time. The entrails of the victims were consulted at Rome three hundred years after Cicero had remarked, that the two augurs could no longer examine them without laughter. The contemplation of this excessive fluctuation of opinions must not, however, inspire us with a belief that nothing is to be admitted as certain, and thus induce us to yield up to universal scepticism. Facts repeatedly ob- served by individuals in a situation to examine them un- der all their aspects, when once well established and accu- rately described, can no longer be considered as mere opinions, but must be received as absolute truths. When it was demonstrated that all bodies are expanded by heat, this truth could no longer be called in question. Moral and political science present truths equally indisputable, but of more difficult solution. In these sciences, every individual considers himself not only as being entitled to make discoveries, but as being also authorized to pro- nounce upon the discoveries of others; yet how few per- sons acquire competent knowledge, and views sufficiently enlarged, to become assured that the subject upon which they thus venture to pronounce judgment is thoroughly understood by them in all its bearings. In society, one is astonished to find the most abstruse questions as quickly decided as if every circumstance, which, in any way, could and ought to affect the decision, were known. What * Every branch of knowledge, even the most important, is but of very recent origin The celebrated writer on agriculture, Arthur Young, after having bestowed uncommon all the observations that had been made in relation to soils, on© pains in the collection of of the most important parts of this science, and which teaches us by what succession of crops the earth may be, at all times, and with the greatest success, cultivated, rc« •narked, that he could not find that anything had been written on this subject prior to. \he year 1768. Other arts, not less essential to the happiness and prosperity of society ire still also in their infancy

53 INTRODUCTION. would said of a party passing rapidly in front of a be large castle, that should undertake to give an account of every thing that is going on within ? Certain individuals, whose minds have never caught a glimpse of a more improved state of society, boldly affirm it that could not exist; they acquiesce in established evils, and console themselves for their existence by remarking, that they could not possibly be otherwise; in this respect that emperor reminding Japan who thought he us of of would have suffocated himself with laughter, upon being told that the Dutch had no king. The Iroquois were at a be carried on with suc- loss to conceive how wars could if prisoners were not to be burnt. cess, to all Although, appearance, many European nations may be in a flourishing condition, and some of them an- nually expend from one to two hundred millions of dollars for solely of the government, it must not the support thence be inferred that their situation leaves nothing to be desired. A rich Sybarite, residing according to his incli- nation, either at his castle in the country, or in his palace in the metropolis, in both, at an enormous expense, par- taking of every luxury that sensuality can devise, trans- porting himself with the utmost rapidity and comfort in whatever direction new pleasures invite bin), engrossing the industry and talents of retainers and of a multitude a to gratify a whim, servants, and killing dozen horses may be opinion that things go on sufficiently well, and of that the science of political economy is not susceptible of any further improvement. But in countries said to be in r a flourishing condition, how many human beings can be enumerated, in a situation to partake of such enjoyments ? One out of a hundred thousand at most; and out of a thousand, perhaps not one who may be permitted to enjoy what is called a comfortable independence. The haggard- ness of poverty is everywhere seen contrasted with the sleekness of wealth, the extorted labour of some compen- sating for the idleness of others, wretched hovels by the side stately colonnades, the rags of indigence blended of with the ensigns of opulence; in a word, the most useless profusion in the midst of the most urgent wants.

54 INTRODUCTION. Persons, who under vicious order of things have a a competent share social enjoyments, are obtained of never in want of arguments to justify to the eye of reason a of society; such what may not admit of state for view ? If the of apology when exhibited in but one point to cast anew same individuals were to-morrow required the lots assigning them a place in society, they would find many things to object to. Accordingly, opinions in political economy are not only by vanity, the most universal of human in- maintained firmities, but by self-interest, unquestionably not less so; in spite of and which, without our knowledge, and our- selves, exercises a powerful influence over our mode of thinking. Hence the sharp and sour intolerance by which truth has been so often alarmed and obliged to retire; or which, when she is armed with courage, encompasses her with disgrace, and sometimes with persecution. Know- ledge is at present so very generally diffused, that a phi- losopher may assert, without the risk of contradiction, of nature are the same in world and in that the laws a statesman who should venture to affirm, an atom; but a that there is perfect analogy between the finances of a a nation and those of an individual, and that the same prin- ciples of economy should regulate the management of the affairs of both, would have to encounter the clamours of various classes of society, and to refute ten or a dozen different systems. Nor is this all. Writers are found who possess the lamentable facility of for journals, composing articles pamphlets, and even whole volumes, upon subjects, which, according to their own confession, they do not understand. And what is the consequence? The science is involved in the clouds of their own minds, and that is rendered obscure which was becoming clear. Such is the indifference of the public, that they rather prefer trusting to assertions than be at the trouble of investigating them. Sometimes, more- over, a display of figures and calculations imposes upon them; numerical calculations alone could prove as if any thing, and as if any rule could be laid down, from which an inference could be drawn without the aid of Bound reasoning.

55 ]£j INTRODUCTION. These are among the causes which have retarded the progress of political economy. Everything, however, announces that this beautiful, and above all, useful science, is spreading itself with increasing rapidity. Since it has been perceived that it does not rest is founded upon observation and upon hypothesis, but experience, its importance has been felt. It is now taught the universities of wherever knowledge is cherished. In Germany, of Scotland, of Spain, of Italy, and of the north of Europe, professorships of political economy are already established. Hereafter this science will be taught in them, with all the advantages of a regular and systematic study. Whilst the university of Oxford proceeds in her old and a beaten track,* within of Cambridge has few years that established chair for the purpose of imparting instruc- a tion in this new science. Courses of lectures are delivered in Geneva and various other places; and the merchants a pro- of Barcelona have, at their own expense, founded It fessorship on political economy. is now considered a? forming an essential part of the education of princes ; and those who are called to that high distinction ought to blush at being ignorant of its principles. The emperor of Russia has desired his brothers, the grand dukes Nicho- jast and Michael, to pursue course of study on this sub- a the of M. Storch. Finally, the ject under direction government of France has done itself lasting honour by of establishing in this kingdom, under the sanction public authority, the first professorship of political economy. When the youths who are now students shall be scat- tered through all the various classes of society, and ele- vated to the principal posts under government, public affairs will be conducted in a much better manner than as people, be- they hitherto have been. Princes as well as to their true interests, will coming more enlightened perceive that these interests are not at variance with each * In the year 1826, a professorship of political economy was founded at the university of Oxford, and a highly able and instructive course of lectures has since been delivered l>efore that university, by Nassau William Senior, A. M., the first professor of political economy. We have rarely read a more masterly and entertaining performance than I he professor's discussion of the mercantile theory of wealth, which occupies three of n.s lectures. AMERICAN EDITOB. t The present Emperor Nicholas.

56 INTRODUCTION. \[ v other; which on the one side will naturally induce Jess oppression, and on the other beget more confidence. At present, authors who venture to write upon politics, history, and d fortiori upon finance, commerce, and the arts, without any previous knowledge of the principles of political economy, only produce works of temporary suc- that do not succeed in fixing public attention. cess, But what has chiefly contributed to the advancement of political economy, is the grave posture of affairs in the civilized world during the last thirty years. The expenses of governments have risen to a scandalous height; the appeals which they have been obliged to make to their subjects, in order to relieve their exigencies, have dis- closed to them their own importance. A concurrence of public sentiment, or at least the semblance of it, has been almost everywhere called for, if not brought about. The enormous contributions drawn from the people, under pre- texts more or less specious, not even having been found sufficient, recourse has been had to loans; and to obtain credit, it became necessary for governments to disclose their wants as well as their resources. Accordingly, the publicity of the national accounts, and the necessity of vindicating to the world the acts of the administration, have in the science of politics produced a moral revolu- tion, whose course can no longer be impeded. The disorders and calamities incident to the same pe- riod, have also produced some important experiments. The abuse of paper money, commercial and other restric- tions, have made us feel the ultimate effects of almost all excesses. And the sudden overthrow of the most im- posing bulwarks of society, the gigantic invasions, the destruction of old governments and the creation of new, the formation of rising empires in another hemisphere, the colonies that have become independent, the general impulse given to the human mind, so favourable to the development of all its faculties, and the great expectations and the great mistakes, have all undoubtedly very much enlarged our views; at first operating upon men of calm observation and reflection, and subsequently upon al' mankind.

57 li INTRODUCTION. v It is to the facility of tracing the links in the chain o* causes arid effects that we must ascribe the great improve- ment in the kindred branches of moral and politica science; and hence it is, when once the manner in which political and economical facts bear upon each other is wel. understood, that we are enabled to decide what course of conduct will be most advantageous in any given situation, Thus, for example, to get rid of mendicity, that will not be done which only tends to multiply paupers; and, in ordei to procure abundance, the only measures calculated to prevent it will not be adopted. The certain road to na- tional prosperity and happiness being known, it can and will be chosen. For a long time it was thought that the science of po- litical economy could only possibly be useful to the very limited number of persons engaged in the administration of public affairs. It is undoubtedly of importance that men in public life should be more enlightened than others; in private life, the mistakes of individuals can never ruin but a small number of families, whilst those of princes and ministers spread desolation over a whole country. But, is it possible for princes and ministers to be enlight- ened, when private individuals are not so This is a ? question that merits consideration. It is in the middling classes of society, equally secure from the intoxication of power, and the compulsory labour of indigence, in which are found moderate fortunes, leisure united with habifs of industry, the free intercourse of friendship, a taste for literature, and the ability to travel, that know- ledge originates, and is disseminated amongst the highest and lowest orders of the people. For these latter classes, not having the leisure necessary for meditation, only adopt truths when presented to them in the form of axioms, re- quiring no further demonstration. And although a monarch and his principal ministers should be well acquainted with the principles upon which national prosperity is founded, of what advantage would this knowledge be to them, if throughout all the different departments of administration, their measures were not supported by men capable of comprehending and enforcing them ? The prosperity of a city or province is sometimes

58 INTRODUCTION. | v of a single individual* dependent upon the official acts and the head of a subordinate department of government, important decision, often exercises at> an by provoking influence even superior to of the legislator himself. that representative form of govern- In countries blessed with a a to ment, each citizen is under much greater obligation of make himself acquainted with the principles political economy ; for there every man is called upon to deliberate upon public affairs. Finally, in supposing that every person in any way con- the highest to the lowest, nected with government, from be could well acquainted with these principles, without the nation at large being so, which is wholly improbable, of their wisest what resistance would not the execution 1 plans experience ? What obstacles would they not en- of those even who should most counter in the prejudices ? favour their measures A nartion, in order to enjoy the advantages of a good system of political economy, must not only possess states- men capable of adopting the best plans, but the popula- 3 a situation to admit of their application. tion must be in * It is of avoiding doubts and perpetual also the way of changes principles, which prevent our profiting even from whatever may be good in a bad system. A steady and consistent policy is an essential element of national prosperity; thus England has become more opulent and powerful than would seem to comport with her territorial extent, by an uniform and steadfast adherence to a system, in many respects objectionable to her, of even monopo- lizing the maritime commerce of other nations. But to follow for any length of time the same route, it is neces- sary to be able to choose one not altogether bad; unfore- seen and insurmountable difficulties would otherwise have * I here suppose the higher orders of society to be actuated by a sincere desire to pro mote the public good. When this feeling, however, does not exist, when the government is faithless and corrupt, it is of still greater importance that the people should become acquainted with the real state of things, and comprehend their true interests. Other wise, they suffer without knowing to what causes their distresses ought to be attributed , or indeed, by attributing them to erroneous causes, the views of the public are distracted, their efforts disunited, and individuals, thus deprived of general support, fail in resolu tion, and despotism is strengthened ; or what is still worse, where the people are so oadly governed as to become desperate, they listen to pernicious counsels, and exchange a vicious order of things for one still worse.

59 1*1 INTRODUCTION. to be encountered, which would oblige us to change our course, without even the reproach of versatility. It is, perhaps, to this cause we must attribute the evils which, for two centuries, have tormented France; ape* riod during which she was within reach of that state of high prosperity she was invited to by the fertility of her soil, her geographical position, and the genius of her in- habitants. With no fixed opinions in relation to the causes of public prosperity, the nation, like a ship without chart or compass, was driven about by the caprice of the winds and the folly of the pilot, alike ignorant of the place of her departure or destination.* A consistent policy in France would have extended its influence over many suc- cessive administrations; and the vessel of the state would at least not have been in danger of being wrecked, or ex- posed to the awkward manoeuvres by which she has so much suffered. Versatility is attended with such ruinous consequences, that it is impossible to pass even from a bad to a good system without serious inconvenience. The exclusive and restrictive system is without doubt vastly injurious to the development of industry, and to the progress of national wealth ; nevertheless, the establishments which this policy has created could not be suddenly suppressed, without causing great distress/!" A more favourable state of things can only be brought about, without any inconvenience, by the gradual adoption of measures introduced with infinite skill and care. A traveller whose limbs have been frozen in traversing the Arctic regions, can only be preserved from the dangers of a too sudden cure, and restored to entire health, by the most cautious and imperceptible remedies. The soundest principles are not at all times applicable. The essential object is to know them, and then such as are applicable or desirable can be adopted. There can * In how many instances have not great pains been taken, and considerable capital ! How many expended, to increase the evils mankind have been desirous of shunning regulations are just so far carried into execution as to produce all the injury restrictions |K)ssibly can effect, and, at the same time, just as far violated as to retain all the incoji- leniences arising from their infringement! f • This arises from our not being able, without serious losses, to displace the capi J, •rid talents, which, owing; to an erroneous system, have received a faulty direcUni

60 INTRODUCTION. Ivjj be no doubt that a new community, which in every in- stance should consult them, would rapidly reach the high- est pitch of opulence ; but every nation may, nevertheless, in many respects violate them, and yet attain a satisfac- tory state of prosperity. The powerful action of the vital principle causes the human body to grow and thrive in spite of the accidents and excesses of youth, or of the wounds which have been inflicted on it. Absolute perfec- tion, beyond which all is evil, and produces only evil, is nowhere found; evil is everywhere mixed with good. When the former preponderates, society declines; when the latter, it advances with more or less rapidity in the road of prosperity. Nothing, therefore, ought to discou- rage our efforts towards the acquisition and dissemination of sound principles. The least step taken towards the attainment of this knowledge is immediately productive of some good, and ultimately will yield the happiest fruits. If, for the interest of the state, it is important that indi- viduals should know what are the true principles of politi- cal economy, who will venture to maintain that the same Knowledge will be useless to them in the management of their own private concerns ? That money is readily earned without any knowledge of the nature or origin of wealth, I admit. For that purpose, a very simple cal- culation, within the reach of the rudest peasant, is all that is necessary: such an article will, including every expense, cost me so much ; I shall sell it for so much, and, therefore, gain so much. Nevertheless, accurate ideas respect- shall ing the nature and growth of wealth, unquestionably afford us many advantages in forming a sound judgment of enterprises in which we are interested, either as prin- cipals or as parties. They enable us to foresee what these enterprises will require, and what will be their results; to devise the means of their success, and to establish our exclusive claims to them ; to select the most secure invest- ments, from anticipating the effects of loans and other public measures; to cultivate the earth to advantage, from accurately adjusting actual advances with probable returns; to become acquainted with the general wants* of society, and thus be enabled to make choice of a pro

61 INTRODUCTION. ession ; and to discern the symptoms national pros of perity or decline. The opinion that the study of political of the science economy is calculated to be useful to statesmen only, fal- as it lacious is, has been attended with other disadvan- on this subject, until the tages. Almost all the authors time of Dr. Adam Smith, had imagined that their principal object was to enlighten the public authorities ; and as they as were far from agreeing among themselves, inasmuch the facts, and their connexion and consequences, were but imperfectly known to them, and entirely overlooked by the multitude, it is by no means surprising that they should have been regarded as in relation visionary dreamers in to the public good. Hence the contempt which men power always affect towards everything like first prin ciples. But since the rigorous method of philosophizing, which of knowledge leads to in every other branch truth, has been applied to the investigation of facts, and to the rea- sonings founded on them, and the science of political economy has been thus confined to a simple exposition of whatever takes place in relation to wealth, it no longer to offer counsel public authorities. Should attempts to be of ascertaining the good or they, however, desirous evil consequences likely to result from any favourite pro- ject, they may consult this science, exactly as they would consult hydraulics upon the construction pump or of a sluice. All that can be required from political economy to furnish governments with a correct representation is of the nature of things, and the general laws necessarily resulting from it. Perhaps, until such views be more gene- rally diffused, it may also be required, to point out to them of its principles. Should these some of the applications be despised or neglected, the governments themselves, as well as the people, will be the sufferers. The husbandman who sows tares can never expect to reap wheat. Certainly, if political economy discloses the sources of wealth, points out the means of rendering it more abun- dant, and teaches the art of daily obtaining a still greater amount without ever exhausting it; if it demonstrates, that the population of a country may, at the same time,

62 INTRODUCTION. ilx be more numerous and better supplied with the necessaries of life ; of the if it satisfactorily proves that the interest different nations, are not rich and poor, and of opposed to each other, and that all rivalships are mere folly; and necessarily results, that it if from all these demonstrations a multitude evils supposed to be without remedy, may of reckoned curable, but even easy to cure, and that not only be we need not suffer from them any longer than we are will- so to it must be acknowledged that there are ing do ; greater importance, or more deserving the few studies of attention of an elevated and benevolent mind. Time is the great teacher, and nothing can supply its It operation. alone can fully demonstrate the advantages a knowledge political economy in to be derived from of legislation and government. On of the general principles so many men the one hand, the custom which condemns of sense, at the same time that they admit the principles act as if they were wholly of this science, to speak and ignorant of them,* and on the other, the resistance, which individual as well as general interests, imperfectly under- stood, oppose to many of these principles, exhibit nothing that ought either to surprise or alarm individuals animated a desire of promoting the general welfare. The phi- with losophy Newton, which, during a period of fifty years of was unanimously rejected in France, is now taught in all its schools. Ultimately it will be perceived, that there are studies of if esti- still greater importance than this, mated by their influence on the happiness and prosperity of mankind. the very na- Still how unenlightened and ignorant are myself, I might be able to demonstrate that * "They would wish, so to express that in submitting to them. The my proofs are conclusive, and that they are not wrong of soundness a momentary conviction; but they afterwards my reasoning has produced of feel the habitual influence their former opinions return with undiminished authority, in the case of although without any adequate cause,' as in the the apparent increase diameter of the moon at the horizon. They would wish to be freed by me from these troublesome relapses, of whose delusiveness they are sensible, but which nevertheless importune them. In a I should be enabled to effect by word, they are desirous that reason what time alone can accomplish ; which impossible. Every cause has an is effect peculiar to itself. Reason may convince, opinions carry us along, and illusions perplex us; but time alone, and the frequent repetition of the same acts, can produce that state of calmness and ease which we call habit. Hence it is, that all new opinions im- are such length of time in spreading themselves. If an innovator has ever had a mediate success, it is only from having discovered and promulgated opinions already floating in every mind." DESTUTT-TRACY, Logique, chap. 8.

63 Jx INTRODUCTION. tions we term civilized Survey entire provinces of proud ! Europe; interrogate a hundred, a thousand, or even ten thousand individuals, and of this whole number, you will hardly, perhaps, find two embued with the slightest tincture of the improved science of which the present age so much boasts. This general ignorance of recondite truths is by no means so remarkable as an utter unacquaintance with the simplest rudiments of knowledge applicable to the situation and circumstances of every one. How rare, also, are the qualifications necessary for one's own instruction, and how few persons are solely capable of observing what daily happens, and of questioning whatever they do not understand! The highest branches of knowledge are then very far from having yielded to society all the advantages to be T ould be expected from them, and without which they w mere curious speculations. Perhaps their perfect appli- cation is reserved for the nineteenth century. In moral as well as in physical science, inquirers of superior minds will appear, who, after having extended their theoretical views, will disclose methods of placing important truths within the reach of the humblest capacities. In the ordi nary occurrences of life, instead of then being guided by the false lights of a transcendental philosophy, mankind will be governed by the maxims of common sense. Opin- ions will not rest on gratuitous assumptions, but be the result of an accurate observation of the nature of things. Thus, habitually and naturally ascending to the source of all truth, we shall not suffer ourselves to be imposed upon by empty sounds, or submit to the guidance of erroneous impressions. Corruption, deprived of the weapons of em- piricism, will lose her principal strength, and no longer be able to obtain triumphs, calamitous to hone*?* men, and disastrous to nations.

64 BOOK I. J*F THE PRODUCTION OF WEALTH. CHAPTER I. Of -VHAT IS TO BE UNDERSTOOD BY THE TERM, PRODUCTION. IF we take the pains to inquire what that is, which mankind in a social state of existence denominate wealth, we shall find the term employed to designate an indefinite quantity of objects bearing inherent value, as of land, of metal, of coin, of grain, of stuffs, of commodities of every description. When they further extend its signification to landed securities, bills, notes of hand, and the like, it is evidently because they contain obligations to deliver things pos- sessed of inherent value. In point of fact, wealth can only exist where there are things possessed of real and intrinsic value. Wealth is proportionate to the quantum of that value; great, when the aggregate of component value is great; small, when that aggre- gate is small. The value of a specific article is always vague and arbitrary, so long as it remains unacknowledged. Its owner is not a jot the richer, by setting a higher ratio upon it in his own estimation. But the moment that other persons are willing, for the purpose of obtaining it, to give in exchange a certain quantity of other articles, likewise bearing value, the one may then be said to be worth, or to be of equal value with, the other. The quantity of money, which is readily parted with to obtain a thing, is called its price. Current price, at a given time and place, is that price which the owner is sure of obtaining for a thing, if he is inclined to part with it.* The knowledge of the real nature of wealth, thus defined, of the difficulties that must be surmounted in its attainment, of the course and order of its distribution amongst the members of society, of the * The numerous and difficult points arising out of the confusion of positive and relative value are discussed in different parts of this work; particularly in the leading chapters of Book II. Not to perplex the attention of the reader, I con- fine myself here to so much as is absolutely necessary to comprehend the phe nomenon of the production of wealth.

65 62 ON PRODUCTION. BOOK I. to which applied, and, further, of the consequences uses it may be resulting respectively from these several circumstances, constitutes of entitled Political Economy. science that branch now in use it objects originates The value that mankind attach to the for cloth- can make of them. Some afford sustenance; others serve of the season, as the ing; some defend them from inclemencies houses ; others gratify their taste, or, at all events, their vanity, both species of wants: of this class of which mere ornaments are are all It is men attribute and decorations. universally true, that, when thing, in consideration of its useful properties; what to any it is value nothing they set no price upon.* To is good for this inherent fitness of certain things to satisfy the various wants of man- or capability I shall take leave to affix the name of utility. kind, will go And I on that, to create objects which have any kind of utility, is to to say, for the utility things is the ground-work of their create wealth; of their value constitutes wealth. and value, created by human means; nor is the be Objects, however, cannot matter, of which this globe consists, capable of increase or mass of All that man can do is, to re-produce existing materials diminution. may an under another form, which utility they did not give them or merely enlarge one they may have before present- Defore possess, that, in fact, there is a creation, not ed. matter, but of utility; So of I call production of and this wealth. In this sense, then, word production must be understood in the political economy, throughout the whole course of the present and work. Production is the creation, not of matter, but of utility. It is not to be by the length, the bulk, or the weight of the estimated but by the utility presents. product, it measure value of things, and their is the of the Although price measure value their utility, it would be absurd to draw the the of by forcibly raising their price, their utility can be inference, that, or an augmented. Exchangeable value, index of the recog- price, is of a so long only as human dealings are exempt nised utility thing, but that of the identical utility: from every influence like manner in as barometer denotes the weight of the atmosphere, only while the a to the exclusive action of atmospheric gravity. mercury is submitted In fact, when one man sells any product to another, he sells him the utility vested in the buyer buys it only for the sake that product; its of the use he can make of it. If, by any cause what- of utility, the buyer is obliged to pay more than the ever, to himself of value * It would be out of here to examine, whether or no the value mankind place to a attach to its actual utility. The accuracy of thing be always proportionate the estimate must depend upon the comparative judgment, intelligence, habits, and prejudices of it. True morality, and the clear perception those who make to of of their real interests, lead mankind benefits. Politi- the just appreciation cal economy takes this appreciation finds it—as one of the data of its rea- as it Honings; leaving to the moralist and the practical man, the several duties of x \ guiding their fellow-creatures, as well in and of enlightening is, as in other Particulars of human conduct.

66 CHAP. I. ON PRODUCTION. 63 he pays value that has no existence, and consequent that utility, for does ly which not he receive.* the to a particular precisely case, when authority grants is This the class of carrying on a certain of merchants exclusive privilege trade, the India trade for instance; branch price of Indian of the is any accession to their utility or imports thereby raised, without price nothing more of or less than so is intrinsic value. This excess pockets of the consumers into the much money transferred from of the privileged traders, whereby the latter are enriched ex- those as actly as the former are unnecessarily impoverished. In much a government imposes wine a tax, which like manner, when on cents be bottle what would otherwise to 15 sold for 10 raises the it else, but transfer 5 cents per bottle from the hands cents, what does or the consumers of wine to those of the tax-gather- of the producers er?! The is here only the means resorted to particular commodity at the or less convenience; and its for getting tax-payer with more is composed of two ingredients, viz, current value real value 1. Its originating in its utility: 2. The value of the tax that the govern- ment thinks fit to exact, for permitting its manufacture, transport, or consumption. Wherefore, there actual production of wealth, without a is no or augmentation utility. Let us see in what manner this creation of produced. is to be utility II. CHAPTER DIFFERENT KINDS OF INDUSTRY, OF MODE IN WHICH THEY THE AND THE IN PRODUCTION. CONCUR items of human consumption are the spontaneous gifts SOME of nature, require no exertion of man for their production ; as air and and destitute are water, light, under certain circumstances. These of of exchangeable value; because the want them is never felt, others as ourselves. Being neither pro- being equally provided with them curable production, nor destructible by consumption, they come by not within the province of political economy. But there are of others equally indispensable to our abundance and to our at all, existence happiness, which man would never enjoy not his industry awaken, assist, or complete the operations of did * This position will hereafter be For the present it is further illustrated. enough know, that, whatever be the state of society, current prices approxi- to mate to the real value of things, in proportion to the liberty of production awl mutual dealing. the It will be shown in Book Til. of this work, what proportion of t tax is pain X JV the producer, and what by the consumer.

67 04 ON PRODUCTION. BOOK I. are most the articles which serve for his food, rai natuie. Such of lodging. merit and to the bare collection of natural When that industry limited is agricultural industry, simply called agriculture. products, it is or employed severing, compounding, or fashioning the it is When in nature, so as to fit them to the satisfaction of our various products of called it is wants, manufacturing industry.* employed placing within our reach objects of want it is When in beyond reach, it is called commercial which would otherwise be simply or industry, commerce. solely by is of industry that mankind can be furnished, It means any degcee of in and with that abundance, with actual necessaries, variety other objects, the use of which, though not altogether in- of yet marks distinction between a civilized communi- dispensable, the tribe savages. Nature, left entirely to itself, would pro- and a of ty very scanty subsistence vide small number of human beings. a to a but desert tracts have been found inadequate to the bare Fertile of a few wretches, cast upon them by the chances nourishment of shipwreck: while presence of industry often exhibits the spec- the of a the most un- tacle dense population plentifully supplied upon grateful soil. products is applied to things that industry furnishes The term ty means only either mechanical or chemical, all branches of manufacturing industry may be predomi- subdivided into mechanical and the chemical arts, according to the the nance of the one or the other in their several processes.

68 CHAP. II ON PRODUCTION. 05 its attainmep of the husbandman, who chooses his object and effects same kind the as the other two. of by precisely means of faculty originally creating matter No human being has the which is more than nature itself can do. But any one may avail him by nature, to himself of the agents offered invest matter with fact, industry is nothing more or less than the human In utility. natural agents; the most perfect product of labour, employment of workmanship, the one that derives nearly its whole value from its rs action probably the result a natural product upon of of the steel, a natural product.* or some substance other, likewise this principle, the economists of the 18th Through ignorance of reckoned century, though many enlightened writers were to be most serious errors. They amongst them, were betrayed into the industry to be allowed but that which procured the no productive, of the husbandman, the fisherman and raw materials; as the industry not the miner; to the distinction, that wealth consists, not adverting but in the value matter; because matter without value in matter, of item wealth; otherwise water, flint-stones, and dust of the no of is be wealth. Wherefore, if the roads, of matter consti- would value is to be created by the annexation of value. tutes wealth, wealth the man who has in his warehouse a quintal of wool Practically, worked up is richer than one who has the same into fine cloths, of wool packs. quantity in economists replied, that the additional value the To this position to a product by manufacture, was no more than equi- communicated valent to the value consumed by the manufacturer during the process; the competition of Tor, said they, manufactures prevents their ever raising the price beyond the bare*amount their own expenditure of to the and consumption ; wherefore their labour adds nothing total the community, because their wants on the one side destroy wealth of as their industry produces on the other, f as much * Alagrotti in his Opuscula, by way of exemplifying the prodigious addition of the value given to an the spiral springs that object by industry, adduces of watches. pound weight of pig-iron costs the check the balance-wheels A cents. This is worked up into steel, of five which- operative manufacturer about little spring that moves the balance-wheel of a watch. Each of these is made the tenth part of a grain ; and when completed, may be sold but the springs weighs as three dollars, so that out of a pound as high iron, allowing something for of the loss metal, 80,000 of these springs may be made, and a substance of five of be 240,000 dollars. a value of cents value wrought into Merrier work entitled Riviere, in his f "Ordre Naturel des Societes Poh- de la torn. ii. p. 255, while labouring to prove, that manufacturing labour is tiques" barren and unproductive, makes use of an argument, which I think it may be of some service to it has been often repeated in different shapes, refute, because of He says, " that if the unreal products of and some them specious enough. are considered as realities, industry necessary inference, that an useless it is a multiplication of workmanship is a multiplication of wealth." But because human labour is productive of value, when it has an useful result, it by no means result follows, that of value, when its productive is either useless or injuri it is ous. All labour is not productive; but such only as adds a real value t< any substance or thing. And the futility of this argument of the economists is pus

69 60 ON PRODUCTION. BOOK I. r it e been previously demonstrated by those who But should hav this argument, that the by mechanic made use of value, consumed the by necessity barely equal value produced and artizans, must of them, which is not the fact; for it is unquestionable, that more savings and are made, and more capital accumulated from the profits of trade agriculture.(1). of manufacture, than from those Besides, even admitting that the profits of manufacturing industry the satisfaction of the necessary wants of the manu- are consumed in their families, that circumstance does not prevent facturers and wealth. them being positive acquisitions For of unless they were satisfy their wants: not profits of the land-owner they could so, the allowed to be items and agriculturist positive wealth; yet they are of in the of those classes. are equally consumed maintenance like manner as manufacturing industry, concurs Commercial, in by augmenting the value in production, a product by its transport of from place to another. A quintal of Brazil cotton has acquired one and therefore larger value, time it reaches a greater utility, by the Europe, than possessed in one at Pernambuco. The in it warehouse modification that the transport to the commodity, is a trader gives to our use what was not before available; which whereby he adapts is equally useful, complex and uncertain in the result, modification any it as the other two branches of industry. He derives from of of the timber and the metals avails himself the natural properties in the construction of his ships, used the hemp whereof his rigging of is composed, of the wind that fills his sails, of all the natural agents brought to concur in his purpose, with precisely the same view and the same result, and in the too, as the agriculturist same manner of the earth, rain, and the atmosphere.* avails himself the question circumstance, that it may be equally employed all by the beyond their opponents. They may be told, " You against their own system and that of industry of the cultivator to be productive; therefore he has only to the admit and sow his fields ten times a plough to increase his productiveness ten- year fold," which absurd. is Genovesi, on political economy at Naples, defines commerce * who lectured be "the exchange of superfluities for necessaries." He gives as his to reason, that every transaction of exchange, the in of the article received appears to each contracting parties more necessary than that given. This is a far-fetched notion, which I think myself called on to notice, because it has obtained considerable currency. It to prove, that a poor labourer, who goes to the would be difficult in " that more savings are made, and more (1) [Our author, here asserting, the profits of trade capital accumulated from manufacture, than from those and of has fallen into an error, which agriculture," proper to notice. In the it is absence of prohibitions and restraints, the profits of agriculture, manufactures and commerce, will all be on an or always nearly approaching towards equality, for any material difference will cause it; diversion of capital and industiy to a the more productive channel, and by that means restore the equilibrium. * In overthrowing the hypothesis the economists, the author has inadvertently, for of R moment, lost sight of his own general principles, which so clearly establish the equality of profits in all the different branches of industry.] AMERICAN EDITOR.

70 CUAP. II. ON PRODUCTION. r 4 when Raynal says as contrasted wi of h agricul Thus, commerce, arts, that ture of itself," he shows him- " it and the produces nothing of the phenomenon self to have had no just conception of production. to In this instance Raynal has fallen into the same error with regard and commerce, as the economists made respecting both commerce manufacture. They pronounced agriculture to be the sole channel of agri- to of production; Raynal refers production the two channels manufacture: his position is nearer the truth than culture and the but is erroneous. other, still confused his enrl^avour to explain the mode in is Condillac also in pretends that, because all commo- which commerce produces. He to the seller less than buyer, they derive an increase dities cost the mere the transfer from one hand to another. of value from act of not so; for, But this is a sale is nothing else but an act of barter, since in which kind of goods, silver for example, is received in lieu one of goods, loss which either of the parties dealing of another kind the article would equivalent to the profit he on one be should sustain other, and there would would make community no on the be to the of value whatsoever.* When Spanish wine is bought at production equal value is really given for equal value: the silver paid, raris, the and the wine received, are worth one not other; but the wine had its its value has really the same vaiue before export from Alicant: in the hands of the trader, by the circumstance of trans- increased and not by the port, or at the moment, of exchange. circumstance, alehouse Sunday, exchanges there his superfluity for a necessary. In all on a fair traffic, there occurs a mutual exchange of two things, which are worth one the other, at the and place of exchange. Commercial production, that is time to the things exchanged, is operated by to say, the value added by commerce not of the commercial operations that precede it. exchange, but by the act only writer within my knowledge, who has explain- is the The Count de Verri true principle and ground-work ed commerce. In the year 1771, ho the of himself: " Commerce is in fact nothing more than the transport, thus expresses goods from one place to another." (Meditazioni sulla economia politico, § 4.) of to The celebrated Adam Smith himself appears had no very clear idea of have He merely discards opinion, that there is any pro- commercial production. the value in the act of exchange. duction of has escaped the attention of Sismondi, * This circumstance would not or he have said, The trader places himself between the producer and the consumer, " at once, making his charge for that benefit upon both." to benefit them both (Nouveaux Principes d'Economie Pol. Liv. ii. ch. 8). He would make it appear as if the value produced by the agricul- the trader subsisted wholly upon the manufacturer; whereas maintained by the real value he him- turist and he is commodities to giving them an additional modification, an self communicates by It is this very notion that stirs useful property. popular indignation up the against dealers in grain. the Say, L. Nantes, has fallen into the same mistake (Principales Causes de of la Richesse, &c. p. 110). By way of demonstrating the value conferred by of commerce he alleges it to be absorbed by the charges be unreal, transport. to By this incidental process of reasoning, the economist concluded manufacture to he unoroductive; not perceiving, that in these very charges consists the revenue that nf commercial and manufacturing producers; and that it is in this way tne the values raised by production at large are distributed amongst the several pro ducers.

71 S8 ON PRODUCTION. BOOK L The sel'er does not play the rogue, nor the buyer the fool; and Con- dillac h/is no grounds for his position, that " if men always exchang- ed equal value for equal value, there would be no profit to be made by the traders."* of In some particular cases the two other branches industry pro- viz. by giving a duce in to manner analogous to commerce, a value things to which they actually communicate no new quality, but that of approximation to the consumer. Of this description is the indus- metal may exist in the earth, in a perfect try of miners. The coal or of but unpossessed state, value. The miner extracts them thence, value, by fitting them for the use of a and this operation gives them the herring fishery. Whether in or out mankind. So also of of is the same; but under the latter circumstances, it the sea, the fish has acquired an utility, value, it did not before possess, f a Examples might infinitely multiplied, and would all bear as be close an affinity, as those natural objects, which the naturalist classi- fies only to facilitate their description. have shown This fundamental error of the economists, in which I to that their adversaries in some measure participated, led them the strangest conclusions. According to their theory, the traders and to add an iota to the general stock of manufacturers, being unable wealth, live entirely at of the sole producers, that is to the expense of the say, the proprietors and cultivators land. Whatever new value they may communicate to things, they at the same time con- sume an equivalent product, furnished by the real producers: manu- facturing and commercial nations, therefore, subsist wholly upon the wages they receive from their agricultural customers; in proof of which position, they alleged that Colbert ruined France by his pro- tection of manufactures, &c.J The truth that, in whatever class of industry a person is is, engaged, he subsists upon the profit he derives from the additional * See his work entitled, " Commerce et le Gouvernment consideres rela- Le tivement Vun a Vaulre." Ire. partie, ch. 6. of the same class of industry, the cultivator of f We may consider as agents the land, the breeder of cattle, the woodcutter, the fisherman that takes fish he at has been no pains in breeding, and the miner who, from the bowels of the earth, extracts metal, stone, or combustibles, that nature has placed there in a to perfect state; and, of denominations, the whole of these avoid multiplicity occupations may be called by the name of agricultural industry, because the superficial cultivation of the earth, is the chief and all. Terms most important of of are little consequence, when the ideas are clear and definite. The wine- of his grapes, performs a grower, who himself expresses the juice mechanical operation, that partakes more of manufacture than agriculture. But it matters little whether he be classed as a manufacturer or agriculturist; provided that it be clearly comprehended what manner his industry adds to the value of the in product. If we wish.to give separate consideration to every possible manner of giving value to things, industry may be infinitely subdivided. If it be the object to generalize to the utmost, it may be treated as one and the same; for every branch of it will resolve itself into this: the employment of natural substance* and agents in the adaptation of products to human consumption. ] See tne numberless writings of that sect.

72 CHAP. II. ON PRODUCTION. 69 or portion of value, no matter in what ratio, which his ag value, mcy at work upon. The total value of pro- attaches to the product he is of in those occupied in pro- this way to pay the profits ducts serves duction. mankind are supplied and satisfied out ot The wants of values produced and created, and the out of the net values gross not" only. A nation, or a class of a nation, engaged in manufacturing or com- mercial industry, is not a whit more or less in the pay of another, than one employed in agriculture. The value created by one branch of the same nature as that created by is Two equal others. values are worth one the other, although perhaps the fruit differ- of ent branches of industry: and when Poland barters its staple product, wheat, of Holland, East and West India for the staple commodity no more in the pay or is of Poland, than produce, Holland service Poland is of Holland. herself, Nay, Poland at the rate of ten millions of which exports wheat annually, and therefore, according to the economists, takes the sure road to national wealth, is, notwithstanding, poor and depopu- lated : and why ?—Because she confines her industry to agriculture, though she might be at the same time a commercial and manufactur- of keeping Holland in her pay, she may with ing state. Instead more propriety be said to receive wages from the latter, for the raising of of wheat, per annum. Nor is she a jot less ten millions of her: she has just dependent than the nations that buy wheat for sell to to as they have to buy of her.* as much desire them, it is not true that Colbert ruined France. On the con- Moreover, trary, the fact is that France, under Colbert's administration, emerged from the distress that two regencies and a weak reign had involve.! her in. She was, indeed, afterwards ruined again; but for this second of calamity, she may thank the pageantry and the wars Louis XIV. of that prince is an undeniable evidence Nay, the very prodigality of the vast resources that Colbert had placed at his disposal. It must, be admitted that those resources would have been still however, more ample, if he had but given the same protection to agriculture, as to the other branches of industry. Thus it is evident, that the means of enlarging and multiplying wealth within the reach of every community are much less confined A than the economists imagined. nation, by their account, was un- able to produce annually any values beyond the net annual products of its lands; to which fund alone recourse could be had for the sup- not only port the proprietary and the idler, but likewise of the of merchant, the manufacturer, and the mechanic, as well as for the total consumption of the government. Whereas we have just seen that the annual produce of a nation is composed, not of the mere net pro- * find in the sequel, that, if any one nation can be said to be in the We shall service of another, it is that which is the most dependent; and that the most dependent nations are, not those which have a scarcity of land, but those which have a scarcity of capital.

73 70 ON PRODUCTION. BOOK 1 of its agriculture, gross produce of its agriculture, duce but of the manufacture united. commerce, is not the sum For, in and fact, of say, the aggregate total, that is to the gross product raised by the ? Is value produced less an nation, disposable for its consumption And it be consumed ? must needs does not of item wealth, because this very applicability to value itself originate in consumption. The English writer, Stewart,who may be looked upon as the leading the exclusive system, the system founded on the maxim, advocate of wealth derived from the impoverish- the of one set of men is that another, is himself no less mistaken in asserting, that, " ment of when a top is put to external commerce, the stock of internal wealth once 6 be augmented."* Wealth, it seems, can come only from cannot ? abroad; but abroad, where does it come from So from abroad also. in tracing from abroad to abroad, we must necessarily, in the that it last we compelled to look for it at are end, exhaust every source, till limits of our own planet, which beyond absurd. the is too, builds his prohibitory system on this glaring Forbonnais,f and to speak freely, on this fallacy are fallacy; the exclu- founded sive systems short-sighted merchants, and all the govern- of all the of and of the world. They all take it for granted, ments Europe one individual gains must needs be lost that what another; that to what gained by one country is inevitably lost to another: as ii is the possessions of abundance of individuals and of communities could not be the robbery of somebody or other. It multiplied, without man or set of men, could only enriched at others' expense, one be a whole number the of whom of state is com- how could individuals, be richer at one period than at another, as they now confess- posed, are in France, England, Holland, and Germany, compared with edly How is it, that nations days what they were formerly? are in our every respect, than in more opulent, and their wants better supplied in the seventeenth century? Whence can they have they were of derived that portion had no their present wealth, which then existence Is it from the mines ? continent ? They had of the new already advanced in wealth before the discovery of America. Be sides, what that which these mines have furnished? Metallic is or value. other values which those nations now wealth But all the middle ages, whence are they possess, beyond what they did in the ? Is it not derived can be no other than created clear, that these values? in the value We must conclude, then, that wealth, which consists that human industry, furtherance of natural agents, com- in aid and municates to things, is susceptible of creation and destruction, of increase diminution, within the limits of each nation and inde- and pendently of external agency, according to the method it adopts to bring about those effects. important truth, which ought to teach An * Essay or. Political Economy, b. ii. c. 26. t Elemens de Commerce,

74 CHAP. Ill ON PRODUCTION. 7] the objects rational desire are within their mankind, that of will provided they have to employ the true and the intelligence it is the of obtaining them. Those means Una means of purpose investigate unfold. to work and CHAPTER III. WHICH IT CONCURS OF THE NATURE OF CAPITAL, AND THE MODE IN IN OF THE BUSINESS PRODUCTION. advance the investigation of the processes of industry we in As perceive, that mere unassisted industry we cannot fail insuffi- to is to invest things with value. The human agent of industry cient must, besides, be provided with pre-existing products; without which and his agency, however skilful be put in intelligent, would never are, motion. These pre-existing requisites tools and implements of the several arts. The husband- 1. The nothing without spade do and mattock, the weaver man could his loom, or the mariner without his ship. without his The 2. for the subsistence of the industrious products necessary agent, long as he is occupied in completing his share of the work as of his subsistence is, indeed, in the long or production. This outlay by the run, replaced he is occupied upon, or the price he product will receive for it; but he is obliged continually to make the advance. 3. The raw are to be converted into finished materials, which by the means industry. These materials, it is true, products of his gratuitous offerings nature, but they are much more the are often of antecedent industry, of in the case of seed- generally the products as by agriculture, metals, the fruit of the labour of the corn supplied and smelter, drugs brought by the merchant perhaps from the miner of the The value of all these must be found in extremities globe. by the industrious agent that works them advance up. The value these items constitutes what is denominated pro- of all ductive capital Under this head of productive capital must likewise be classed the value of all erections and improvements upon real or landed property, r whicn increase its annual produce, as w as that of the farming live ell as aid of human industry and dead stock, that operates machinery in of productive capital, is money, whenever it is Another item to facilitate the interchange of products, without which employed production could never make any progress. Money distributed through the whole mechanism of human industry, like the oil that greases wheels of complex machinery, gives the requisite ease the ind facility to its movements. But gold and silver are not produc Uve unless employed by industry: they are like the oil in a machine

75 72 ON PRODUCTION. BOOK I. in a state inaction. And so also of all other tools and remaining of human industry. implements of to suppose that the capital It would evidently great mistake be a of its the The merchant, community consists solely of a money. the least considerable manufacturer, the cultivator, commonly have value composing their capital invested form of of the portion in the more active their concern is, the smaller is their money; nay, the their capital vested of to the iesidue. The relative proportion so merchant placed out in goods on their transit by of the are funds water, or warehoused in different directions: the land of or capital of the raw in different the manufacturer chiefly consists material of of tools, implements, and necessaries for his work- stages progress, : men of the cultivator is vested in farming buildings, live while that stock, fences enclosures. They all studiously avoid burthening and is sufficient current use. themselves with more money than for true three, or four individuals, is true of is of one, two, What the aggregate. The capital of society is made up of the in a nation of private capitals; and, in proportion as a nation is pros- sum total and industrious, perous same proportion is that part of its in the capital, vested the shape of money, trifling compared to the amount in the the circulating of gross national capital. Neckar estimates in France, in the year 1784, at about 440 medium of dol- millions lars, and there are reasons for believing his estimate exaggerated; but this is not the time to state them. However, if account be taken of all the works, enclosures, live stock, utensils, machines, ships, and provisions sorts belonging to the French commodities, of all their government part of the world; and, if to or people in any added the furniture, decorations, jewellery, plate, and other these be of luxury convenience, whereof they were possessed, at the items or will it found that 440 millions of circulating medium same period, be a mere trifle compared to the aggregate was these united values.* of Beeke estimates total capital of Great Britain at 2300 millions the to of dollars.) The total sterling,f (equal more than 11,000 millions of her circulating specie, before the establishment of her amount was by the present paper money, highest estimates never reckoned of 47 ;J that at more than about l-50th millions sterling is to say, her capital. Smith reckoned it at no more than 18 millions, which could not be the l-127th part.(l). *Artnur Young-, in Journey in France" in spite of the unfavourable his " he of French Agriculture, estimates the total capital employed in •new gives in that branch of industry alone, at more than 2200 millions that kingdom, of dollars; states his belief, that the capital of Great Britain, similarly employ- and is in the proportion of two to one. ed, t Observations on the produce of the income-tax. | Pitt, who is to have overrated the quantity of specie, states the supposed at forty-four-millions; and Price estimates the silver at three milliony, pold making a total of forty-seven millions. in (1) following summary recapitulation of the value of property [The Great Britain and Ireland, in the year 1833, is extracted from "Table XVI. GUNERAI.

76 CHAF. III. ON 73 PRODUCTION. in the hands national government forms a part of tho Capital of a gross national capital. is to a conti- We shall see, by-and-by, how capital, which subject the process of production, is continu- nual wear and consumption in the very operation of production; or rather, how its ally replaced by form, re-appears under another. one value, when destroyed under it is enough to have a distinct conception, that, without it, At present as it were, industry could produce nothing. Capital must work, in concert with industry; this concurrence is what I call the pro- and of capital ductive agency PUBLIC and PRIVATE ESTIMATE ENGLAND and WALES, SOOT- of the Property of and IRELAND, (1833)," from " PEBRER LAND TAXATION, DEBT, CAPITAL, on the RESOURCES, &C. the whole BRITISH EMPIRE," a work of of the highest authority, published in London, April, 1833. SUMMARY RECAPITULATION. AGGREGATE VALUE OF PROPERTY IN GREAT BRITAIN AND IRELAND. Productive Private Property, £2,995,000,000 Unproductive 580,700,000 do. 3,575,700,000 Public Property, 103,800,000 Total, £3,679,500,000 Equal to dollars, 17,661,600,000 AND : WALES ENGLAND £2,054,600,000 Productive Private Property, - - - - 374,300,000 do. - ... Unproductive 2,428,900,00(1 SCOTLAND: v - - Productive Private Property, 318,300,000 - - do. - - - - Unproductive 51,100,000 269,400,000 ELAND : [R Productive Private Property, 622,100,000 - - - - Unproductive do. - - - - 116,400,000 738,500,1'00 Do. do. in Great Britain and Ireland, 38,900,000 Public Property in and Wales, 42,000,000 England in Scotland, Do. 3,900,006 - - - - Do. in Ireland, ... 11,900,000 Do. in common to Great Britain } and Ireland, the Navy, Military, and > 46,000,000 as Ordnance Stores, &c. - - - - ) 103,800,0 0 Grand Total, £3,679,500,000 Equal to dollars, - - . - - 17,661,600,000 AMERICAN EDITOR.

77 ON PRODUCTION. BOOK IV. CHAPTER PRODUCTION OF WEALTH, ANL ON NATUltAL AGENTS THAT ASSIST IN THE LAND. SPECIALLY OP INDEPENDENTLY that industry receives from capital, of the aid of her own say, from products previous creation, towards that is to of the agency the creation of still further products, she avails herself of agents not of her own creation, but offered variety of a and powers nature: and from the co-operation of these natural spontaneously by portion of the utility she communicates to things. agents derives a a is ploughed and sown, besides the science and when field Thus, this operation, besides the the labour employed in pre-created values the values, for instance, of the plough, the harrow, brought into use, the I he seed-corn, and clothing consumed by labourers during food the process production, there is a process performed by the soil, of air, the rain, sun, wherein mankind bears no part, but the and the creation product that in the of the new which nevertheless concurs acquired at the season of will I call the be harvest. This process of natural agents. productive agency natural agents is here employed The term very extensive in a sense; comprising merely inanimate bodies, whose agency ope- not to the physical of value, but likewise the laws of the rates creation world, as the weight of a clock descend; gravitation, which makes the needle of the compass: the elasticity of magnetism, which points steel; the gravity of the atmosphere; the property of heat to dis- charge itself by ignition, &c. &c. of capital often so interwoven with that The productive faculty is difficult, perhaps impossible, to assign, it is of natural agents, that or business of production- with accuracy, their respective shares in the for the raising exotic plants, a meadow fertilized by of A hot-house greater part of their productive powers the judicious irrigation, owe and to works the effect of antecedent production, which erections, form part of the capital devoted to the furtherance of actual and a The said may be present production. of land newly cleared same of of and brought into cultivation; enclosures ; and farm-buildings; all other permanent ameliorations of a landed estate. These of values are items of capital, though it be no longer possible to sever them from the are attached to.* soil they the of machinery, which wonderfully augments In employment of man, the product obtained is due the productive power to partly the value of the capital vested in the machine, and partly to the * It is for the proprietor of the land and of the capital respectively, when the ownership different persons, to settle between them the respective value is in und efficacy of the agency of these two productive agents. The world at large of may content to comprehend, without taking the trouble be measuring, then respective shares in the production of wealth.

78 CHAP. IV. ON PRODUCTION. 75 of natural powers. Suppose tread-mill,* worted by ten agency a used men, of a wind-mill, the product ol the mili in to be place as the the productive agency of considered of a capi- might be fruit of the machine, and of the labour of ten of the tal consisting value turning the wheel. If the tread-mill be supplant men employed in sails, ed evident that the wind, a natural agent, does the work by it is of ten human beings. the of the natural agent might be reme- In this instance, absence employment of another power; but there died, many by the are in which the agency of nature could not possibly be dispensed *ases, and is yet equally positive and real; for example, the vegeta- with, of the tive power the vital principle which concurs in the pro- soil, of the animals domesticated use. A flock of sheep duction to our the owner's shepherd's care, and the capital of and is the joint result fodder, shelter, and shearing, and of the action of the advanced in viscera with which nature organs furnished these animals. and has is the fellow-labourer of man and his Thus nature commonly a fellowship advantageous to him in proportion instruments; as he succeeds dispensing with his own personal agency, and that of in and in a larger part of the burthen his capital, throwing upon nature of production. has taken infinite pains to explain, how it happens that Smith so civilized communities enjoy an abundance of products, in great and in spite of the swarm of comparison with nations less polished, idlers and unproductive labourers that is to be met with in society. He has the source of that abundance to the division of la- traced ;f and it cannot doubted, that the productive power of in- bour be wonderfully enhanced that division, as we shall here- is by dustry following his steps; but after is not see by this circumstance alone to explain a phenomenon, that will no longer surprise, if sufficient the power of the natural agents that industry and civili- we consider set at zation for our advantage. work and the knowledge Smith admits that human intelligence, of the nature, enable mankind to turn of resources she offers to laws the but he better account: on to attribute to the division of labour goes this very degree of intelligence and knowledge: and he is right to a certain degree; for a man, by the exclusive pursuit of a single art or science, has of accelerating its progress towards ampler means But, the system of nature is discovered, the perfection. when once the discovery, is no longer the production resulting from of product the inventor's industry. first discovered the property The man who of fire soften metals, was not the actual creator of the utility this to process adds to smelted ore. That utility results from the physical * A wheel form of a drum, turned by men walking inside, (roue a in the rnarchre.) + his own words: "It is the great multiplication of the productions ot Take all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence, which extends itself to th« lowest rai.*s of the people." Wealth of Nations, b. i. c. 1.

79 76 ON PRODUCTION. BOOK L fire, action it is true, with the labour and capita) in of concurrence, the But are there no processes tha* employ process. of those who of to pure accident 1 or that mankind owes the knowledge are so self- have required skill to discover? When no tree, a as to evident, a felled, is society put into possession of no greater natural product, is mere labour produce than that woodman 1 of the of the drawn the all From this error Smith has false conclusion, that industry, or values produced represent pre-exerted human labour either recent or or, in other words, that wealth is nothing remote; infers a se- more than labour accumulated; from which position he that labour viz. sole cond consequence equally erroneous, is the wealth, value produced. of or of measure obviously This system direct opposition to that of the is in of the eighteenth century, who, on the contrary, main- economists no tained that labour produces equiva- value without consuming an leaves lent; that, consequently, no net produce; and that surplus, no it earth produces gratuitous value,—therefore nothing but the nothing yield net produce. Each of these positions has lpeen re- else can system; duced only cite them to warn the student of the dan- to I error in the outset,* and to bring the gerous consequences of an to the simple observation of facts. Now facts demon- science back are strate, that values produced agency and concur- referable to the of of capital/f and of natural agents, whereof the rence industry, though by no means the only one, is land capable of cultiva- chief, these three sources ; no other but that can produce value, or and tion to human wealth. add of the system of the economists, is •Amongst other dangerous consequences 1 one of substituting the notable a land-tax in lieu of all other taxation; in the certainty, that this tax all produced value whatever. Upon a con- would affect and in pursuance maxims laid down by Smith, the net trary principle, of the land capital ought to be exempted from taxation altogether, if of produce and of take for granted, that they produce nothing spontaneously ; but thig with him we unjust be as opposite side. would on the admitted the has of land, he has disre- f Although Smith productive power the completely analogous power of capital. A garded an oil-mill for machine, example, which employs capital of 4000 dollars, and gives an annual net return a 200 product quite as substantial as that after paying all expenses, gives a of dollars, a annual rent and brings an of or net produce real estate, that cost 4000 dollars, of dollars, all charges deducted. Smith maintains, that a mill which has cost 200 4000 dollars, represents labour to that amount, bestowed at sundry times upon the different parts of its fabric; therefore, that the net produce of the mill is the net pro- labour. But the duce of that precedent he is mistaken: granting for argument sake, of the mill itself be of value to this previous labour; yet the value daily value the by the produced is a new value altogether; just the same as the rent of a mill ^nded estate is a totally different value from the value of the estate itself, and may be consumed, without at all affecting the value of the estate. If capital contained in no productive faculty, independent of that of the labour which itself it, how is it possible, that capital could furnish a revenue in perpetuity, created 1 of the of the industry that employed it independent ? The labour that profit created the capital would receive wages after it ceased to operate—would have seen by-tml-oy, thit these iiterminable value; which absurd. It will be is notions have not been mere matter of soeculation.

80 CHAP. V. ON PRODUCTION. "7 are susceptible appropriation, that is Of natural agents, some of becoming to of an occupant, as a field, a cur- the say of property can not be appropriated, but remain liable to rent water; others of the sea, free navigable streams, the physical the wind, public use, as bodies or chemical action upon another, &c. &c. of one an of convincing ourselves, We shall by-and-by have opportunity productive agents being being suscep- of or not that this alternative, appropriation, is tible to the progress of wealth- of highly favourable are susceptible Natural agents, like land, which appropriation, of would produce nearly so much, were not the proprietors certain not and able vest in them, of exclusively gathering their produce, to capital which much enlarges their the pro- with full confidence, so On the the indefinite latitude allowed to ductiveness. other hand, to occupy at will the industry unappropriated natural agents, opens a boundless prospect extension of her agency and production. to the is not the but ignorance and bad government, that limit It nature, of productive powers industry. Such of the natural agents as are susceptible of appropriation, form an item of productive means; for they do not yield their con- currence without equivalent; which equivalent, as the we shall see in an item revenues of the appropriators. proper place, forms of the content investigate the productive opera- be to At present we must natural agents tion every description, whether already known, of of to be discovered. or hereafter CHAPTER V. THE MODE IN ON AND NATURAL AGENT3 WHICH INDUSTRY, CAPITAL, UNITE PRODUCTION. IN have seen how industry, capital, and natural agents concur WE in production, each in its respective department; and we have likewise are indispensable seen that these three sources creation of to the products. It is not, however, absolutely necessary that they should all belong to the same individual. An industrious person may lend his industry to another possessed of capital and land only. his to a person possessing capital The landholder may lend estate and industry only. the thing lent be industry, capital, Whether land, inasmuch as or all three concur in the creation of value, their use also bears value and is commonly paid for. The price paid loan of industry is called wages. for the The price paid for the loan of capital is called inter zst. And that paid for the loan of land is called rent

81 78 ON PRODUCTION. BOOK I. of land, capital, industry is sometimes united The ownership and same hands. in his own garden at his A man who the cultivates the of land, capital, and industry, once possessor own expense, is at of proprietor, capitalist, and exclusively enjoys the profits and labourer. no occupancy of land; he car- The knife-grinder's craft requires stock in trade upon his ries and his skill and industry his shoulders, his at the same time adventurer, (a) capitalist, at fingers' ends; being and labourer. is we meet with adventurers in industry It poor so seldom that in not to own at share of the capital embarked a their con as least cern. Even the common labourer generally advances some portion; his trowel the bricklayer comes with hand; the journeyman in his tailor is provided with his thimble needles; all are clothed better and and though true, that their clothing must be found or worse; it be their wages, still they find themselves in advance. of it out land is not Where as is the case with the exclusive property, and seas to which industry some stone-quarries, with public rivers for fish, pearls, coral, &c, products may be obtained by resorts and capital only. industry and capital likewise competent to produce by them- are Industry employed upon products of foreign is selves, when that industry by capital only; growth, procurable European manufac- as in the ture cotton and many other articles. So that every class of of manufacture is competent to raise products, provided there be in- dustry and capital exerted. The presence of land is not absolutely necessary, unless perhaps the the work is done, and area whereon is commonly rented, thought to come under this which may be extreme strictness certainly must. However, as in it description, ground where the if of industry is carried on, be the business as lnnd used, it must at least be admitted, that, with aid of reckoned capital, an immense manufacturing concern may be conducted a large a very trifling spot ground. Whence this conclusion may be upon of limited, is territorial extent, drawn, that national industry not by but by extent of capital. a A stocking manufacturer with say of 4000 dollars, may capital keep constant work ten stocking frames. If he manages in double to his capital he can employ twenty; that is to say, he may buy ten more frames, pay double ground-rent, purchase double the quantity of Bilk or to be wrought into stockings, and make the requisite cotton to the number of workmen, &c. &c. advances double of agricultural industry, devoted to the tillage oi But that portion entrepreneur («) The term to render in English; the corresponding is difficult undertaker, word, to a limited sense. It signifies being already appropriated the master-manufacturer in manufacture, the farmer in agriculture, and the mer chant in and generally in all three branches, the person who takes commerce; the immediate responsibility, risk, and conduct of a concern of upon himself industry, whether upon his own or a borrowed capital. For want of a better word, it will be rendered into English by the term adventurer. T

82 OHAP. VT. ON PRODUCTION. 7J» in the course nature, limited by extent of surface. Neither land, is, of communities individuals or fertilize their territory, can nor extend of but they have unlimited nature things permits; the beyond what power consequently, of setting at of enlarging their capital, and larger body of industry, and thus of multiplying their work a pro- in ducts ; other words, their wealth. people, like There have been instances the of Genevese, who with the produced of the necessa- has not a territory that twentieth part ries yet contrived to live in affluence. The natives of of life, have of Jura are in the barren glens easy circumstances because many mechanical arts there practised. In the 13th century, the world are the republic Venice, ere it held a foot of land in Italy, beheld of commerce to possess itself of Dalma- derive wealth enough from its of the and even the capital of tia, together with most Greek isles, The extent and the Greek empire. of a nation's territory fertility depend good deal upon its fortunate position. Whereas the power a its and capital depends upon its own good management; of industry it is'always competent to for the one and augment the improve other. Nations deficient in capital, labour under great disadvantage in the sale of their produce; being unable to sell at long credit, or to grant time or to their home or foreign customers. If accommodation be very great indeed, they unable even to the deficiency may be advance own material and their the industry. This make of the raw necessity, in the Indian and Russian trade, of re- accounts for the the purchase-money six months or sometimes a year in mitting the advance, before an order for goods can be executed. time when be in other respects, or they These nations must highly favoured in the face of such never could make considerable sales disad- a vantage. Having informed ourselves of the method in which the three great agents of production, industry, capital and natural agents, con- cur in the of products, that is to say, of things applicable creation the of mankind, let us proceed to analyze more minutely the to uses of each. The inquiry particular operation important, inasmuch is as leads imperceptibly to the knowledge of it is more and what what is less favourable to production, the true source of individual affluence, as w°ll national power. as CHAPTER VI. OP OPERATIONS ALIKE COMMON TO ALL BRANCHES OF INDUSTRY. IF we examine closely the workings of human industry, it will be founa. mat, to whatever object it be applied, it consists of three dis- i operations.

83 80 ON PRODUCTION. BOOK i the attainment specific product, is The first step towards of any laws and of nature regarding that product. the study of the course previous know- A lock could never have been constructed without a ledge iron, the method of extracting from the properties of the of as well as of mollify'ag and fashioning refining the ore, mine and the metal. is the application this knowledge to an useful pur- The next step of for particulai the conclusion, or conviction, that a : pose instance, metal, will furnish the means of closing a form, communicated to the to all the to the possessor of the key. door wards, except is the execution of the manual labour, suggested and The last step out by the two pointed as, for instance, the former operations; of the different component parts forging, filing, and putting together lock. of the by one and the same These three operations are seldom performed commonly happens, that one man studies the laws and person. It science, nature; that is say, the philosopher, or man of to conduct of to create useful products, of whose knowledge another avails himself or trader; while the being either agriculturist, manufacturer, third supplies executive exertion, under the direction of the former the is the or labourer. two ; which third person operative workman be found, on analysis, to derive exist- All products whatever will ence from these three operations. Take the example sack of wheat, or a of a of wine. The first pipe stage towards the attainment of either of these products was, the discovery by the or geologist, (a) of the con- natural philosopher of nature in the production the grain or the grape; duct and course of sowing planting ; and the care requi- for or the proper season and soil bring the herb or plant site maturity. The tenant, if not the to to himself, must afterward have applied this knowledge to proprietor own particular object, brought together the means requisite to his of an the creation and removed the obstacles in tho useful product, of its up the way creation. Finally, the labourer must have turned the seed, or pruned and bound up the vine. These three soil, sown to the complete production of distinct operations were indispensable or wine. the product, corn of a product of external commerce; such as Or take the example indigo. The science of the geographer, the traveller, the astro- nomer, brings us acquainted with the it is to be met with, spot where the of crossing the seas to get at it. The merchant equips and means and sends them in quest of the his vessels, and the commodity; mariner and land-carrier perform the mechanical part of this pro- duction. But, loooking at the substance, indigo, as a mere primary material we all of or secondary product, of blue cloth for instance; further a {a) Agronome: I am not aware of any corresponding English term, denoting; the student in that branch of geology conversant with the properties of the sur• ace of the earth; in other words, the scientific agriculturist. T

84 CHAP. VI. $* ON PRODUCTION. is first applied for information, as to the know that the chemist to the substance, the method dissolving it, and mordants of of nature requisite for fixing the colour; the means of perfecting me process* of dyeing are then collected by the master manufacturer, under the process. whose orders the labourer executes the manual part of cases, divisible into theory, application, and in all Industry is, execution. Nor can it approximate to perfection in any nation, til! that nation excel in all three branches. A people, that is deficient or other of them cannot acquire products, which are in one and must be the result all three. And thus we may learn to appreci- of at first sight, appear ate the vast utility of many sciences, which, to mere curiosity and speculation.* of be the objects The negroes of the coast Africa are possessed of considerable of ingenuity, and excel in all athletic exercises and handicraft occupa- ; tions but they seem greatly deficient in the two previous operations of industry. Wherefore, they are under the necessity of purchasing of. from Europe the stuffs, arms, and ornaments, they stand in need so few products, notwithstanding its natural Their country yields fertility, that the slave traders are obliged lay in their stock of to provisions beforehand, tp feed the slaves during the voyage.f In qualities favourable to industry, the moderns have greatly sur- passed the ancients, and the Europeans outstrip all the other nations of the globe. The meanest inhabitant of an European town enjoys innumerable comforts unattainable to the sovereign of a savage tribe. The single article, glass, that admits light into his apartment, and, at the same time, excludes the inclemency of the weather, is the beauti- ful result of observation and science, accumulated and perfected long course of ages. To obtain this luxury, it was neces- a during of sand was convertible into a sary previously to know what kind substance possessing extension, solidity, and transparency; as well as of heat, by the compound of what ingredients, and by what degree the substance was obtainable: to ascertain, besides, the best form of furnace. The very wood-work, that supports the roof of a glass-house, its of the requires, in construction, the most extensive knowledge of strength of employing it to advantage. timber, and the means Nor was the mere knowledge of these matters sufficient; for that knowledge might possibly have lain dormant in the memory of one or two persons, or in the pages of It was further requi- literature. the direct impulse, given by science to progressive industry, and * Besides which indeed is indispensable to its success, it affords an indirect assistance, by the gradual removal of prejudice; and by teaching mankind to rely more upon is the their own exertions, than on the aid of superhuman power. Ignorance inseparable concomitant of practical habits, of that slavery of custom which stands in the way of all improvement; it is ignorance that imputes to a supernatural cause the ravages of an epidemical disease, which might perhaps be easily pre- vented or eradicated, and makes mankind recur to superstitious observances, when precaution, or the application the remedy, is all that is wanted. Sci- of ences, like facts, are linked together by a chain of general connexion, and jie'd one another mutual support and corroboration. + See (Euvres de Poivr?, p. 77, 78.

85 82 ON PRODUCTION. BOOK I. that a of the site, manufacturer should have been found, possessed reducing means who should have the of knowledge into practice; was of that par- that at first made himself master known of all and afterwards have accumulated, 01 ticular branch of industry, and the and procured requisite capital, collected artificers labourers, his respective occupation. to assigned each work must have been completed by the manual skill Finally, the workmen employed; some of constructing the buildings and the in keeping fire, mixing up the ingredients, in up the furnaces, some fitting and fixing the pane of blowing, cutting, rolling out, glass. of the to The utility and beauty resulting product, are inconceivable who of human in- those have never beheld this admirable creation By means dustry. industry, the vilest materials have been in- of vested with highest degree of utility. The very rags and refuse the the white thin of wearing apparel have been transformed into and globe other, the re- one end of the to the sheets, that convey from commerce and the particulars of art; that serve as the quisitions of the conceptions of genius, and the vehicles of human of depositories one age to another; to them we look for the evi- experience from dence of our to them we entrust the most noble arid properties; of the and by theYn we awaken corre- amiable sentiments heart, in the breasts of our fellow-creatures. The extra- sponding feelings ordinary facilities for the communication of human intelligence which it to be considered as one of the paper affords, entitles products that nave been most efficacious in ameliorating the condition of mankind. Fortunate, indeed, would it have been, had an engine so powerful never have been made the of falsehood, or the instrument vehicle of tyranny! It to remark, that the knowledge of the man of is worth while development industry, circu as it is to the of science, indispensable rapidity from one nation to all the rest. And lates with ease and science have themselves an interest in its diffusion ; for upon of men of fortune, arid, what is more that diffusion they rest their hopes prized by of reputation too. For this reason, a nation, in them, is but may nevertheless carry its in- which science little cultivated, a very great length, by taking advantage of the information dustry to derivable from abroad. But is no way of dispensing with the there other two operations industry, the art of applying the knowledge of of man to the supply of his wants, and the skill of execution. These qualities are of to none but their possessors; so that a advantage country well stocked with intelligent merchants, manufacturers, and agriculturists has more powerful means attaining prosperity, than of to the pursuit of the arts and sciences. At the one devoted chiefly of the revival of literature in Italy, Bologna was the seat of period science; but wealth was centred in Florence, Genoa, and Venice. In days, the enormous wealth of Britain is less owing to her our own advances in scientific acquirements, high as she ranks in that department, than wonderful practical skill of her adventurers to the i\ of her useful application of knowledge, and the superiority the

86 CHAP. VI. ON PRODUCTION. S3 and masterly execution. national pride, that workmen in rapid The often charged with, does the English not are prevent their accom- of tastes their modating themselves with wonderful facility to the customers and the consumers of their produce. They supply with and the south, because they have learnt to hats both the north make market, and warm and thick for the other. for the one them light nation that makes but of one Whereas be content the pattern, must the with home market only. master manufacturer; The English labourer seconds he is the and does commonly patient willingly send out an laborious, and not hands, without giving article from utmost possible preci- his it the and perfection; not that he bestows more time upon it, but that sion he gives more of his care, attention and diligence, than the work- it men most other nations. of is no people, however, that need despair acquiring the There of perfection their industry. It is but 150 to the qualities requisite of made so little progress, that she pur- years since England herself had woollens from Belgium ; and it is not more than chased nearly all her 80 years since Germany supplied with cotton goods the very nation, now manufactures them for the whole world.* that I have said that the cultivator, the manufacturer, the trader, make it their business turn to profit the knowledge already acquired, to it to the to of human wants. I ought further and apply satisfaction of of add, that they have need another kind, which can knowledge only gained in the practical pursuit of their respective occupa- be tions, and may be called their technical skill. The most scientific naturalist, with all his superior information, would probably succeed his tenant, in attempt to improve his own land. much worse than the A first-rate mechanist would most likely spin very indifferently his without having served apprenticeship, though admirably skilled construction of the cotton-machinery. In the arts there is a in the perfection, that results only from repeated trials, certain sort of sometimes successful and sometimes the contrary. So that science is not sufficient to ensure alone progress, without the aid of ex- the r hich is always attended with more or less of risk, and periment, w not the adventurer, whose profit, even when does always indemnify is moderated by competition; although society at successful, large receives the accession of a new product, or, what amounis to the same thing, of an abatement in the price of an old one. In agriculture, experiments usually cost the of the soil for a rent or and the and above the labour year capital engaged more, over in them. not exist in England in the 17th century. In * The cotton manufacture did 1705, we see by the returns of the English customs, that the raw cotton manu- factured in 1,170,880 pounds weight. that country then amounted to no more than In 1785, quantity imported was 6,706,000 lbs.; but in 1790 it had got up to the 25,941,000 lbs., and in 1817 to as much as 131,951,000 lbs., for the English ; in re-exportation. The quantity of cotton imported and for 1831 market nto tfcj United Kingdom?, was 288,708,453 lbs.

87 s4 ON PRODUCTION L BOOK In manufacture, experiment is hazarded on safer grounds of cal- culation capital engaged for a much shorter period, and if success ensue, the adventurer rewarded by a longer period of exclusive ad- vantage, because his process is less open to observation. In some places, too, the exclusive advantage is protected by patents of inven- tion. For all "which reasons, the progress of manufacturing is gene- rally more rapid and more diversified than that of agricultural industry. In commercial industry, the risk of experiment would be greater than in the other two branches, if the costs of the adventure had no auxiliary and concurrent object. But it is usually in the course of a regular trade, that a merchant hazards the introduction of a virgin commodity of foreign growth into an untried market. In this man- ner it was that the Dutch, about the middle of the seventeenth cen- tury, while prosecuting their commerce with China, with no very sanguine expectation, made experiment of a small assortment of dried leaves, from which the Chinese were in the habit of preparing their fa- vourite beverage. Thus commenced the tea-trade, which now occa- sions the annual transport of more than 45 millions of pounds weight, that are sold in Europe for a sum of more than 80,000,000 of dollars.* In some cases of very rare occurrence, boldness is nearly certain of success. When the Europeans had recently discovered the pas sage round the Cape of Good Hope and the continent of America, their world was suddenly expanded to the East and West; and such was the infinity of new objects of desire in two hemispheres, whereof one was not at all, and the other but very imperfectly known before, that an adventurer had only to make the voyage, and was sure of selling his returns to great advantage. In all but such extraordinary cases it is perhaps prudent to defray the charges of experiments in industry, not out of the capital en- gaged in the regular and approved channels of production, but out of the revenue that individuals have to dispose of at pleasure, with- out fear of impairing their fortune. The whims and caprices that divert to an useful end the leisure and revenue which most men devote to mere amusement, or perhaps to something worse, cannot be too highly encouraged. I can conceive no more noble employ- ment of wealth and talent. A rich and philanthropic individual may, in this way, be the means of conferring upon the industrious classes, and upon the consumers at large, in other words, upon the mass of mankind, a benefit far beyond the mere value of what he ac tually disburses, perhaps beyond the whole amount of his fortune however princely it may be. Who will attempt to calculate the valuu conferred on mankind by the unknown inventor of the plough?f A government, that knows and practises its duties, and has large lesources at its disposal, does not abandon to individuals the whole * Voyage Commerciel et Politique aux Indes Orientates, par M. Felix Renouard de Sainte Croix. + Thanks to the art of Printing, the names of the benefactors of mankind will Henceforward be lastingly recorded; and if I mistake not, with more veneration

88 CHAP. VII. ON PRODUCTION. 85 and merit invention and discovery in the field of industry glory of experiment, when defrayed by the are The charges of government, but the national national capital, from the not subtracted from revenue; least, never ought to touch for taxation never does, or, at individuals. The portion of them any thing beyond the revenue of scarcely felt at all, because the burthen is divided among so spent is advantages resulting from and, the innumerable contributors; suc- common benefit to all, it is by no means inequitable cess being a on the sacrifices, which they are obtained, should fall the that by at large. community VII. CHAPTER THE OF OP MANKIND, OF NATURE, AND OF MACHINERY LABOUR RESPECTIVELY. BY labour I shall designate that continuous action, exert- the term perform or a operations of industry, to part only ed any one of the of of one those operations. Labour, upon whichever of those operations it be bestowed, is it concurs in the creation productive, because product. Thus of a the labour philosopher, whether experimental or literary, is of the the of the adventurer or master-manufacturer is productive; labour he perform productive, although actual manual work; the labour no of every operative workman is productive, from the common day- labourer in agriculture, to the pilot that governs the motion of a ship. Labour of an is to say, such as does not unproductive kind, that to the raising the products of some branch of industry contribute of seldom undertaken voluntarily; labour, under the is for or other, trouble so definition above given, implies trouble, and bestowed no compensation or resulting benefit: wherefore, it could yield be mere folly or would in the person bestowing it. When waste trouble directed to the stripping another person of the goods in is before mere by of his possession or violence, what was means fraud extravagance and folly, degenerates to absolute criminality; and there results no production, but only a forcible transfer of wealth from one to another. individual as we and even Man, have already seen, obliges natural agents, than those which derive lustre from the deplorable exploits of military prowess. be preserved the names A..nong these will Olivier de Serres, the father of of French agriculture; the first who established an experimental farm; of Duhamel, of Malsherbes, to whom France is indebted for many vegetables now naturalized i* soil and climate: of Lavoisier, whose new system of chemistry has effect- her ed a still more important revolution in the arts; and of the numerous scientific useful object, may travellers modern times; for travels, with an of be regarded as adventures in the field of industry.

89 46 ON PRODUCTION. BOOK 1. of his own to work in concert with the piv> lucts. previous industry, business Him be no of in the production. There will, therefore, the in or productive service difficulty terms comprehending labour productive service of capital. labour and of nature, or The labour performed that executed b) by natural agents, and which we have given the name of capital, to pre-existent products, are perpetually confounded are closely analogous, with the and one for tools and machines which form a principal item of other: the commonly expedients more or less ingenious, foi are but capital, account. The steam engine is but turning natural powers com- to a of taking advantage of the alternation of the elas- plicated method of water reduced to vapour, and of the ticity of the atmo- weight sphere. that, in point of fact, a steam engine employs more pro- So the agency capital embarked in it: for ductive agency, than of the expedient forcing into the service of man a is an for that machine natural agents, whose gratuitous aid may perhaps infinitely variety of capital invested value interest of the the in the machine. in exceed is in this light that all machinery must be regarded, from It the simplest the most complicated instrument, from a common file to to and complex apparatus. Tools simple the most expensive are but machines and complicated tools, whereby we enlarge machines, but of our hands the limited powers fingers; and both are,in many and respects, mere means obtaining the co-operation of natural agents.* of is to make less labour requisite for the raising Their obvious effect the same quantity of produce, or, what comes exactly to the same thing, to a larger produce from the same quantity of human obtain is the and the acme of industry. labour.—And this grand object new or a new and more expeditious process a machine, Whenever place of is substituted in activity, in the human labour previously of the industrious human agents, whose service is thus ingeni- part out of employ. Whence ously dispensed with, must needs be thrown the use of machinery, many objections have been raised against has been often obstructed popular violence, and sometimes which by act of authority itself. by the any chance of wise conduct in To give it is necessary such cases, beforehand acquire a clear notion of to the economical effect result- ing from the introduction of machinery. A new machine supplants a portion of human labour, but does not diminish the of the product; if it did, it would be absurd amount are in the supply of a city to adopt it. When water-carriers relieved any kind of hydraulic engine, the inhabitants are equally well by The supplied with water. of the district is at least as revenue but it takes a different direction. That of the water-carriers great, is reduced, while that of the mechanists and capitalists, who furnish * Generalization pleasure be carried still further; a landed estate may may at l»e considered a vast machine for the production of grain, which is refitted and as Kept in repair by cultivation: or a flock of sheep as a machine for the raising of mutton or wool.

90 CIUP. VII. ON PRODUCTION. 87 is increased. superior abundance of the f.ro the funds, But, if the inferior charges of its its exchange- duct and the production, lower of the is benefited; for to them revenue consumers able value, the every saving much gain. of expenditure is so revenue, however advantageous to the com- of This new direction large, as we shall presently see, is always attended with munity at distress For the capitalist, when some painful circumstances. of a unprofitably engaged state of inactivity, is are or in a his funds that of an industrious population deprived of the means nothing to of subsistence. as it is clearly objection- Inasmuch machinery produces that evil, But are circumstances that commonly accompany its able. there and wonderfully reduce the introduction, at the. mischiefs, while same time they give full play benefits of the innovation. For, to the New machines slowly constructed, and still more slowly 1. are give time those who are interested, to so as to for brought into use; public administration take their measures, provide a and for the to remedy.* 2. Machines cannot be constructed without considerable labour, to the hands they throw out of employ. For which gives occupation of a city with water by conduits gives increased .nstance, the supply to carpenters, masons, smiths, paviours, occupation &c. in the con- and works, laying down of the main the branch pipes, struction the &c. &c. 3. condition of consumers at large, and consequently, The amongst them, of the class of labourers affected by the innovation, is improved by the reduced value of the product that class was occupied upon. Besides- would be vain to attempt to avoid the transient evil, it il upon invention of a new machine, by prohibiting consequent the beneficial, be will If introduced some- its employment. it is or other; or products will be cheaper than those of labour where its on the old principle; and sooner or conducted later that cheapness will away with the consumption and demand. Had the cotton run on the old spinning-jennies who destroyed the spinners on principle, in their introduction into Normandy, 1789, succeeded in their object the cotton manufacture; every body France must have abandoned would have bought foreign article, or used some substitute; and the the spinners of Normandy, who, in the end, most of them, found employment in the new yet worse establishments, would have been off for employment. * Without having recourse local or temporary restrictions on the use of new to or machinery, which are invasions methods property of the inventors or of the fabricators, a benevolent administration can make provision for the employment of supplanted or inactive labour in the construction of works of public utility at the public expense, canals, roads, churches, or the like; in extended cole* as of nization; in the transfer of population from one spot to another. Employment by iri more readily found for the hands thrown out of work the machinery because thev are commonly already inured to labour.

91 88 ON PRODUCTION. BOOK L for the immediate effect the introduction of machinery. So much of wholly in its The ultimate effect is favour. its a conquest of nature, and com- by means man makes if Indeed pels nature and the properties of natural agents to the powers of advantage, the gain is too obvious to need illus- work for his use and be an increase product, or a dimi- tration. There must always of cost production. If the sale-price of a product do in the of nution acquisition redounds to the not fall, of the producer; and the profit to the consumer. If it do fall, the consumer is that without any loss to the whole amount benefited fall, without any loss to the of the producer. of a product commonly reduces price, that The multiplication its consumption; production, though its and so its reduction extends become more rapid, nevertheless gives employment to more hands beyond question, that the than before. of cot It is manufacture now occupies more hands in England, France, and Germany, ton it did before the introduction of the machinery that has abridg- than and ed of manufacture in so remarkable a perfected this branch degree. Another striking example similar effect is presented by the of a to multiply with rapidity the copies of a machine used per literary formance,—I mean the printing press. Setting aside all consideration of the prodigious impulse given by the art of printing to the progress of human knowledge and civiliza- tion, I of it merely as a manufacture, and in an economi will speak of view. When printing first brought into use, a cal point was copyists were course immediately deprived of occu- of of multitude fairly reckoned, that one pation ; for it may be journeyman printer the business of two hundred copyists. We may, therefore, does 199 out of 200 were thrown out of work. What conclude, that Why, in a the followed? greater facility of reading little time, the low to which books fell, the printed than written books, price stimulus this invention gave to authorship, whether devoted to or instruction, the combination, amusement short, of all these in causes, operated so effectually as to set at work, in a very little time, more journeymen printers than there were formerly copyists. And if we could now calculate with precision, besides the number ot journeymen printers, the of other industrious people total number the for, whether as type-founders and that press finds occupation moulders, paper-makers, carriers, compositors, bookbinders, book- and the like, we sellers, the number of should probably find, that persons occupied in the manufacture of books is now 100 times what it was before the art of printing was invented. It may be to add, that viewing human labour and ma- allowable chinery aggregate, in the supposition of the extreme case, viz. in the that machinery should be brought to supersede human labour alto gether, numbers of mankind would not be thinned; for the yet the sum total of products would be the same, and there would probab.v be less suffering to the poorer and labouring classes to be appieticnd-

92 CHAP. VII. ON PRODUCTION. 89 for in that case momentary fluctuations, that distress the ed; the industry, would principally affect machinery* different branches of be and machinerj- and not paralyzed ; which, human labour, would it can only cease to yield profit to its cannot die of hunger ; employ- generally farther removed from want than mere who are ers, labourers. But however great may be the advantages, which the adventur- industry, and ers the operative classes, may ultimately in even of the great gain derive from the employment improved machinery, consumers, which always the most important class, to the accrues is most numerous; because it comprehends every because it is the producers whatever; and because the welfare of this description of wherein all others are comprised, constitutes class, general well- the being prosperity of a nation.* I repeat, that it is the consumers and the greatest benefit from machinery; though the who draw for indeed some years enjoy the exclusive advantage may for invei/or invention, which of highly just and proper he should, yet his it is is no instance of a secret remaining long undivulged. Nothing there of all a can long escape publicity, least personal what people have in if the secret be necessarily con- interest discovering, especially of a number of persons employed in construct- fided to the discretion or ing in working the machine. The product is thenceforward cheap- by competition to the ened of the saving in the cost of full extent production; and thenceforward begins the full advantage to the con- sumer.—The grinding of is probably not more profitable to the corn now than formerly; costs infinitely less to the con- miller but it sumer. is the Nor cheapness the sole benefit that the consumer reaps from more expeditious processes: he generally gains in introduction of the greater perfection product. Painters could un- addition of the brush or pencil the designs that ornament doubtedly execute with the and furniture papers, but the our printed calicoes and copperplates rollers employed that purpose give a regularity of pattern, ana for of the most skilful artist could never equal. uniformity colour, which of this inquiry through all the arts of The close pursuit industry would show, that the advantage of machinery is not limited to the bare substitution of it for human labour, but that, in fact- it gives a positive new as it gives a degree of perfection product, inasmuch The and the die execute products, before unknown. flatting-mill the utmost skill and attention of the human hand could never that accomplish. In fine, machinery does still more; multiplies products with it it has no trouble; the which immediate connexion. Without taking to reflect, perhaps would scarcely imagine that the plough, the one harrow, and other similar machines, whose origin is lost in the night * Paradoxical appear, it is nevertheless true, that the labouring class as it may '» of all others the most interested in promoting" the economy of human labour; general cheapness, fiir that class which benefits the most by the is the and suf fers most from the genera, dearness of commodities.

93 00 ON PRODUCTION. BOOK I. to procure mankf id, besides of ages, 'rave powerfully contributed for life, *he absolute necessaries of the superfluities a of vast number had any enjoy, whereof they would otherwise never have they now the soil requires could Yet, if the different dressings conception. otherwise given, than spade, the hoe, and other such no be by the tardy expedients, if simple to* make available in and we were unable in the eye of agricultural production those domestic animals, that, kind machines, it is most likely thit political economy, of are but a human labour, now applicable to the arts of indus- the whole mass of occupied in raising the bare necessary subsistence of be try, would the the actual population. Thus, has been instrumental *n plough releasing number of hands for the prosecution of the arts, even of a and what more importance, for the the most frivolous kind; is of of cultivation the intellectual faculties. The ancients were unacquainted with water or wind-mills. In the wheat their bread was made of, was pounded by the their time, of the so labour that perhaps no less than twenty individuals hand: in can as much wheat as one mill were occupied grind.* pounding Now single miller, or two at the most, is enough to feed nnd a superintend a mill. By the aid, then, of this ingenious piece of mechanism, two persons are as productive as twenty were in the dnys of Coesar. Wherefore, every one of our mills, we make the wind, in a current water, do the work of eighteen persons; which of or just as well provided with subsistence; are eighteen extra persons the mill has in no respect diminished the general produce of the for and to the community: creation of whose exertions may be directed to be produce by them in exchange for the new products, of given the mill; thereby augmenting the general wealth the community.} of CHAPTER VIII. OP THE ADVANTAGES AND DISADVANTAGES RESULTING PROM DIVISION OP LABOUR, AND OP THE EXTENT TO WHICH IT MAY BE CARRIED. WE have already observed that several operations, the com- the but one of industry, are not in gene- bination of which forms branch or performed by the same person; for ral undertaken they commonlv * Homer tells us, in the Odyssey, b. xx., that twelve women were daily em- ployed in grinding corn for the family consumption of Ulysses, whose establish- ment is not represented as larger than that of a private gentleman of fortune of 1 riodern days. Sismondi Since the publication of the third edition of this work, M. de + hag published l.is Nouveaux Principes (VEconomie Politique. This valuable writer to have been impressed with an exaggerated notion of the transient evila

94 CHAP. VIII. PN PRODUCTION. 91 require different kinds of talent; and the labour requisite to each is enough to take up a man's whole time and attention. Nay, in some instances, a single one of these operations is split again into smaller subdivisions, each of them sufficient for one person's exclusive occu- pation. the study of nature is shared amongst the chemist, the Thus, botanist, the astronomer, and many other classes of students in philosophy. too, in the application of human knowledge to the satisfac- Thus, tion of human wants, in manufacturing industry, for instance, we find different classes of manufacturers employed exclusively in the fabric of woollens, pottery, furniture, cottons, &c. &c. Finally, in the executive part of each of the three branches of in- dustry, there are often as many different classes of workmen as there are different kinds of work. To make the cloth of a coat, there must have been set to work the several classes of spinners, weavers, dressers, shearers, dyers, and many other classes of labourers, each of whom is constantly and exclusively occupied upon one operation. The celebrated Adam Smith was the first to point out the im- mense increase of production, and the superior perfection of products referable to this division of labour.* He has cited among other faint one of the permanent benefits machinery, and to be utterly unac- of and a the science, which place those benefits beyond of quainted with those principles controversy, (a) in a * of lectures on political economy, delivered at Beccaria, public course year 1769, and before had publication of Smith's work, in the remark- Milan the the of the division of labour upon the multiplication of ed favourable influence words: products. These are his Ciascuno prova colV esperienza, che, applicant " do la e Vingegne sempre olio stesso genere di opere e di prodotti, egli piu mano piu abondanti migliori ne travo i resultati, di quello, che se ciascuno facilli, e tutte a se necessarie soltanto facesse : onde altri pascono isolatamente le cose pecore, altri ne cardano le lane, altri le tessonoe \ le Made, chi ne fa chi coltiva il pane: veste, chi fabrica agli agricoltorie la voranti ; crescendo e conca- chi tal tenandosi e dividendosi in arti, maniera, per la commune e privata u'ilitd le gli nomini in varie classi e condizioni." " We all know, by personal experi- ence, that, by the continual application the corporeal and intellectual faculties of of work product, we can obtain the product with more to one peculiar kind or in and and perfection, than if each were to depend upon ease, greater abundance objects of his wants. For this reason, one man feeds his own exertions for all the a second cards the wool, and a third weaves sheep, one man cultivates wheat, it: another makes bread, another makes clothing* lodging for the cultivators and or and division of the arts, and mechanics: this multiplication of concatenation a mankind into of classes and conditions, operating to promote both pub- variety lic and private welfare." However, I have given Smith the credit of originality in his ideas of the di- vision of in all probability, he had published his opinions labour; first, because, of philosophy of from his chair at Glasgow before Beccaria, as it is professor f Our author, in his recent argument with Malthus, upon the subject of the a) excess of manufacturing power and produce, appears to me to have completely vindicated own positions against the attacks of Sismondi and Malthus ; and his to have exposed the fallacy of the appalling doctrine, that the powers of human industry can ever be too great and too productive.— Vide Letters a M. Malthu*

95 «*2 ON PRODUCTION. BOOK L pins. The workmen occupied in this examples, the manufacture of manufacture execute each but one part of a pin. One draws the another cuts it, a third sharpens the points. The head of a wire, pin alone requires two or three distinct operations, each performed by a different individual. By means of this division, an ill-appointed establishment, with but ten labourers employed, could make 48,000 pins per day, by Smith's account. Whereas, if each person were obliged to finish off the pins one by one, going through every opera- tion successively from first to last, each would probably make but 20 per day, and the ten workmen would produce in the whole but 200, in lieu of 48,000. Smith attributes this prodigious difference to three causes: ] The improved dexterity, corporeal and intellectual, acquirecr by frequent repetition of one simple operation. In some fabrics the rapidity with which some of the operations are performed exceeds what the human hand could, by those who had never seen them, be supposed capable of acquiring. 2. The saving of the time which is commonly lost in passing from one species of work to another, and in the change of place, position, and tools. The attention, which is always slowly transferred, has no occasion to transport itself and settle upon a new object. 3. The invention of a great number of machines, which facilitate and abridge labour in all its departments. For the division of labour naturally limits each operation to an extremely simple task, and one that is incessantly repeated; which is precisely what machinery may most easily be made to perform. Besides, men soonest discover the methods of arriving at a parti- cular end, when the end is approximate, and their attention exclu- well known he did the principles that form the ground-work of his book; but ehiefly because he has the merit of having deduced from them the most import- ant conclusions. (1) (1) [All the fundamental doctrines contained in the Inquiry into the Wealth of were comprehended in Dr. Smith's course of political lectures, deliv- Nations, ered at Glasgow as early as the year 1752; " at a period surely," says DUGALD STEWART, " when there existed no French (and he might have added, nor Italian) performance on the subject, that could be of much use to him in guiding his researches." A short manuscript, drawn up by Dr. Smith in the year 1755, fully establishes his exclusive claim to the most important opinions detailed in his treatise on the Wealth of Nations, which did not appear until the beginning of the year 1776. " A great part of the opinions enumerated in this paper, (he observes,) is treated of at length in some lectures which I have still by me (1755,) and which were written in the hand of a clerk who left my service six jears ago. They have all of them been the constant subject of my lectures, since I first taught Mr. Craigie's class, the first winter I spent in Glasgow, down to this day, without any considerable variation.—They had all of them been the subject of lectares which I read in Edinburgh the winter before I left it, and I can adduce innumerable witnesses, both from that place and from this, who will ascertain them sufficiently to be mine." Vide Mr. Stewart's Account of the Life an* Writings of Adam Smith, LL. D. read before the Royal Society of Edinburgh, January 21 and March 18, 1793.] AMERICAN EDITOR

96 CHAP. VIII. ON PRODUCTION. & sively directed to it. Discoveries, even in the walk of philosophy, are for the most part referable, in their origin, to the subdivision of labour; because it is this subdivision that enables men to devote themselves to the exclusive pursuit of one branch of knowledge; which exclusive devotion has wonderfully favoured their advance- ment.* Thus the knowledge or theory necessary to the advancement of commercial industry for instance, attains a far greater degree of per- fection, when different persons engage in the several studies; one of geography, with the view of ascertaining the respective position and products of different countries; another of politics, with a view to inform himself of their national laws and manners, and the advan- tages and disadvantages of commercial intercourse with them; a third of geometry and mechanics, by way of determining the preferable form of the ships, carriages, and machinery of all kinds, that must be employed; a fourth of astronomy and natural philosophy, for the purposes of navigation, &c. &c. Thus, too, the application of knowledge in the same department of commercial industry will obviously arrive at a higher degree of perfection, when divided amongst the several branches of internal, Mediterranean, East and West Indian, American, wholesale and retail, &c. &c. Moreover, such a division is no obstacle to the combination of operations not altogether incompatible, more especially if they aid and assist each other. There is no occasion for two different mer- chants to conduct, one the trade of import for home consumption, and the other the trade of export of home products; because these operations, far from clashing, mutually facilitate and assist each other, (a) The division of labour cheapens products, by raising a greater quantity at the same or less charge of production. Competition soon obliges the producer to lower the price to the whole amount of the saving effected; so that he derives much less benefit than the consu- mer ; and every obstacle the latter throws in the way of that division is an injury to himself. * But though tnany important discoveries in the arts have originated in divi- sion of labour, we must not refer to that source the actual products that have re- sulted, and will to eternity result, from those discoveries. The increased product must flow from the productive power of natural agents, no matter what may have been the occasion of our first becoming acquainted with the means of employing Vide supra, Chap. IV. those agents. (a) The combination of operations which at first sight appears to be distinct, is far more practicable in what our author calls the branch of application, than in either the theoretical or the executive branch. A general merchant, by means of clerks and brokers, will combine a vast variety of different commercial opera- tions, and yet prosper. Why? Because his own peculiar task is that of super- intendence of commercial dealings; which superintendence may be extended over a greater surface of dealing without incongruity, being on a closer m spection, but a repetition of the same operation.

97 94 ON PRODUCTION. BOOK I a tailor make his own shoes as well as his coat, he Should try to We see every people acting as would infallibly ruin himself.* day to ordinary a regular trader the merchants, their own avoid paying to use their own expression, with the view of of profit his business; this is an erroneous calcula- pocketing that profit themselves. But ; for of labour enables the regular dealer to execute tion this division them much cheaper than they themselves. for can do it the business trouble it costs them, the loss Let them reckon time, the up the of in extra charges, which is always proportion- money thrown away in small than in large operations, and see if all these to- ally more do not gether to more than the two or three per cent, that amount be saved every paltry item of consumption; even suppo- might on deprived what little advantage they might not to be sing them of the cultivator or manufacturer they would expect, by the avarice of deal directly with, who will of course impose, if he can, have to upon their inexperience. is no advantage, even to the cultivator or manufacturer himself, I* to intrude upon the except under very particular circumstances, of the merchant, endeavonr to deal directly with the province and intervention. He would only divert his at- consumer without his his tention from and lose time that might be ordinary occupation, far better employed peculiar line; besides being under in his own of keeping the necessity establishment of people, horses, car- up an riages, &c. the expenses of which would far exceed the merchant's profit, reduced as it be by competition. always must of labour enjoyed The advantages accruing from division can be particular kinds products only; and not in them, un- of of in respect exceeded a certain point of extension. Ten til their consumption has make 48,000 pins workmen would hardly do so, can in a day; but a of pins to that amount; unless where there was daily consumption to arrive for, this degree of division of labour, one workman must at be wholly exclusively occupied in sharpening the points, while and are a different part of the process. the rest severally engaged, each in be a daily demand for no more than 24,000, If there must needs he lose half his day's work, or change his occupation, in which case, the division of labour will be less extensive and complete. For this reason, divisions of labour cannot be carried to the extreme limit, except products capable of distant transport and the conse- in of or where manufacture is carried on quent increase consumption; a dense population, offering an extensive local consumption. amidst of For the same reason, too, many kinds work, the products of which to instantaneous consumption, are executed by the same are destined individual, places where the population is limited. In a small in town or village, the same person is often barber, surgeon, doctor, * The low price sugar in China is probably occasioned, in part, by the cir- of uimstauce the grower leaving to a separate class the extraction of the sugar of from the cane. This operation is performed by itinerant sugar pressers, who an go from house house, offering their services, and provided with to extremely rimple apparp'us Vide Macartney's Embassy, vol. iv. p. 198.

98 CHAP. VIII. ON PRODUCTION. 95 and apothecary; while in a populous city, and there only, those are not merely separate and distinct occupations, but some of them are again subdivided into several branches; that of the surgeon, for in- stance, is split into the several occupations of dentist, oculist, ac- coucher, &c.; each of which practitioners, by confining his practice to a single branch of this extensive art, acquires a degree of skill, which, but for this division, he could never attain. The same circumstance applies equally to commercial industry. Take the village grocer; the consumption of his groceries is so lim- ited, as to oblige him to be at the same time haberdasher, stationer, innkeeper, and who knows what, perhaps even news-writer and pub- ; lisher whereas in large cities, not only grocery at large, but even the sale of a single article of grocery, is a great commercial concern. At Paris, London, and Amsterdam, there are shops, where nothing else is sold but the single article tea, oil or vinegar; and it is natural to suppose that such shops have a much better assortment of the sin- gle article, than those dealing in many different commodities at once. Thus, in a rich and populous country, the carrier, the wholesale, the intermediate, and the retail dealer conduct each a separate branch of commercial industry, and conduct it with greater perfection as well as greater economy. Yet they all benefit by this economy; and that they do so, if the explanations already given are not convincing, ex- perience bears irrefragable testimony; for consumers always buy cheapest where commercial industry is the most subdivided. Ceteris a commodity brought from the same distance is sold cheap- paribus, er at a large town or fair, than in a village or hamlet. The limited consumption of hamlets and villages, besides obliging dealers to combine many elsewhere distinct occupations, prevents many articles from finding a regular sale at all seasons. Some are not presented for sale at all, except on market or fair days; on such days the whole week's or perhaps year's consumption is laid in. On all other days, the dealer either travels elsewhere with his wares, or finds some other kind of occupation. In a very rich and very populous district, the consumption is so great, as to make the sale of one article only, quite as much as a trader can manage, though he devote every day in the week to the business. Fairs and markets are expedients of" an early stage of national prosperity; the trade by caravans is a still earlier stage of international commerce; but even these expedients are far better than none at all.* *The country markets of France not only exhibit extreme inertness in parti sular channels of consumption; but a very cursory observation is sufficient to show, that the sale of products in them is very limited, and the quality of what are sold very inferior. Besides the local products of the district, one sees nothing there, except a few tools, woollens, linens, and cottons of the most inferior quality. In a more advanced stage of prosperity, one would find some few objects of gratification of wants peculiar to a more refined state of existence: some arti- cles of furniture combining convenience and elegance of form; woollens of some variety of fineness and pattern; articles of food of a more expensive kind, wh*»

99 96 ON PRODUCTION. BOOK I. the necessity the existence of a very extended consump- From of labour tion, before division to its extreme point, it can be of carried be in the manufac- never introduced follows, that such division can are placed within ture of products, which, from their high price, the purchasers. In jewellery, especially of the better kinds, of few reach practised in a very limited degree; and such division being, as X is the invention and application of ingenious we have seen, one cause of surprising that such processes it is not met are processes, least often preparation products of highly finished workmanship. in the with of lapidary, one In visiting the workshop often dazzled with the of a is of the materials, and the skill and patience of the work- costliness ; but it is only in the grand manufactories of articles of man univer- sal consumption, that astonished with the display of ingenuity one is to give additional expedition perfection to the pro- employed and looking article of jewellery, it is easy to form an idea In at an duct. processes, of the tools means of which it has been executed; and by a common stay-lace, would suppose whereas few people, on viewing had been made by a horse or a current of water, which it actually is the case. Of the three branches of industry, agriculture is the one that admits division labour in the least degree. It is impossible to collect any of of cultivators on the same spot, to use their joint exer- great number in the tions of one and the same product. The soil they raising work upon extended over the whole surface of the globe, and is obliges them to work at considerable distance from each other. Be- sides, agriculture does allow of one person being continually not in the same operation. cannot be all the yeai employed One man digging, more than another ^an find constant occu- or any ploughing gathering in the crop. Moreover, it is very rarely that the pation in one's land can be devoted to the same kind of cultivation, of whole the same kind of cultivation can be continued on the same or that for spot and, many successive years. The land would be exhausted; the of the whole property to be uniform, yet supposing cultivation the preparing and dressing of the whole ground, and the even then, getting in of of the crops, would come on at the same time, the whole the and be unoccupied at other periods of the year.* labourers ther on account of their preparation or the distance they may have been brought from; a few of instruction or tasteful amusement; a few books besides works In a the consump- mere almanacs and prayer-books. still more advanced slage, tion of all these things would be constant and extensive enough to support regu- and well-stocked shops in all these different lines. lar this degree of wealth Of examples be found in Europe, particularly are to parts of England, Holland, in and Germany. * It is not common to meet with such large concerns in agriculture, as in the branches of and manufacture. A farmer or proprietor seldom under- commerce takes more than four five hundred acres; and his concern, in point of capital or and amount of produce, does not exceed that of a middling tradesman, or manu- facturer. This difference attributable to many concurrent causes; chiefly to is cf the extensive area this branch of industry requires; to the bulky nature M>e

100 CW. VIII. ON PRODUCTION. 9? Moreover, the nature of his occupation and of agricultural pro ducts makes it highly convenient for the cultivator to raise his own vegetables, fruit, and cattle, and even to manufacture part of the tools and utensils employed in his house-keeping; though in the other channels of industry, these items of consumption give exclusive occupation to a number of distinct classes. Where concerns of industry are carried on in manufactories, in which one and the same master manufacturer conducts the product through all its stages, he can never establish any great subdivision of the various operations, without great command of capital. For such division requires larger advances of wages, of raw materials, and of tools and implements. Where eighteen workmen manufacture but twenty pins each per day, that is to say, in ail 360 pins, weigh- ing scarcely an ounce of metal, the daily advance of an ounce of fresh metal is enough to keep them in regular work. But if, in con- sequence of division of labour, these same eighteen persons can be brought, as we know they can, to produce 86,400 pins, the daily supply of raw material requisite for their regular employ will be 240 ounces weight of metal; consequently a much more considerable advance will be called for. If we further take into calculation, that there is an interval of probably a month or more, from the purchase of the metal by the manufacturer to the period of his reimbursement by the sale of his pins, we shall find that he must necessarily have at ail times on hand, in different stages of progressive manufacture, 30 times 240 ounces of metal; in other words, the portion of his capital vested in raw material alone will amount to the value of 450 lbs. of metal. In addition to which, it must be observed, that the division of labour cannot be effected without the aid of various implements and machines, that form themselves an important item of capital. Thus, in poor countries, we frequently find a product carried through all its stages, from first to last, by one and the same workman, from mere want of the capital requisite for a judicious division of the dif- ferent operations. We must not however suppose, that, to effect this division of labour, it is necessary the capital should be placed all in the hands of a single adventurer, or the business conducted all within the walls of one grand establishment. A pair of boots undergoes a variety of processes, whereof all are not executed by the bootmaker alone; the grazier, the tanner, the currier, all others, who immediately or re^ motely furnish any substance or tool used in the making of boots; contribute to the raising of the product; and though there is a very considerable subdivision of labour in the making of this article, tb3 collecting it at one point from the distant produce, and consequently difficulty of parts of the farm, or sending it to very remote markets; to the nature of the business itself, which is not susceptible of any regular and uniform system, and requires in the adventurer a succession of temporary expedients and directions, manuring by the difference of culture, of suggested and dressings, and the variety of each labourer's occupations, according to the seasons, the change of weather &

101 Oft ON PRODUCTION. BOOK L of the joint concurrent producers may have very greater part and capital. fittle command of of the subdivision of the various Having detailed advantages the and the which to industry, it may be carried, occupations of extent be incomplete, were we to omit of the the view subject would other hand, the inconveniences that inseparably noticing, on the it. attend devoted to the execution of a single A man, whose whole life is faculty executing it the of operation, will most assuredly acquire quicker than others; but he will, at the better be and same time, fit for every other occupation, corporeal or intellectual; rendered less be gradually blunted or extinguished ; and the his other faculties will man, as an in consequence. To have individual, will degenerate any thing make the eighteenth part of a pin, is a never done but human being of give for a his existence. Nor is it sorry account to imagined that this degeneracy from the dignity of human to be is confined to the labourer, that plies all his life at the file or nature the hammer; men, whose professional duties call into play the finest of are subject to similar degradation. This divi- faculties the mind, of occupations has given rise to the profession of attorneys, sion it is to whose sole business in the courts of justice instead of appear and to the principals, up the different steps of the process on follow their behalf. These legal practitioners are, confessedly, seldom deficient in and ability; yet it is not uncommon to technical skill men, even eminence in this profession, wholly igno- meet with of most simple processes manufactures they every of the of the rant who, if they were set to work to day make use of; mend the simplest of their furniture, would scarcely know how to begin, and article not drive a nail, without exciting the risibility could probably of every carpenter's awkward apprentice; placed in a situation and if a for instance, to save a drowning of greater emergency, called upon, or to rescue a fellow-townsman from a friend, hostile attack, would be truly distressing perplexity; whereas a rough peasant, inha- in a biting semi-barbarous district, would probably extricate himself a from a similar situation with honour. With regard to the labouring class, the incapacity for any other than a the condition of mere labourers single occupation, renders and as well as less profitable. They have more hard wearisome, of enforcing their own rights to an equitable portion of less means of the the gross value The workman, that carries about product. him the whole implements with his trade, can change his locality of at pleasure, and earn his subsistence wherever he pleases: in the other case, mere adjective, without individual capacity, inde- he is a pendence, or substantive importance, when separated from his fellow- labourers, and obliged to (accept whatever terms his employer thinks fit to impose On the whole, we may conclude, that division of labour is a skil- ful mode employing human agency, that it consequently multiplies of c o other words, the powers end the enjoy- society; in the productions

102 CHAP. IX. ON PRODUCTION. 0i> of mankind; that it in some degree degrades the faculties ments but individual capacity, (a) (1) of man in his CHAPTER IX. THE DIFFERENT METHODS EMPLOYING COMMERCIAL INDUSTRY, AND CP OF WHICH THEY CONCUR IN PRODUCTION. THE MODE IN are not all to be had in all places indifferently. COMMODITIES The immediate products of the earth depend upon the local varie- ties of soil and climate; and even the products of industry are met with only in such places as are most favourable to their production. Whence it follows that, where products, whether of industry or of the earth, do not grow naturally, they can not be introduced or produced in a perfect state, and fit for consumption, without under- going a certain modification; that is to say, that of transport or con- veyance. This transfer gives occupation to what has been called commercial industry. External commerce consists of the supply of the home market with foreign, and of foreign markets with home products.* Wholesale commerce is the buying of large quantities and re- selling to inferior dealers. Retail commerce is the buying of wholesale dealers, and re-selling to consumers. merchandise; and merchan- •Products that are bought to be re-sold, are called for dise bought is denominated commodities. (6) consumption it peculiarly incumbent upon government (a) This consideration makes the of manufacturing nation diffuse a benefits to early education, and thus of the the degeneration from being intellectual as prevent as corporeal. T. well (6) This distinction been discarded in the translation, for the sake has of simplification; the general term products being sufficiently intelligible and specific. T. (1) ["The extensive propagation of light and refinement," says 1)UOALD STEWART, " the influence of the press, aided by the spirit of com- arising from to be the to be provided by nature against the fatal effects merce, seems remedy be produced, by the subdivision of labour accompanying which would otherwise of the the progress nor is any thing wanting to make the mechanical arts: but wise institutions to facilitate general instruction, and to remedy effectual, adapt the education of individuals to the stations they are to occupy. The mind of the the limited sphere of his activity, would sink below artist, which, from the of the the level savage, might receive in infancy peasant means of or the "ntellectual enioyment and the seeds of moral improvement; and even the insipid uniformity of nis professional engagements, by presenting no object to awaken to his ingenuity distract his attention, might leave him at liberty or to employ his faculties on subjects more interesting to himself, and more extensively useful to others."] AMERICAN EDITOR.

103 iOO ON PRODUCTION. BOOK I of money specie is conducted by the banker, The commerce or pays on of other people, or gives bills, or- who receives or account of at the place where letters credit, payable elsewhere than ders, or is sometimes called they banking trade, (a) are given. This the sellers together. and The broker brings buyers these several branches are all agents of The persons engaged in approximate products to commercial industry, whose agency tends hands of the ultimate consumer. The agency of the retailer the to ounce to the pepper is quite as indispensable an consumer, as of of the merchant, who despatches his vessel to the Moluccas for that, of only reason why these different functions are not a cargo; and the by one and the same individual is, both performed can because they be executed with more economy and convenience two. To enter by an examination limits and practices of these minutely into of the commercial industry, would write a of be to various departments commerce.* All we have to do in this work treatise on is, to in- in what manner and degree they influence the production of quire values. II., we shall see how the actual demand for a product In Book originating in its is limited by the amount of the cost of utility, and its relative value is determined production, upon what principle At present it is sufficient for the clear con in each particular place. ception of to consider the value of a product commercial production, as given quantity or datum. Thus, without examining the reason a why oil of olives is worth at Marseilles thirty, and at Paris forty sous per lb., I shall content myself with simply stating, that who- the transport that article from Marseilles to Paris, ever effects of value amount of ten sous per lb. Nor its to the thereby increases supposed, that its intrinsic value has received no is it to be accession the transit. The value has positively augmented. The intrinsic by of silver is greater at Paris than at Lima; and the value are cases precisely similar. the transport products can not be effected without the In fact, of variety of means, which have each an intrinsic concurrence of a of their own, and of value the actual transport itself, in the which literal confined sense of the term, js commonly and most not the chargeable. There must be one commercial establishment at tho * A complete treatise on commerce is still a desideratum in literature, not- withstanding the labours of Melon Forbonnais, for hitherto the principles and of (1) nnd consequences commerce have been little understood. The banker's business is not confined to dealings in metal, coined or un^ (a) and but is to dealings in paper-money, extended dealings in credit, as coined,

104 CHAP. IX. ON PRODUCTION. 10) the products collected; another at the place it is place where are besides package and transported to; warehousing. of advance There must capital equivalent to the value trans- be an and brokers, to be ported. Moreover, there are agents, insurers, are really productive occupations, since, without these paid. All their agency, the consumer can never enjoy the product; and suppos- reduced by competition to the lowest ing their remuneration to be he can be in no way cheaper supplied. rate possible, well as the discovery as In commercial, manufacturing industry, more economical more expeditious process, the more skilful a of or employment of natural agents, the substitution, of a canal for instance, of a road, or the removal of a difficulty interposed by nature in place by human institutions, reduces the or of production, and pro- cost cures gain to the consumer, without any consequent loss to the a who can lower price without prejudice to himself, producer, his outlay advance are likewise reduced. his own and because internal commerce. The same principles govern both external and Germany or to Russia, and sells to The merchant that exports silks for 40 cents per yard, stuffs that have cost but 30 at Petersburg cents at a value of 10 cents per yard. If the same mer- Lyons, creates a of peltry from Russia, and sells at Havre chant brings return cargo dollars, or a value equiva- for 240 dollars what cost him at Riga but 200 a new value of 40 dollars, created and lent to 200 dollars, there will be shared amongst different agents engaged in this production of the value, whatever nation they may belong to, and whatever be the rela- tive importance of the first- their respective productive agency, from to the ticket-porter inclusive.* this creation rate merchant And by the wealth of the French nation is enriched to*the amount value, of of gains of French industry and of French capital, in the all the course and the Russian nation to the amount of those of of this production; and Russian capital. Nay, perhaps a third nation, Russian industry independent both of and of Russia, may get the whole profit France the accruing from mutual commercial intercourse between these and yet neither of them loses any thing, if their industry and nations; ai home. The capital have other equally lucrative employments of the existence of very circumstance an active external commerce, no matter what agents it be conducted by, is a very powerful stimu- lus to internal industry. The Chinese, who abandon the whole of their external commerce to an other nations, must nevertheless raise as enormous gross product, otherwise they could never support, they a population twice as large as that of all Europe, upon do, surface a of nearly equal extent. A shop-keeper in good business is quite as well off as a pedlar that travels the country with his wares on his back.f Commercial jealousy is, all, nothing but prejudice : it after is wild fruit, that will drop of itself when it has arrived at maturity. a * The ordinary proportions of this division will be explained, infra, Book IT. Chip. 7. 1 f It has been often asked, Why not combine commercial with agriculture and

105 1U2 ON PRODUCTION. BOOK L The external commerce of all countries is inconsiderable, com. pared with the internal. To convince ourselves of the truth of this position, it will be sufficient to take note at all numerous or even sumptuous entertainments, how very small is the proportion of values of foreign growth, in comparison with those of homo produc- tion; especially, if we take into the account, as we ought to do, the value of buildings and habitations, which is necessarily cf home (a) production.* The internal commerce of a country, though, from its minute amification, it is less obvious and striking, besides being the most ] considerable, is likewise the most advantageous. (1) For both the remittances and returns of this commerce are necessarily home pro- ducts. It sets in motion a double production, and the profits of it are not participated with foreigners. For this reason, roads, canals, (&) bridges, the abolition of internal duties, tolls, duties on transit, (c) which are in effect tolls, every measure, in short, which promotes internal circulation, is favourable to national wealth. manufacturing productions? Why, for the same reason that makes a whole- have a surplus of sale cotton spinner, and capital, more apt to extend if he time to his labour and capital in the working up his spinning concern, than employ of his own filiature into muslin and printed calicoes. the be impossible to estimate would proportion with any tolerable accu- * It in countries where calculations of this kind racy, even most in vogue. In- are deed, attempt would be a sad waste of time. To say the truth, statistical the are of little real utility; their accuracy ever so well assured, statements for, be only can correct for the moment. The only knowledge really useful is, hey be of general principles and laws, that is to say, the knowledge of the knowledge can the connexion between cause and effect, which alone us what safely teach it is sole to adopt in every possible emergency. The measures use of sta- best in political economy is, to supply examples and illustrations of general tistics principles. They can never be the basis of principles, which are grounded upon the nature of whereas statistics, in the most improved state, are only an things; index of their quantity. (a) This position may or not, according to circumstances. The be correct long run, be supplied by the national indus- national wants must always, in the and exertions: but what is there to prevent a try the nation from exchanging larger portion domestic products for the products of other nations 1 The of its of external than of domestic people of Tyre probably consumed more products industry, although indeed those external must have been purchased with domes- tic products. Tyre, true, was rather a city than a nation. Holland resem- it is bled her in many particulars. The observation applies to every community, the chief part of is, the modification of external products. T. whose production Douanes. Octrois. (6) (c) [The author has here, in common with Dr. (1) an error. Smith, fallen into Capital, whether employed in the home or foreign trade, is equally productive. If, for example, the home trade realized greater profits than foreign commerce, every cent of capital employed latter would, in a very little time, be with- in the drawn from »» comparatively disadvantageous an investment. Capital will flow into the foreign, instead of the home trade, only because it will thereby yield a be larger profit. internal commerce of a country cannot therefore The said to be •' Hie most advantageous."] AMERICAN EDITOU.

106 CHAP. IX. ON PRODUCTION. 103 is a further branch commerce, called the trade oi" spocu There of purchase of at one time, to be lation, which consists in the goods and at another time, when they same place condition re-sold in the is productive; its are expected to be dearer. Even this trade utility employment of capital, warehouses, care in the pre- in the consists short, human industry in the withdrawing from circu- servation, in a commodity depressed value by temporary superabun- lation in thereby reduced price below the charges of production, and in dance, discourage its production, with the design and purpose of so as to circulation when restoring shall become more scarce, and it to it its be raised above the natural price, the charges of when price shall so as to throw a loss upon the consumers. The evident production, of operation of trade is, to transport commodities in respect this kind of locality. prove an unprofitable or losing of time, instead If it sign that was useless in the particular instance, and it is a it concern, commodity was not redundant at the time that purchase, and the of at the time of re-sale. This operation has also been denomi- scarce the trade of reserve, (a) Where nated, with much propriety, it is directed buying up of the whole of an article, for the sake of to the an it is called fc/reslalling, exacting exorbitant monopoly price, is happily difficult, in proportion as the national commerce which is extensive, consequently, the commodities and, circulation both in abundant and various. The carrying trade, as Smith calls it, consists in the purchase of goods in one for re-sale in another foreign market. foreign market of industry beneficial not only to the merchant that This branch is also the two nations between whom it is practised; it, but to practises reasons which have been explained while treating of ex- and that for carrying trade is but little suited to nations The ternal commerce. r small capital, whereof the w give activ- hole is wanted to possessed of to internal industry, which is always entitled to the preference. ity it on in ordinary times with advantage, because their The Dutch carry capital are both redundant, population The French, in peace and (b) have carried on a time, lucrative carrying trade between the different ports the Levant; because adventurers could procure advances of of on better terms capital France than in the Levant, and were per- in haps less exposed to the oppression of the detestable government of that country. They have since been supplanted by other nations, of is so far from being an injury whose possession the carrying trade the subjects of the Porte, that it actually keeps alive the to little remaining industry its* territories. Some governments, less wise of the in this particular than Turkish, have interdicted their carrying to foreign adventurers. trade the native traders can carry on the If \ja) Commerce de reserve. There is no corresponding term in English ; it ia intelligible enough. The carrying trade of Holland is now almost extinct. In fact, whether oi (b) no it be suited to a given nation at a given time, depends upon a great variety of circumstances. advantage of the neutral character gave a very large pro- The portion of it for some years to the American Union, though notoriously deficient in capital for the purposes of internal cultivation. T

107 104 ON PRODUCTION. BOOK I. to greater profit than foreigners, there occasion to transport is no latter; and, exclude be conducted cheaper by foreigners, if it the can of the of employing voluntary sacrifice profit their exclusion is a to elucidate this position. The freight them. An example will serve a Dutch skipper, say 7 dollars per Havre costs to of hemp from Riga must be taken ton. granted, that no other but the Dutchman can It for it so He makes a tender to the French government, carry cheap. consumer dollars Russian hemp, to provide tonnage at 8 is a which of per himself to of 1 dollar a per ton, thereby obviously securing profit a view to favour ton. Suppose then, that the French government, with to employ French tonnage, which can the national shipping, prefers be not for less than 10 dollars per ton, or 11 dollars, allow- navigated Tho ing the same profit to the ship-owner—What is the consequence? pocket 3 dollars per ton, for the mere pur- government will be out of giving of profit of 1 dollar to the national ship-owners. And, a pose individuals of the nation contribute towards the na- but the as none tional expenditure, this operation will have cost to one class of French- 3 dollars men the purpose of giving to another class of Frenchmen for a profit 1 dollar only. However the numbers may vary, the result of be the for there is but one fair way of stating must account. similar; I is to caution the reader, that It have through- hardly necessary out been considering maritime industry solely in its relation to national wealth. Its influence upon national security is another thing. The art of is an expedient of war, as well as of commerce. navigation of a vessel military manoeuvre; and the nation The working is a larger proportion seamen, is, therefore, ceteris the of containing more powerful in a military point paribus, view; conse- the of and military considerations have always interfered quently, political with national views of commerce, in matters of navigation; and Eng- in passing her celebrated Navigation Act, interdicting land, her car- rying trade to vessels, the owners and at least three-fourths of the all not had in view, not so much crews whereof were British subjects, of the carrying trade, as the increase of the profits her own military marine, diminution of that of and the the other powers, especially of Holland, which then enjoyed an immense carrying trade, and was the chief object of English jealousy. Nor can it a wise national be denied, that these views may actuate it is an advantage administration; assuming always, that to one domineer over others. to these political dogmas are fast nation But day or other be growing obsolete. Policy will some to consist held in coveting pre-eminence of merit rather than of the The force. love of domination never attains more than a factitious elevation, that is sure to make enemies of all its neighbours. It is this that engen- ders national debt, internal abuse, tyranny and revolution; while the of the sense mutual interest begets international kindness, extends of sphere and leads to a prosperity, permanent, useful intercourse, because it is natural. (1) (1) [The operation of British Navigation-acts, like all other restrictive ~*« the ^illations, has been prejudicial to the growth of national wealth, without, at the same time, having contributed in any degree to the establishment of the navaJ

108 X. ON 105 PRODUCTION. X. CHAPTER TRANSFORMATIONS UNDERGONE BY CAPITAL IN THE PROGRESS OP THE OF PRODUCTION WE have seen above (Chap. III.) of what the productive capital of a nation consists, and to what uses it is applicable. So much it was necessary to specify, in enumerating the various means of produc- tion. We now come to consider and examine, what becomes of capital in the progress of production, and how it is perpetuated and increased. To avoid fatiguing the reader with abstract speculation, I shall begin with giving examples, which I shall take from every day's experience and observation. The general principles will follow of themselves, and the reader will immediately see their applicability to all other cases, which he may have occasion to pronounce a judg- ment upon. When the land-owner is himself the cultivator, he must possess a capital over and above the value of his land; that is to say, value to some amount or other consisting, in the first place, of clearance of the ground, together with works and erections thereon, which may at pleasure be looked upon as part of the value of the estate, but which preponderance " If it can be made to appear," says a highly Great Britain. of the greater wealth which should, in distinguished political economist, "that we these laws, have possessed, would have supplied a revenue ade- the absence of to the maintenance of an quate of seamen in the navy, it would equal number follow that we gainers by these acts; and if it further appear that this ad- are no to the maintenance twice or three ditional revenue would have been equal of would be clear it losers by them. It is acknow- times as many seamen, that we are by many of ledged for these laws, that their tendency has not been the advocates to increase national revenue, but in some degree the reverse. the " Our national preponderance," says, we believe, Mr. Horner, "rests on a very Our national energy and wealth originate in our freedom, and different basis. in that security of property which is its happy consequence. The number of our seamen in is owing to the spirit and capital of our tra- merchant shipping our and coast. The magnitude of our great extent of navy is due neither ders, to nor to colonial monopolies, but to the resources of an indus- to navigation-acts, trious country. " How different ideas suggested by such observations, from the narrow are the acts of our naval superiority to the theories of a few those who trace operation of Parliament! They remind us of thje technical philosophy of the judge, wcio Gravely ascribed the lamentable prevalence of duelling, not to the violence of human passions, but to a of the law of the land ! Besides, our misapprehension as it is well remarked by Dr. Smith, was conspicuous before naval greatness, It existed then, as it had done before, and nir navigation laws were framed. has done since, in a degree commensurate with our commerce, and with the ex- Vnt national prosperity. These circumstances, and not navigation laws, of our will be found the regulator of naval power in all countries. They determine its extent among the Dutch, to whom, even in the season of their greatest strength, navigation laws were entirely unknown." Vide Edinburgh Review, vol. xiv. .•age 95.] AMERICAN EDITOR

109 1 to ON PRODUCTION. BOOK I never', lelejs, the of previous human exertion, and an ac- sire, result original value cession of to the the land.* is of wear and tear; trifling This portion little subject his capital to cultivator obtain entire. it occasional repairs will preserve If the to effect these repairs, this from the annual produce wherewithal is item in perpetuity. of capital thereby preservable and utensils, together and Ploughs, other farming implements animals employed in tillage, form another item with the culti- the of and an of much quicker consumption, which, vator's capital, article like manner kept up and renovated, as occasion in be however, may expense of the annual produce of the concern, may require, at the maintained and thus full original amount. be at its must have stores he various kinds; seeds for his ground, Finally, of for his cattle, and food as well provisions, fodder money for his as labourers'wages, Observe, that this branch of capitalis totally &c.f in the course the year, at least; and sometimes decomposed once of four times over. eve- money, grain and provisions of or three The must necessarily but so it be, ry description disappear altogether; atom of the and is lost, if the cultivator, after yet not an capital the produce a fair allowance for the productive abstracting from of his land (rent) for the productive service of the capital service and for the productive service personal embarked (interest) of the the whole set motion (wages), contrive to make the labour that has in the outlay of money, seed, live stock, annual produce replace &c, even article of manure, so as to put himself in possession of a to the to what he started with the preceding year. value equal Thus we find, that capital may yet be kept up, though almost every part have undergone some change, and many parts be of it for, indeed, capita] consists this or completely annihilated; not in substance, value. or that commodity but in its difficult to conceive, that if the estate be sufficiently Nor is it managed with order, economy, and intelligence, the extensive, and of the may enable him to lay by a surplus, after profits cultivator the entire value of his capital, and defraying the expenses replacing The of himself and familv. of disposing of this surplus is of mode to the and will be treated of in the utmost importance community, All that is at present necessary is, to impress a the next chapter. * Arthur Young, his Vieio of the Agriculture of France, makes no estimate in of capital permanently vested in the land of France within its old of this item limits; but merely reckons it to be less than the capital so vested in England, in the proportion of 36 per English acre. So that, in the very mode- livres tournois as is vested in permanent amelioration of rate supposi'ion, that half much capital in France as in England, the capital so vested in Old France, reckoned the land 7 at per acre, would amount, upon 131 millions of acres, to 817 millions dollars dollars for this item of French capital alone. of fThe same writer (Young) estimates, that in France, these two last items of rapit-il, viz. implements, beasts of husbandry, stores of provisions, &c. may bo set down at 9 per acre, one acre with another; making an aggregate of dollars 1179 millions dollars; which, added to the former estimate, shows a total of of 1996 millions of dollars, capital engaged in the agricultural industry of Old in France estimates the same items of capital He England at twice as mucr per acre.

110 CHAP. X. ON PRODUCTION. Ifi7 clear conviction, that the value of capital, though consumed, is Hot yet destroyed, wherever it has been consumed in such way as to re- and that a concern may go on forever, and annually produce itself; render a new product with the same capital, although that capital be in a perpetual course of consumption. After tracing capital through its various transformations in the department of agriculture, it will be easy to follow its transforma tions in the other two departments of manufacture and commerce. In manufacture, as well as agriculture, there are some branches of capital that last for years; buildings and fixtures for instance, machi- nery and some kinds of tools; others, on the contrary, lose their form entirely; the oil and pot-ash used by soap-makers cease to be oil and pot-ash when they assume the form of soap. In the same manner, the drugs employed in dyeing indigo cease to be Brazil wood or annatto, as the case may be, and are incorporated with the fabrc they are employed in colouring. And so of the wages and maintenance of the labourers. In commerce, almost the whole capital undergoes complete trans- mutation, and many items of it several times in the cburse of a year. A merchant exchanges his specie for woollens or jewellery, which is one change of form. He ships them for Turkey, and on the voyage, some more of his money is converted into the wages of the crew. The cargo arrives at Constantinople, where he sells the investment to the wholesale dealers, who pay him in bills upon Smyrna, which is a second metamorphosis; the capital embarked is now in the shape of bills, which he makes use of in the purchase of cotton at Smyrna; a third transformation. The cotton is shipped for France and sold there, which completes the fourth change of form; thus reproducing the capital, most probably with profit, under its original shape ot French coin. It is obvious, that the objects capable of acting the part of capital are innumerable. If, at any given period, one wishes to know what the capital of a nation consisted of, it would be found composed of an infinity of objects, commodities and substances, of which it would be impossible to guess the aggregate value with any tolerable accuracy, and of which some are situated many thousand leagues from its frontiers. At the same time, it appears that the most in- significant and perishable articles are a part, and often a very im- portant part, too, of the national capital; that although the items of capital are in a continual course of consumption and decomposition, it by no means follows, that the capital itself is destroyed and con- sumed, provided that its value be preserved in some other shape ; consequently, that the introduction or import of the vilest and most perishable commodities may be just as profitable as that of the most costly and durable — gold or silver; that, in fact, the former, are more profitable the instant they are more sought after; that the pro ducers themselves are the only competent judges of the transforma- tion, export, and import, of these various matters and commodities:

111 108 ON PRODUCTION. BOOK L and that every government which interferes, every system calculated to influence production, do mischief. can only concerns, in the capital is completely renovated, There are which of in the year. work production begun afresh, several times and the can be perfected and An operation of manufacture, that the product three months, will admit of the capital being turned to in sold supposed that the profit account annually four times. It may be less than when is capital is turned but once in twelve each time the otherwise, there would four times the profit it be months. Were advantage that would soon attract an overflow of gained ; an capital and lower the profit by competition. On in this particular channel, it requires more than a the other hand, products that to perfect, year such leather, must, over and above the original capital, yield the as of more than year; otherwise, who could undertake to profits one ? raise them capi- of In and the East Indies, the the trade Europe with China is two or three years before its return. Nor is it ne- tal embarked in commerce or in manufacture, any' more than in agricul- cessary ture, which been cited as an example, that the capital should be has in the of money, to be entirely replaced. Merchants realized form for the most part, realize in this and manufacturers, whole way the of their capital but once in their lives, and that is when they wind up and leave off business. Yet they are at no loss to discover at any time whether their capital be or diminished, by referring to enlarged of their assets time being. the inventory for the productive operation always a mere on a is The capital employed payment of advance made and reimbursed for productive services, the value of their resulting product. by the ore from the bowels of the earth; the The miner extracts him for it. iron-founder pays the miner's production, Here ends is for by an advance out of the capital of the iron-found- which paid the ore, refines and er. This latter next smelts it into steel, makes which he sells to the cutler: thus is the production of the founder paid, and his advance reimbursed by a second advance on the part of the cutler, made in the for the steel. This again the cutler price up the price for which replaces his advance works into razor-blades, and at the same time pays for his productive a^encv. of capital, is manifest, then, that the value of the ultimate product ra^or- It blades, been sufficient to replace all the capital successively em- has ployed in its production, and, at the same time, to pay for the pro- duction itself; rather, that the successive advances of capital have or for the paid and the price of the product has productive services, reimbursed those advances; which is precisely the same tiling as if gone immediately :ne aggregate gross value of the product had or »c defray tne charges of its production.

112 Cm?. XI. ON 10S PRODUCTION. XI. CHAPTER OP THE FORMATION AND MULTIPLICATION CP CAPITAL. IN the foregoing chapter, I have shown how productive capital, though kept, during the progress of production, in a continual state of employment, and subject to perpetual change and wear, is yet ultimately reproduced in full value, when the business of production is at an end. Since, then, wealth consists in the value of matter or itself, I trust my readers substance, not in the substance or matter have clearly comprehended, that the productive capital employed, notwithstanding its frequent transmutations, is all the while the same capital. It will be conceived with equal facility, that, inasmuch as the value produced has replaced the value consumed, that produced value may be equal, inferior, or superior in amount, to the value consumed, according to circumstances. If equal, the capital has been merely replaced and kept up; if inferior, the capital has been encroached upon; but if superior, there has been an actual increase and accession of capital. This is precisely the point to which we traced the culti- vator, cited by way of an example in the preceding chapter. We supposed him, after the complete re-establishment of his capital, so as to put him in a condition to begin the new year's cultivation with equal means at his disposal, to have netted a surplus produce beyond his consumption of some value or other; say of 1000 dollars. Now, let .observe the various methods, in which he may dispose us of his surplus of 1000 dollars; for simple as the matter may appear to be, there is no point upon which more error has prevailed, or which has greater influence upon the condition of mankind. Whatever kind of produce this surplus, which we have valued at 1000 dollars, may consist of, the owner may exchange it for gold or silver specie, and bury it in the earth till he wants it again. Does the national capital suffer a loss of 1000 dollars by this operation? Certainly not; for we have just seen, that the value of that capital was before completely replaced. Has any one been injured to that amount ? By no means; for he has neither robbed nor cheated any body, and has received no value whatever, without giving an equiva- lent. It may be said, perhaps, he has given wheat in exchange for the dollars he has thus buried, which wheat was very soon con- sumed;, yet the 1000 dollars still continue withdrawn from the capital of the community. But I trust it will be recollected, that wheat, as well as silver or gold, may compose a part of the national capital; indeed, we have seen that national capital must necessarily consist, in a great measure, of wheat and such like substances, liable to either partial or total consumption, without any diminution of capital thereupon ; for, in short, that reproduction completely replaces the value consumed, including the profits of the producers, whose

113 1 JO ON PRODUCTION. BOOK I is part value consumed. Wherefore, the productive agency of the cultivator instant that his capital, and begins has the fully replaced as the 1000 same means dollars may be again with before, the the national capital. without reducing thrown into the sea trace the disposal of this surplus of 1000 dollars to But let us instance, that instead every imaginable destination. Suppose, for of cultivator upon being buried, they have been spent an by the elegant this case, this whole value been destroyed in In entertainment. has sumptuous feast, an afternoon; ball, and fireworks, will have a a up the whole. The value thus destroyed exists no longer swallowed the community: it no longer forms an item in the aggregate of in for wealth; the identical pieces of those persons, into whose hands an equivalent wines, refreshments, silver have come, have given in which values eatables, gunpowder, to nothing; are &c, all reduced in this is no the gross national capital, however, more diminished former. case than surplus value had been produced; and in the A is all that has been destroyed, so that things remain just this surplus as they were. 1000 dollars to have been spent in the pur- Again, suppose these of or linen. Still there is no reduction of chase furniture, plate, it must be allowed there is no national productive capital; although for in this case, nothing more is gained than the additional accession; the comforts and his family derive from the newly pur cultivator chased moveables. Fourthly and lastly, suppose the cultivator to add this excess ot 1000 dollars to his is to say, to re-employ it productive capital, that the productive powers farm as circumstances in increasing of his purchase more beasts of husbandry, or the in the of may require, support of more labourers; and in hire at the end and consequence, to gather produce enough to replace the full value of the of the year, a profit, 1000 dollars, with such manner, as to make them capable in of yielding fresh product the year after, and so on every year to a It is of the and then only, that the productive capital eternity. then, is to community that extent. really augmented on no It must be overlooked, that, in one way or other, a account saving such as that we have been speaking of, whether expended productively or is in all cases expended ano unproductively, still and this truth, that must remove a notion extremely consumed; is a in vogue—namely, that saving limits and false, though very much No act of saving subtracts in the injures consumption. least from consumption, provided thing saved be re-invested or restored the to productive employment. On the contrary, it gives rise to a con- sumption perpetually renovated and recurring; whereas there is no repetition of an (a) unproductive consumption, On the subject of (a) Sismondi, and after him our own Malthus, hrwe saving, adopted a different opinion. According* to them, the powers of production have already outrun desire and the ability to consume; consequently, every thing the (hat tends to reduce that desire is injurious, because it is already too inert foi rhe interests of production. Wherefore, inasmuch as the desire of accumulation

114 CHAP. XI. ON PRODUCTION. 1 ] 1 be observed, too, that form in which the value saved It must the saved and no essential differ- is so re-employed productively, makes is The less advantage, according ence. made with more saving or the person making it. Nor intelligence and to the circumstances of not is there any reason why this portion of capital should have been moment assumed the form of accumulated, without ever having for a an specie. of the farm has been saved that It may be actual product transmutation ; and resown or planted, without having undergone any the wood, that might have been used firing to warm su- perhaps as other or perfluous apartments, may have been converted into palings and what was cut down in the first instance as an carpenter's work; revenue, be so employed, as to become an item item capital. of of the way of augmenting the productive capital only indi- Now, of the community, viduals, as well as the aggregate productive capital of by this process of saving; in is of re-employing in pro- other words, duction more products created than have been consumed their cre- n be accumulated mere scra- ation. Productive capital cannot by the values without consuming them; ping together nor of any otherwise, to withdrawing them from unproductive, and devoting them by than reproductive consumption. There nothing odious in the real is accumulation of capital; we picture see its of the shall presently happy consequences. direct opposite of that of consumption, it the of necessity be injurious in is must On the highest degree. it might be proved without difficulty, these principles, that prodigality of public authority, war, or the poor law of England, is a the for all of national benefit: them stimulate consumption. Indeed they leave their to draw this inevitable conclusion; for they maintain in plain terms, that readers of the man, of the enlargement by the use of machinery or productive powers otherwise, makes existence of unproductive consumers a matter, not of mere the possibility or probability, but of actual necessity and expedience. (Vide Sis- mondi, Nonv. Prin. liv. ii. c. 3. and liv. iv. c. 4. Prin. of Pol. Econ.) Malthus, the prodigality Louis XIV. of France, and of the These maxims would justify of England. fortunately they are erroneous; and if the contrary of But Pitt system author here and principles laid down Chap. XV., needed further by our infra, 1 or support, they have been rendered still more clear and convincing illustration his recent Lettres a M. Malthus.—It is true, that the by of pro- enlargement ductive power naturally leads multiplication- of unproductive consumers: to the of 1 desire of barren consumption,'instead the being inert, is always why because in the human breast. But that multiplication is not active ; fi.r the necessary consumer made a producer, if not may be material, at least of immaterial pro- of ducts, which latter are capable of infinitely more multiplication and variety, as well as of re- more general diffusion than material products. While this field a national administration never need despair finding occupation mains open, of human labour supplanted by the And what is the parsimony of for machinery. It is not the hoarding of coin or modern days'! other valuables, which, though as authoi observes, it subtracts nothing from the national capital, is yet a our social because it suspends the utility of an existing product, or at any mischief, rate, prevents it from yielding the human gratification, which its barren con- sumption would afford. The of the miser are now either vested in accumulations reproduction which beneficial, or in the ownership of the sources of produc is tion. land, &3. &c. which it matters not to public wealth who may be possessed of, or in the of those sources, mortgages, national funds, &c. &c, Encumbrances -vhich are but portions of that ownership, and to which the same observation applies. T

115 112 ON PRODUCTION. BOOK I is accumulated, The form under which national capital is com- the respective geographical position, monly determined the by moral of The accumula- peculiar wants each nation. character, and the in its early stages consist, for the most part, of tions of a society of husbandry, live stock, improvements of buildings, implements land; those of a manufacturing people chiefly of raw materials, or still in the hands of its such in a more or less as are workmen, state; some part, of the necessary manufacturing finished and in machinery. nation devoted to commerce, capital is and In a tools form of wrought mostly accumulated unwrought goods, in the or by the merchant for the purpose of re-sale. that have been bought at the same time directs its A nation that to all three energies branches industry, namely, agriculture, manufactures, and com- of has a capital compounded all three different forms of pro- merce, of of of stores of every kind, that we ; that amazing quantity duction which, by the intel- find civilized society actually possessed of; and are that made of them, is constantly renovated, or even use ligent in spite increased, their enormous consumption, provided that the of industry community produces more than is destroyed by its of the consumption. I mean to say, that each nation has produced and laid by do not its actual capital. Values, in some the identical article that composes these, through or and laid shape other, have been produced by; and various transmutations, have assumed the form most convenient fot the time being. A bushel of wheat saved will feed a mason as well as a in embroidery. In the one case, the bushel of wheat worker in the shape masonry of a house; in the will be reproduced of the laced suit. of a other, under that industry, that has a capital of his own em- in Every adventurer has ready means of employing his saving productively; barked in it, in husbandry, he buys fresh parcels of land ; or, by judi- if engaged and of cious outlays improvements, augments the productive powers and to in trade, he buys if sells a greater what already belongs him; of merchandise. Capitalists have nearly the same advan- quantity tage : in the same manner as their they invest their whole savings is former capital and increase it pro tanto, or look out for invested, new ways of investment, which they are at no loss to discover; for the moment they are to be possessed of loose funds, they known to for propositions for the employment of them; seldom have wait of lands let out to farm, whereas the proprietors individuals that and live upon fixed income, wages of their personal labour, have or the not equal facility advantageous disposal of their savings, and in the can seldom invest them till they amount to a good round sum. Many savings are therefore consumed, that might otherwise have the capitals of swelled and consequently of the nation at individuals, largf. Banks and associations, whose object is to receive, collect, consequently and turn profit the small savings of individuals, are to very favourable to the multiplication of capital, whenever they are perfectly secure.

116 CHAP. XI. ON PRODUCTION. 113 of capital naturally slow of progress: fur it can The increase is value, arid never take place without actual production the of creation of is the labour, besides other ingredients.* of value time work and compelled are consume values all the while producers the Since to in the creation of fresh ones, the utmost they can are they engaged reproductive capital, is the value is to say, add to accumulate, that this sui they produce beyond what they consume; and the sum of additional wealth that plus public or individuals can is all the the more values saved and reproductively employed The acquire. are year, the more rapid is the national progress towards pros- in the is set in Its swelled, a larger quantity of industry is perity. capital and saving becomes more and more practicable, because the motion, and industry are additional means additional capital production. of Every saving increase of capital lays the groundwork of a or not only the saver himself, but likewise to perpetual annual profit, to motion this item of new capital. is set in by all those whose industry this reason that the celebrated Adam Smith likens It is frugal for the who enlarges his productive capital but in a solitary instance, man, the founder of an almshouse for the perpetual support cf a body to the of labouring persons upon of their own labour; and on the fruits the his capita], other hand, compares prodigal that encroaches upon to the roguish steward that should squander the funds of a charitable and leave destitute, not merely those that derived present institution, it, but all who subsistence from might derive it hereafter. likewise to be a He pronounces, without reserve, every prodigal public pest, and every careful and frugal person to be a benefactor of society, f It is fortunate, that self-interest is always on the watch to preserve the capital of and that capital can at no time be with- individuals; a proportionate loss drawn from productive employment, without of revenue. is of in every country, the profusion and igno- Smith opinion, that, individuals and of the public authorities, is rance com- of more than by the prevalent frugality of the people at large, and by pensated of a rich contractor, of a swindler or cheat, of a royal favourite, *The savings and are saturated with grants, pensions, actual accumu- unmerited emoluments, of capital, sometimes made with facility enough. But the values lations and are privileged by a reality, the product of the labour, thus amassed few, are, in and land, capital, numbers, who might themselves have made the saving, and of turned their own account, but for the it to of injustice, fraud* or vio- spoliation lence. f Wealth of Nations, b. ii. c. 3. Lord Lauderdale, in a work entitled," Enquiry wto the and Origin of Public Wealth," has proved, to his own conviction, Nature to increase the accumulation of capital is adverse to the /n opposition Smith, that : argument his af wealth on the position that such accumulation with- grounding to But draws from circulation values which would be-serviceable this industry. position untenable. Neither productive capital, nor the additions made to it, is Are withdrawn from circulation : otherwise they would remain inactive, and yield no profit whatever. On the the adventurer in industry, who makes contrary, of it, empbys, disposes of, and wholly consumes it, but in a way that re- use produces it, ami that with profit. I have noted this error of his lordship, because other works it been made the basis of has on political economy, which abound in false conch pions, having set out on this false principle.

117 IJ4 ON PRODUCTION. Hoo* I. their careful atttention to their own interests.* At least it seems undeniable, that almost all the nations of Europe are at this moment advancing in opulence; which could not be the case, unless each of them, taken in the aggregate, produced more than it consumed unproductively.f Even the revolutions of modern times appear to have been rather favourable than otherwise to the progress of opu- lence for they are no longer, as in ancient days, followed by con- ; tinued hostile invasion, or universal and protracted pillage; whereas, on the other hand, they have commonly overthrown the barriers of prejudice, and opened a wider field for talent and enterprise. But it is still a question, whether this frugality, which Smith gives indi- viduals credit for, be not, in the most numerous classes of society, a forced consequence of a vicious political organization. Is it true, that those classes receive their fair proportion of the gross produce, in return for their productive exertions? How many individuals live in constant penury, in the countries considered as the most wealthy! How many families are there, both in town and country, whose whole existence is a succession of privations; who, with every thing around them to awaken their desires, are reduced to the satis- faction of the very lowest wants, as if they lived in an age of the grossest barbarism and national poverty! Thus I am forced to infer, that, though unquestionably there is an annual saving of produce in almost all the nations of Europe, this saving is extorted much more commonly from urgent and natural wants, than from the consumption of superfluities, to which policy and humanity would hope to trace it. Whence arises a strong sus- picion of some radical defect in the policy and internal economical systems of most of their governments. Again, Smith thinks that the moderns are indebted for their com- parative opulence, rather to the prevalence of individual frugality, * b. ii. c. 3. Wealth of Nations, f Except during the continuance of ruinous wars, or excessive public extra- vagance, such as occured in France under the domination of Napoleon. It can- not be doubted, that, at that disastrous period of her history, even in the moments of her most brilliant miljtary successes, the amount of capital dilapidated exceed- ed the aggregate of savings. Requisitions and the havoc of war, in addition to the compulsory expenditure of individuals, and the pressure of exorbitant taxa- tion, must unquestionably have destroyed more values than the exertions of individual economy could devote to reproductive investment. This sovereign, wholly ignorant of political economy himself, and consequently affecting to despise its suggestions, encouraged his courtiers, like to squander the himself, enormous revenues derived from his favour, in the apprehension that wealth might make them independent. (1) (1) [We are told by Dr. Bowring and Mr. Villiers, in their valuable report on the Commercial Relations between France and Great Britain, published during the present year (1834), that the best authorities agree in declaring that the national riches of France were greatly diminished by the Imperial Regime, and, probably, a much larger amount was sacrificed in increased prices and diminish- ed trade than was lost by the more direct operation of Napoleon's policy.] AMERICAN EDITOR.

118 CHAP. XI. ON PRODUCTION. 115 to the enlargement productive power. I admit, tha sonn than of profusion absurd kinds ;* are of more rare now-a-days than formerly be can never be prac- should but recollected, that such profusion it of persons; and if we take tised, except by a very small number the to of a more abundant the pains consider how widely enjoyment the middle is and varied consumption diffused, particularly among society, I think it classes be found, that consumption and fru- of will gality have increased both together; for they are by no means incom- many concerns are there in every branch of industry, patible. How times prosperity, yield enough produce to the adventurers in of that, enlarge both their expenses and their savings ? to enable them to true of one particular concern, may possibly be true of the is What in the aggregate. The wealth of France was national production the progressively increasing during of the reign of first forty years in spite profusion, public and private, that the Louis XIV., of the court occasioned. splendour to produc- The of the stimulus given Colbert, multiplied resources faster than the court squan- by tion her dered them. Some people supposed, that this very prodigality was their multiplication; the the cause of which notion of gross fallacy by the the death of that circumstance, that after is demonstrated extravagancies of the court continuing at the same rate, the minister, the progress and production being unable to keep pace with them, of the kingdom reduced to an alarming state of exhaustion. The was of was the most gloomy that can be imagined. close that reign the death of Louis XIV., the public and private expendi- After of ture ;f and to me it ap- France have been still further increasing is not, however, to be *It the internal economy of ancient and supposed, that of modern states is so widely different as some may be led to imagine. There is a the rise and fall of the opulent cities of Tyre, striking similarity between and Alexandria, and those Venetian, Florentine, Genoese, and Carthage, of the same cause must ever attended with the same effect. The be Dutch republics. wonderful riches of Croesus, king of We read his of the Lydia, even before of some neighbouring states: whence we may infer, that the Lydians conquest an industrious and frugal people; for a king can draw his resources solely were from his The dry study of political economy would lead to this infer- subjects. ; happens to be also confirmed by the historical testimony of Justin, ence but it a people once powerful in the resources of industry ; (gens who calls the Lydians potens ;) industria quandam a notion of their enterprising character, and gives when tells us that Cyrus did not complete their subjugation, until he had he habituated them to indolence, gaming and debauchery. (Jussique cauponias el Ivdicras artes et It is clear, therefore, that they must have lenocinia exercere.) of the opposite qualities. Crcesus not taken a turn before been possessed Had military renown, he would probably have remained a powerful for pomp and in misfortune. The monarch, instead of ending his days connecting cause art of with effect, study of political economy, are probably as conducive to the and the of kings, as to that of their subjects. oersonal welfare f This increase of expenditure has not been altogether nominal, and consequen tial upon the reduction in the standard of the silver coinage of France ; a greater and quantity of products were consumed, and those of a better variety mor^ and expensive quality. And though refined silver is now intrinsically worth nearly as much as in the days of Louis XIV., since the same weight of silver is given society now actually for same Quantity of wheat; yet the same ranks of the ex- pend more silver in weight as well as in denomination.

119 j 16 ON PRODUCTION. Loo* I likewise : pears indisputable, that her national wealth has advanced Smith himself admits that it did ; and what is true of France is so of most of the other states of Europe in some degree or other. Turgot* falls in with Smith's opinion. He expresses his belief, that frugality is more generally prevalent now than in former times, and gives the following reasons: that, in most European countries, the interest of money was, on the average, lower than it had ever before been, a clear proof of the greater abundance of capita]; there- that greater frugality must have been exerted in the accumula- fore, tion of that capital than at any former period; and, certainly, the low rate of interest proves the existence of more abundant capital: but it proves nothing with regard to the manner of its acquirement in fact, it may have been acquired just as well by enlarged produc- tion as by greater frugality, as I have just been demonstrating. However, I am far from denying, that in many particulars, the moderns have improved the art of saving as well as that of producing. A man is not easily satisfied with less gratifications than he has been accustomed to: but there are many which he has learnt to procure at a cheaper rate. For instance, what can be more beautiful than the coloured furniture papers that adorn the walls of our apartments, 1 For- combining the grace of design with the freshness of colouring merly, many of those classes of society that now make use of paper hangings, were content with whitewashed walls, or a coarse ill-exe- cuted tapestry, infinitely dearer than the modern paperings. By the recent discovery of the efficacy of sulphuric acid in destroying the mucilaginous articles of vegetable oils, they have been rendered serviceable in lamps on the Argand principle of a double current of air, which before could only be lighted with fish oil, twice or thrice as dear. This discovery has of itself placed the use of those lamps, and the fine light they give, within reach of almost every class.f For this improvement in frugality, we are indebted to the advances of industry, which has, on the one hand discovered a greater number of economical processes; and, on the other, everywhere solicited the loan of capital, and tempted the holders of it, great or small, by better terms and greater security. In times when little industry existed, capital, being unprofitable, was seldom in any other shape than that of a hoard of specie locked up in a strong box, or buried in the earth as a reserve against emergency: however considerable in amount, it yielded no sort of benefit whatever, being in fact little else than a mere precautionary deposit, great or small. But the moment that this hoard was found capable of yielding a profit pro- portionate to its magnitude, its possessor had a double motive for increasing it, and that not of remote or precautionary, but of actual, * Reflex sur la Form, et la Distrib. des Rich. § 81. j- It is to be feared, that taxation will ultimately deprive the consumer of the nrivantage of such improvements. The increase of the internal taxes (droits reunis), of the stamps on patents, of the taxes and impediments affecting the internal transport of commodities, have already brought the price of these vege* bl oils almost to a par with the article they had so beneficially supplanted

120 CHAP. XI. ON PRODUCTION. 117 the profit yielded capital might, immediate benefit; since by the least diminution without and procure addi- of it, be the consumed an it greater tional gratifications. Thenceforward object became of none to those that in and more general solicitude than before, had create, augment, productive capital; and and in those that had one to be regarded as a property equally to a capital bearing interest began lucrative, and sometimes equally substantial with land yielding rent. capital as an evil, insomuch To such as regard the accumulation of as to the inequality of human fortune, I would sug- it tends aggravate accumulation has constant tendency to the multiplying if gest, that, a nature has anjequal tendency to divide of large fortunes, the course of man, whose life been spent A in augmenting hi; them again. has that of his country, must die at last, and the succes- own capital and a sole heir sion rarely devolves upon legatee, except where the or national laws sanction entails right of primogeniture. In and the the baneful influence such institutions, countries exempt from of left free and beneficent action, wealth is is where nature to its own subdivision through all the ramifications of the naturally diffused by life and furthest extremities.* social tree, carrying health to the nation of the enlarged at the same time that the The total capital is of individuals is capital subdivided. Thus, of an individual, when honestly acquired the growing wealth far from being viewed with jealous and reproductively employed, to be nailed as a eyes, of general prosperity. I say ought source" a fortune amassed by honestly acquired, because or extortion rapine is addition to the national stock; it is no a portion of capital rather transferred from the hands of one man, where it already existed, to those of has exerted no productive industry. On the another, who it is but too common, that wealth ill-gotten ill-spent also. contrary, is amassing capital, other words, value, I appre- of or, in The faculty cause of the vast superiority of man hend the brute to be one over in the aggregate, is a powerful engine con- creation. Capital, taken to the use of man alone. He can direct towards any one signed of the channel successive accumulations of many gene- employment can at most, no more than their rations. Other animals command, It is to be regretted that people should be so little attentive to merit in their * is always a degree of discredit thrown upon testamentary dispositions. There by the memory of a testator, to an unworthy object; and, on the con- his bounty trary, nothing endears him more to the survivors than a bequest dictated by public spirit, or the love of private virtue. The foundation of a hospital, of an establish- ment for the of the poor, of a perpetual premium for good actions, or a education a bequest to writer of eminent merit, extends the influence of the wealthy beyond of mortality, and enrols his name in the records of the limits (a) honour, («) This laudable ambition is always proportionate to the wealth, the civil Nberty, and the intelligence of a nation. In England, scarcely a year passes o heads without more than one instance of useful and extensive muni- er our ficence. The bequests to the elder Pitt, to Wilberforce, and other public men, «he frequent foundations and enlargements institutions of relief or education, of reflect equal honour on the character of the nation, and the memory of the iuJU rid»als. T.

121 JJ8 ON PRODUCTION. BOOK! vnd vidual accumulations, scraped together course respjctiAie in the days, of at the utmost, which can never amount or a a lew season so a degree of intel- tiling considerable: that, granting them to any of, that intelligence would ligence they do not seem possessed yet want of the materials to set it in motion. for remain ineffectual, Moreover, the powers of man, resulting it may be remarked, that the of amassing capital, are absolutely indefinable; from faculty assignable limit capital he may accumu- is no to the because there the aid of time, industry, late, frugality with and XII. CHAPTER OF UNPRODUCTIVE CAPITAL WE have seen above, that values once produced may be devoted, to the either of the wants of those who have acquired satisfaction them, further act of production. They may also be with- or to a and from reproductive drawn both from unproductive consumption remain buried concealed. employment, or and values, in so disposing of The owner not only deprives of them, of the self-gratification he might have derived from their himself but also of the advantage consumption, might draw from the he productive ageacy the value hoarded. He furthermore withholds of the employment it might make by the from industry of thai profits value. Amongst abundance of other causes of the misery and weakness of the countries subjected to the Ottoman dominion, it cannot be doubted, that one of the is, the vast quantity of capital principal in a state inactivity. The general distrust and uncer- remaining of future induce people of every rank, from the peasant tainty of the the pacha, to withdraw a part of their property from the greedy to of power: and value can never be invisible, without being inac- eyes This misfortune common to all countries, where the govern- tive. is is arbitrary, though in different degrees proportionate ment to the severity of despotism. For the same reason, during the violence of political convulsions, there is always a sensible contraction of capita], a stagnation of a disappearance of profit, and a general de- industry, the on the contrary, an instan- pression while alarm continues: and, and activity highly favourable to public prosperity, taneous energy the re-establishment of confidence. The saints and madonnas upon of superstitious nations, the splendid pageantry and richly decorated idols of Asiatic worship, gave life to no agricultural or manufacturing adoration enterprise. of the fane and the time lost in riches The tvould really purchase the blessings that barren prayers can never oxtort from the object of idolatry. There is a great deal of inert capital in countries, where the national habits lead to the extended

122 CHAP. XIII. ON PRODUCTION. IIS use of the precious metals in furniture, clothes, and decorations. The silly admiration bestowed by the lower orders on the display of such idle and unproductive finery, is hostile to their own interests For the opulent individual, who vests 20,000 dollars, in gilding plate, and the splendour of his establishment, has it not to lay out at interest, and withdraws it from the support of industry of any kind. The nation loses the annual revenue of so much capital, and the annual profit of the industry it might have kept in activity. Hitherto we have been considering that kind of value only, which is capable, after its creation, of being, as it were, incorporated with matter, and preserved for a longer or shorter period. But all the yalues producible by human industry, have not this quality. Some there are, which must h^ve reality, because they are in high estima- tion, and purchased by the exchange of costly and durable products, which nevertheless have themselves no durability, but perish the moment of their production. This class of values I shall define in immaterial the ensuing chapter, and denominate products.* CHAPTER XIII. OP IMMATERIAL PRODUCTS, OR VALUES CONSUMED AT THE MOMENT OF PRODUCTION. PHYSICIAN goes to visit a sick person, observes the symptoms A of disease, prescribes a remedy, and takes his leave without deposit- ing any product, that the invalid or his family can transfer to a third person, or even keep for the consumption of a future day. Has the industry of the physician been unproductive? Who can The patient's life has been saved perhaps. ? for a moment suppose so Was this product incapable of becoming an object of barter? By no means: the physician's advice has been exchanged for his fee; but the want of this advice ceased the moment it was given. The act of giving was its production, of hearing its consumption, and the consumption and production were simultaneous. This is what I call an immaterial product. The industry of a musician or an actor yields a product of the same kind: it gives one an amusement, a pleasure one can not pos- sibly retain or preserve for future consumption, or as the object of barter for other enjoyments. This pleasure has iis price, it is true. f perishable products, but this * It was my first intention to call these erm would be equally applicable to products of a material kind. Intransferable would be equally incorrect, for this class of products does pass from the pro- ducer to the consumer. The word transient does not exclude all idea of dura lion whatever, neither does the word momentary.

123 120 ON PRODUCTION. BOOK L it has no further existence, except perhaps memory, ana but in the instant no exchangeable value, after of its the production. of the products to the results of these allow name Smith will not so bestowed branches calls unproductive; of industry. Labour he into by his definition of wealth, which he defines he was led an error things bearing a to consist of being preserved, of value capable of the name to all things bearing exchangeable instead extending value: consequently, excluding products consumed as soon as created. of as well as that of The industry the public the physician, however, advocate or the judge, which are all of them of the the functionary, so essential a nature, that without those of same class, satisfies wants no society could exist. Are not, professions the fruits of their then, labour real? They purchased at the price of are so far so, as to be to be wealth; other and material products, which Smith allows and repetition immaterial this kind of barter, the producers of the by of products acquire fortunes.* to items of pure amusement, it cannot be denied, that To descend of a good comedy gives as solid a pleasure as a the representation box of or a discharge of fire-works, which are products, comfits, Nor ca!i I any sound rea- even within Smith's definition. discover why the talent of the painter should be deemed productive, son, not the and of the musician.f talent the Smith himself has exposed of the economist in confining error the term, wealth, to the mere value of the raw material contained in each product; he a great step in political economy, by advanced to consist material, plus the value demonstrating wealth of the raw industry; having gone so far as to promote to to it by but, added wealth an abstract commodity, the rank why reckon it as of value, and exchangeable, when not incorporated in nothing, however real is the more surprising, because he matter? This so far as to went treat labour, abstracted from the matter wherein it is employed; of the and influence its value; to examine causes which operate upon to propose that value as the safest and and even mea- least variable sure of all other values.J The nature of immaterial products makes it impossible ever to accumulate them, so as to render them a part of the national capital. A people containing a musicians, priests, and public func- host of abundantly amused, well versed religious be tionaries might in admirably governed; and that is all. Its capital doctrines, but no direct accession.from the total labour of all these would receive in their respective vocations, individuals, though industrious enough be consumed as fast as produced. because their products would 1 de Verri is wrong in asserting * Wherefore , that the occupations of the sove- ieign, the the priest, do not fall within the cognizance magistrate, the soldier, and political economy. s>f § 24.) (Meditazioni sulla Economia Politica, f This error has already been pointed out by M. Germain Gamier, in the notes to his French translation of Smith. 1 Some writers, who have probably taken but a cursory view of the positions Jaid down, still persist in setting down the producers of immaterial product*

124 LHAP. XIII. ON PRODUCTION. 121 is gained score of public prosperity, Consequently, nothing on the unnatural demand by ingeniously creating of anv for an the labour of labour diverted into that channel produc- of these professions; the tion can not be increased, without increasing the consumption also. we If this consumption yield a gratification, then indeed may console sacrifice; but when that consumption is itself an for the ourselves must be confessed the system which causes it is evil, it deplorable enough. practice, whenever legislation is too complicated. This occurs in the law, becoming more intricate and tedious, occupies of The study more persons, whose labour must likewise be better paid. What does this ? Are the respective rights of its members bet- society gain by ? Undoubtedly intricacy of law, on the con- ter protected not: the great encouragement out a fraud, by multiplying the trary, holds to of chances and very rarely adds to the solidity of title or of evasion, right. only advantage is, the greater frequency and duration of The The same reasoning applies superfluous offices in the pub- suits. to create of office for the administration To what lic administration. an left to itself, is to do an injury to the subject in the ought to be and make him pay for it afterwards as if it were a first instance, benefit.* Wherefore impossible to admit the inference offM. Gamier, it is the of physicians, lawyers, and the like, is pro- that because labour a nation gains as much by the multiplication ductive, therefore tha of class of labour as of any other. This would be the same as bestow- ing upon a material product more manual labour than is necessary for its The labour productive of immaterial products, completion. is productive only as it augments the like every other labour, so far thereby value of a product: beyond this point it is a and the utility, render the pureiy unproductive exertion. pur- To laws intricate to give lawyers full business in expounding them, would be posely as to.spread a disease that doctors may find practice. equally absurd, are the fruit of human industry, in which Immaterial products we of productive labour. It is not term have comprised every kind to understand how they can at the same time be tire fruit of so easy Yet are for the capital. most part the result of some these products or other, which always implies previous study ; and no study talent can take place without advances of capital. Before the advice of the physician can be given or taken, the phy- amongst the vain to struggle against the unproductive labourers. But it is of at all conversant with the science of political economy, nature things. Those to yield involuntary homage to its principles. Thus Sisjnondi, are compelled of the in the wages of unproductive values expended after having spoken goes on to say, " Ce sont des Consummations rapides qui suivent imme- labourers, 11 production' diatement la Nouv. Princ. torn. ii. p. 203; admitting a production oy those he had to be unproductive! pronounced are we to * What, then, of those who assert in substance, if not in think words, that such a formality or such a tax is productive of one benefit at least, nnmely, the maintenance of such or such an establishment of clerks and officers * i Traduction de Smith, note 20.

125 {22 Oi\ PRODUCTION. I. BOOK or his relations must first have defrayed charges of an edu- sician the many years' duration cation a stu- : he of must have subsisted while dent; professors must have been paid; books purchased; journeys which implies disbursement ; all the perhaps have been performed So likewise the lawyer's opin- of a capital previously accumulated.* are products, that can never be raised musician's song, &c. ion, the concurrence of industry and capital. Even the ability without the public functionary of accumulated capital. It requires the the is an outlay, education of a civil or military engineer, of for the same kind that of a physician. Indeed as take it for granted, that for we may in the training of a young man for the public the funds expended are found by experience to be a fair investment service, capital, of and that labour this description is well paid; for we find more of in almost every branch administration, even applicants than offices of unnecessarily multiplied. are in countries where offices of immaterial products will be found to The industry productive same process, as, in the analysis made go through exactly the in the of this work, we have shown to be followed by industry beginning may be illustrated by an example. Before an m general. This can be the ordinary song arts of the composer and the executed, and and practical musician must have been regular distinct callings; the best mode of acquiring skill in them must have been discovered \ is the department of the man of this or theorist. The appli- science, cation this mode and of this art, has been left of the composer and to singer, who have calculated, the one in composing his tune, the others in the execution of it, that it would afford a pleasure, to which the audience would attach some value or the execution other. Finally, the concluding operation industry. is of however, some immaterial products, with respect are, to There which the two first operations are so extremely trifling, that one may nothing. Of this description is the almost account them as service a The art of service is menial domestic. or nothing, and of little of that art is made the application the employer; so that nothing by is left servant, but the executive business of service, which is to the last lowest of industrious operations. the and in this class of industry, and It necessarily follows, that, few some others practised by the lowest ranks of society, that of the porter for instance, or of the prostitute, &c. &c.: the charge of training being Httle or the products may be looked upon not only as the nothing, of but likewise as products, fruits very coarse and primitive industry, the creation of which capital has contributed nothing; to for I can not think expense of these agents' subsistence from infancy, till the the emancipation from parental care, can be considered as a age of * I will not here anticipate the investigation of the profits of industry and ca- pital, but to observe, en passant, that capital is thrown away upon confine myself and his fees improperly limited, unless, besides the recompense of the physician, his actual labour and talent, (which latter is a natural agent gratuitously giv»n to him,) they defray the interest of the capital expended in his education, and but not common rate of interest, the calculated at the rate of an annuity.

126 CHAP. XIII. ON PRODUCTION. 123 the interest which is paid by the subsequent profits. 1 capital, of reasons shall give I come to speak of for my this opinion when wages.* the price any kind of persona] exer- at of The pleasures one enjoys at the instant of production tion, are immaterial products, consumed Of this description are very person that has created them. the by the pleasures derived from arts studied solely for self-amusement. devotes to that study some small capital In learning music, a man personal labour; some time which together are the price and all taking part the pleasure a new air or singing in a concert* for of paid field-sports, are labours Gaming, dancing, same kind. and of the is by the The amusement derived from them instantly consumed have performed them. When who executes a paint- persons a man ing, makes any article of smith's or joiner's work for his amuse- or ment, same time creates a durable product or value, and he at the his personal amusement.f an immaterial product, viz. capital, have seen, that part of it is devoted to In speaking we of material products, and part remains wholly unpro- the production of also a further part productive of utility or plea- is ductive. There which, can, therefore, be reckoned as a portion neither of tho sure, in the capital engaged of material objects, nor of that production may be absolutely inactive. Under this head comprised dwelling- houses, furniture and decorations, that are an addition to the mere of life. pleasures utility they afford is an immaterial product. The When a young couple sets up house-keeping for the first time, the plate they provide themselves with cannot be considered as abso- lutely inactive capital, for it is in use; nor can it constant domestic as capital engaged raising of material products; be reckoned in the leads production of no one object capable of being re- it to the for future consumption; neither is it an served of annual con for object for it may last, perhaps, for their joint lives, and be handed sumption, to their children; but it is capital productive of utility and down pleasure. Indeed, it is so or in other words much value accumulated withdrawn from reproductive consumption; consequently, yielding neither profit interest, but productive of some degree of benefit nor is gradually consumed and incapable of being real- or utility, which ised, yet it is of real and positive value, since it is occa- possessed * The wages mere labourer are limited to the bare necessaries of life, of the without which his agency cannot be continued and renewed; there is no surplus for the on capital. But the subsistence of his children, until old enough interest is in the necessaries of the labourer. to earn their livelihood, comprised An indolent and inert people is always little addicted t amusements result to ing from the exercise of personal faculties. Labour is attended with so much pain to them, as very few pleasures are intense enough to repay. The Turks think us mad to in the violent motions of the dance; without re find pleasure it causes to us infinitely less fatigue than to themselves. They fleeting, that prefer pleasures prepared by the fatigue of others. There is, perhaps, as much exerted in generaj industry expended on pleasures Turkey as with us; but it is in by slaves, who do no* participate in the product.

127 124 ON PRODUCTION. BOOK I the object purchase: as in the instance of the rent of a sionall) of hire of and the like. house or the furniture, of to vest the small- mistake Although personal interest it be a sad in a manner wholly unproductive, it is by no est particle of capital in a way productive of utility or amusement, so out, means so to lay disproportionate to the circumstances of the much as may be not is a regular gradation the ratio of capital so vest- individual. There of individuals respectively, from ed of the poor the by rude furniture and dazzling jewels of the up to the man's hovel, costly ornaments nation is wealthy. When the poorest family in it possesses a a rich, of this kind, not indeed of any great amount, but still enough capital to satisfy moderate limited desires. The prevalence of general and wealth community is more strongly indicated by meeting uni- in a and agreeable household conveniences versally with some useful in inferior ranks, than splendid palaces and of the by the the dwellings favourites of fortune, or by the casual costly magnificence of a few diamonds and finery we sometimes see brought together of display a large city, where the whole wealth of the place is often exhibit- in at one ed at a fete or a theatre of public resort; but which, view, all, are a the aggregate value of after mere trifle, compared with of a great people. the household articles of a or The component items amuse- capital producing bare utility are liable ment, wear and tear, though in a very slight degree; to and if that wear and tear be not made good out of the savings of annual revenue, there is a gradual dissipation and of capital. reduction yet how many people think they This remark may appear trifling; same time are living upon their revenue, when they par- are at the tially consuming their capital! Suppose, for instance, a man is the the house he lives in; if the house proprietor calculated to last of be and have cost 20,000 dollars in the building, it costs the 100 years, or his heirs 200 dollars per annum, exclusive of the proprietor the interest upon the whole capital will be original cost, otherwise or so, by the end of 100 years. The same rea- extinguished, nearly is applicable to every other item of capital devoted to the soning jewel, every of or pleasure; to a sideboard, a utility im- production aginable object, in short, that comes under the same denomination. And, vice versa, when annual revenue, arising from whatever source, is for the purpose of enlarging the capital encroached upon to the of useful or agreeable objects, there is an devoted production of capital and of fortune, though none of actual in^iease revenue. Capital this class, like all other capita], without exception, is of by the partial accumulations of annual products. There is formed no other way of acquiring capital, but by personal accumulation, or by succession to of others. Wherefore, the reader is accumulation of on referred Chap. XI, woere I have treated this head the accu- to mulation of capital. A public edifice, a bridge, i hfghwsv, are savings or accumulations of revenue, devoted to.-maticfi of a capital, whose returns ar

128 CHAP. XIII. ON PRODUCTION. 125 struction of a bridge or highway, added to the purchase of the ground it stands upon, have cost 200,000 dollars, the use the public makes of it may be estimated to cost 10,000 dollars per annum.* There are some immaterial products, towards which the land is a principal contributor. Such is the pleasure derived from a park oi pleasure-garden. The pleasure is afforded by the continual and daily agency of the natural object, and is consumed as fast as produced. A ground yielding pleasure must, therefore, not be confounded with ground lying waste or in fallow. Wherein again appears the anal- ogy of land to capital, of which, as we have seen, some part is pro- ductive of immaterial products, and some part is altogether inactive. Gardens and pleasure-grounds have generally cost some expense in embellishment; in which case, capital and land unite their agency to yield an immaterial product. Some pleasure-grounds yield likewise timber and pasturage: these are productive of both classes of products. The old-fashioned gar- dens in France yielded no material product; those* of modern times are somewhat improved in this particular, and would be more so, if culinary herbs and fruit-trees were oftener introduced. Doubtless, it would be harsh to find fault with a proprietor in easy circumstances, for appropriating .part of his freehold to the mere purpose of amuse- ment. The delightful moments he there passes with his family around him, the wholesome exercise he takes, the spirits he inhales, are among the most valuable and substantial blessings of life. By all means then let him lay out on the ground as he likes, and give full scope to his taste, or even caprice; but if caprice can be directed to an useful end, if he can derive profit without abridging enjoyment, his garden will have additional merit, and present a two-fold source of delight to the eye of the statesman and the philosopher. I have seen some few gardens possessed of this double faculty of production; whence, although the lime, horse-chestnut and sycamore and others of the ornamental kind, were by no means ex- trees, cluded, any more than the lawns and parterres; yet at the same time the fruit-trees, decked in the bloom of vernal promise, or weighed down by the maturity of autumnal wealth, added a variety and rich- ness of colouring to the other local beauties. The advantages of dis- tance and position were attended to without violating me conve- nience of division and inclosure. The beds and borders, planted with vegetables, were not provokingly straight, regular, or Uniform, * If it entail a further charge of 300 dollars for annual repairs and mainte- nance, the public consumption of pleasure or utility may be set down at 10,200 dollars per annum. This is the only way of taking the account, with a view to public taxes, with the sacrifices compare the advantage derived by the payers of imposed on them for the acquisition of such conveniences. In the case pn above, the public will be a gainer, if the outlay of 10,200 dollars have effected an annual saving in the charge of national production, or, what is the same thing, an annual increase of the national product, of still larger amount. In the contrary supposition, the national administration will have led the nation into a losing concern.

129 120 ON PRODUCTION. BOOB I the undulations the surface, and of vegetation hat harmonised with of walks were of larger growth; as to serve both so and the disposed a and for pleasure view cultivation. Every thing was arranged with filling to ornament, even watering for vine-trelliced well to the the in short, pots. ordered, as if designed to impress The whole, was so beauty are by no means incompatible, and the conviction, that utility grow and that pleasure side of wealth. may up by the may, in its A whole country like manner, grow rich even upon ornamental possessions. Were trees planted wherever they could to accession of other products,* besides thrive without injury the and the additional moisture attracted by the and beauty salubrity, multiplication the value of the timber alone would, of timber-trees, a country of much extent, amount to something considerable. in is this advantage, in There of timber-trees, that they the cultivation require human industry beyond the first planting, after which no is the sole agent their production. But it is not enough nature of plant, must check the desire of cutting down, until the to merely we the earth and weak and slender stalk, gradually imbibing the juices of hand of cultivation, have acquired atmosphere, shall, without the solidity, and and its lofty foliage to the heavens.f The bulk spread man can do for it is, to forget best that some years; and even it for where yields no annual product, it will recompense his forbearance it at by an ample supply of firing, and of tim- when arrived maturity, for the carpenter, the joiner, and the wheel-wright. ber In all of trees and their cultivation has been strongly ages, the love recommended best writers. The historian of Cyrus records, by the among his chief titles to renown, the merit of having planted all Asia Minor. In the the birth of a daughter, the United States, upon a little wood, grow up with her, and to be her cultivator plants to marriage. (1) Sully, whose views policy on the day of portion of provinces of were extremely enlightened, enriched most of the plantation he directed. I have seen several, to France with the his name; and they remind me which public gratitude still affixes the of of Addison, who was wont to exclaim, whenever he saying a " A useful man has passed this way." saw plantation, In many countries, an exaggerated notion seems to * of the damage prevail, done by timber-trees, to other products of the soil; yet it should seem, that they rather enhance than diminish the revenue of the landholder; for we find those countries most productive, that are the Nor best clothed with timber: witness and Lombardy. mandy, England, Belgium gas leaves trees absorb the f of floating in the atmosphere The carbonic-acid and which we breathe, injurious to respiration. When this gas is super- is so abundant, it brings on asphyxia, and occasions death. On the contrary, vegeta- tion increases the proportion of oxygen, which is the gas most favourable to re- spiration and to Ceteris paribus, those towns are the healthiest, which health. the have It would be well to plant all most open spaces covered with trees. our spacious quays. (i; The American cultivator might be said, with much greater semblance of down truth, bi^th of a daughter, to cut on the "a little wood," instead of plant- ng one AMERICAN EIHTOH..

130 CHAP. XIV. ON PRODUCTION. 127 yet we ha\ e been taken with the consideration of the agents As up production; without whose agency mankind would have essential to the scanty and limited sup- no other subsistence enjoyment, than or the We ply that nature affords spontaneously. first investigated mode in which these agents, each in its respective department, and concert, co-operate in the work of production, and have after- all in detail the individual action of each, for the fur- wards examined in subject. must now proceed to examine of the We ther elucidation accidental causes, which act upon production, the intrinsic and and or facilitate the exertion of productive agents. ciog CHAPTER XIV. THE RIGHT OF PROPERTY. OF IT province of speculative philosophy to trace the origin of is the of property; legislation to regulate its transfer; and of the right of devise surest means to of protecting that right. political science the the of property solely as the most Political economy recognises right of all encouragements to the multiplication of powerful and wealth, is satisfied with actual stability, without inquiring about its origin its its property In fact, the legal inviolability of or is obvi- safeguards. a mere mockery, where the sovereign power is unable to make ously the laws respected, where it either practises robbery itself,* or is impotent to repress it in others; or where possession is rendered perpetually insecure, by the of legislative enactments, and intricacy of technical nicety. property be said to exist, the subtleties Nor can then matter reality it is not well as of right. Then, and of where as can the sources of production, namely, land, capital, and indus- only, of fecundity. (1) try, attain their utmost degree The * of an individual is so little, when opposed to that of the go- strength he can the subject vernment have no security against the exac- lives under, that tions abuses of authority, except in those countries where the guardianship and of the laws is entrusted to the all-searching vigilance of a free press, and their violation checked by an efficient national representation. to our it is the province of speculative philos- (1) Although, according author, to trace the origin of property, the existence of which, in all politico-econo- ophy mical inquiries, is assumed as the foundation of national wealth, it not. here be may to introduce improper observations on the Right of Property, illustrating a few its historical origin, and pointing out its true character. Most writers on natu- ral law, among whom may be named Grotius, Puffendorff, Barbeyrac, and Locke, in general, the origin of property to priority of occupancy, and have much ascribe, perplexed themselves in attempting to prove how this act should give an exclu- in sive right individual enjoyment to what was previously held of common Bla»*kstone, although he does not enter into the dispute about the manner, as ha»

131 12S ON PRODUCTION. L BOOK There are some truths so completely self-evident, that demonstra- tion is quite superfluous. This i? one of that number. For who will attempt to deny, that the certainty of enjoying the fruits of one's been remarked, in which occupancy conveys a right of property, expresses no doubt about its having this effect, independent of positive institutions. on the subject of pro- on Later writers jurisprudence have adopted other theories perty, which being altogether unsatisfactory, we will not notice, except to remark that the most refined and ingenious speculations, although equally inconclusive, respecting the nature and origin of property, are" those of Lord Kames, in the Essay on Property, in his Historical Law Tracts. however, is the first inquirer who has taught us to think STEWART, DUOALD and reason with accuracy on this subject, and it is to his observations on the Property, contained in the supplement to the chapter, "Of in Right of Justice," his work on the " Philosophy of the Active and Moral Powers of Man," that we must refer the reader who is desirous of possessing just and unanswerable argu- ments for the true foundations on which property rests. We must here content ourselves with extracting a few passages, which will exhibit this illustrious phi- losopher's views of the origin of the acquisition of property, which he traces to distinct sources. two " It is necessary," says Stewart, " to distinguish carefully the complete right of property, which is founded on labour, from the transient right of possession which is acquired by mere priority of occupancy; thus, before the appropriation of land, if any individual had occupied a particular spot, for repose or shade, it would have been unjust to deprive him of possession of it. This, however, was only a transient right. The spot of ground would again become common, the right moment the occupier had left it; that is, the of possession would remain no longer than the of possession. Cicero illustrates this happily by the simili- act a theatre. ' Quemadmodum theatrum, cum commune sit, recte tamen dici tude of ejus esse cum locum quem quisque occuparit.' The general conclusions potest which I deduce are these:—1. That in every state of society labour, wherever it is exerted, is understood to found a right of property. 2. That, according to natural law, labour is the only original way of acquiring property. 3. That, possession; and according to natural law, mere occupancy founds only a right of that, whenever it founds a complete right of property, it owes its force to positive institutions." After premising these leading propositions, he proceeds with what he terms a b|ight historical sketch of the different systems respecting the origin of property, from which we have only room to copy the following passage, which, however, right of property, as recognised by contains this eminent author's views of the and the the law of nature; created by the municipal regu- right of property, as lations, and demonstrating the futility of the attempts hitherto made to resolve all the different phenomena into one general principle. " In such a state of things as that with which we are connected, the right of property must be understood to derive its origin from tioo distinct sources; the one is, that natural sentiment of the mind which establishes a moral connexion between labour and an exclusive enjoyment of the fruits of it; the other is the municipal institutions of the country where we live. These institutions every- where take rise partly from ideas of natural justice and partly (perhaps chiefly) from ideas of supposed utility,—two principles which, when properly under- stood, are, I believe, always in harmony with each other, and which it ought to the great aim of every legislator to reconcile be the utmost of his power. Among to those questions, however, which fall under the cognizance of positive laws, there are many on which natural justice is entirely silent, and which, of consequence, utility solely. Such are most of the question* inay be discussed on principles of concerning the regulation of the succession to a man's property after bis death; of some of which it perhaps may be found that the determination ought to vary with the circumstances of the society, and which have certainly, in fact, been freouently determined by the caprice of the legislator, or by some principle ulti

132 CHAP. XIV. ON PRODUCTION. 120 and labour, most powerful inducement to render land, capital is the dull enough them productive? no one to Or who is doubt, that as the to make the best use of his well proprietor how knows so in practice property] that inviolability of pro- Yet how often is theory* is allowed by all to be so in perty disregarded, which, often is it broken in upon for immensely advantageous? How tnts. and its most insignificant purposes; violation, that should naturally excite indignation, justified upon the most flimsy pretexts'? So few a lively sense of any but a there who have are persons direct injury, most lively feelings, have firmness enough to act up to the or, with security their sentiments! There property, where a despotic is no of can of the property of possess itself authority the subject against his is there such security, where the consent is merely consent. Neither nominal delusive. In England, the taxes are imposed by the and national representation; then, the minister be in the possession of if, by means electioneering influence, an absolute majority, whether of overwhelming patronage foolishly placed disposal, by the at his or r taxation w ould no longer be in reality imposed by the national repre- the body bearing that name would, sentatives effect, be the repre- ; in of the minister; and the people of England would be sentatives to the severest privations, to forcibly subjected further projects that possibly might every way injurious to them.* be is to be the right of property is equally invaded, It observed that the free employment of the by obstructing of production, as means by violently depriving the proprietor of the product of his land, capital, or industry: for the right of property, as defined by jurists, is the of use or even abuse. Thus, landed property is violated right or plantation; interdicting by arbitrarily prescribing tillage or by cultivation; particular modes of the capitalist is the property of for instance, employing it; violated, by prohibiting particular ways of by interdicting large purchases all bullion to be of corn, directing to the mint, forbidding the proprietor to build on his own carried or prescribing the form and soil, of the building. It is a requisites further violation capitalist's property to prohibit any kind of of the or to he it with duties amounting to prohibition, after industry, load in manifest, that It is has once embarked his capital a that way. of the prohibition upon sugar would annihilate most of the capital sugar refiners, vested in furnaces, utensils, &c. &c. f The property a man has in his own industry, is violated, whenever mately resolvable into an of ideas. Indeed, various cases accidental association but be which it is not only useful, in necessary, that a rule should may supposed at the same time, neither justice be fixed ; while, utility seem to be much nor interested particular decision."—AMERICAN EDITOR. in the to property by the law.* * Adam Smith has asserted, that the security afforded of England has more than counteracted the repeated faults and blunders of its government. may be doubted, whether he would now adhere to that opinion. It T It would be vain to say to him, why not employ your works in some other works way Probably, neither the spot nor the 1 of a refinery could be othei win* employed without enormous loss.

133 130 ON PRODUCTION. BOOK I is forbidden free exercise of his faculties ar > rjJents, excepi ne the they would interfere with the ox third parties. insomuch as rights a requi- is put in committed when A similar violation is man's labour by himself for another; as for one sition purpose, though designed artisan or trader is forced into the military life, whether when an merely occasion. or permanently for the well aware, that I of maintaining social order, the am importance security property depends, takes precedence of pro- the whereon of for which very reason, nothing short perty the necessity of itself; of can or defending that order from manifest danger authorise these individual right. of this it is which impresses similar violations And the proprietors the necessity of requiring, in the constitution of upon or the body politic, some guarantee the public service other, that be made mask to the passions and ambition of those in shall never a power. not as an engine of national depres- Thus taxation, when intended misery, must be proved indispensable to the existence sion and of it is an actual social order; every step takes beyond these limits, for by national consent, is a spoliation; taxation, even where levied of property; since violation values can be levied, but upon the no produce land, capital, and industry of individuals. of the are But there some extremely rare cases, where interference between the owner and his property is even beneficial to production For example, in all itself. the detestable right countries that admit of slavery, a right standing in hostility to all others, it is found expe- dient to limit the master's power over his slave, (a) Thus also, if a * The are, of all kinds of property, the least questiona- industrious faculties ; being derived directly either from nature, from personal assiduity. The ble or them higher pretensions than that of the land, which may in is of property to an act of spoliation; for it is hardly possible generally be traced show an up to in which its ownership has been legitimately transmitted from the first instance, It ranks higher than the right of the capitalist also; for even taking occupancy. it for granted, that this latter has been acquired without any spoliation whatever, by the gradual accumulations of yet the succession to it could not have ages, and legislation, which aid may have been granted of been established without the aid Yet, sacred as the property on conditions. faculties of industry is, it is in the constantly infringed upon, only in the flagrant abuse of not but personal slavery, in many other points of more frequent occurrence. A government is guilty of an invasion upon it, when it appropriates to itself a particular branch of the business of exchange and brokerage for exam- industry, It ; it sells the exclusive privilege of conducting it. when is still a greater ple or to authorize a gendarme, violation of police, or judge, to arrest and commissary detain individuals discretion, on the plea at public safety or security to the of constituted authorities; thus depriving the individual of the fair and reasonable certainty of his time and faculties at his own disposal, and of being able having to complete what may begin upon. What robber or despoiler could commit he n more atrocious act of invasion upon the public security, certain as he is erf* being speedily put down, and counteracted by private as well as public opposition? necessity v«) This merely an instance of the is of counteracting one bv another. T.

134 CHAP. XIV. PRODUCTION. 131 ON in urgent need timber for the shipwright or carpen- society stand of must reconcile itself to some regulations respecting ter, the it felling fear losing the veins of mineral that or the of of private woods ;* may sometimes oblige a intersect to work th<» the soil, government It may be readily conceived, that, even if there were itself. mines skill, the no restraints upon mining, want of avarice, of impatience the of capital, might induce a proprietor to exhaust or insufficiency commonly poorest loads, and occasion are the the superficial, which superior depth and quality. (1) Sometimes the loss vein of of a of many proprietors, but is acces- mineral passes through the ground in one spot. In this case, the obstinacy of a sible only refractory proprietor must disregarded, and the prosecution of the works be be all, I not undertake to affirm, that it compulsory; though, after will more advisable his whole to respect not be rights, or would on the the of a few additional mines is not too dearly pur- that possession by this infringement upon the inviolability of property. chased the sacrifice Lastly, public safety sometimes imperiously requires but that sacrifice violation, notwithstanding of private property; is a such cases. in right of property implies an indemnity given For the of one's own; and its sacrifice, however fully the free disposition indemnified, is a forced disposition. to the is itself a spoliator, it When public authority not procures nation the greatest of all blessings, protection from spoliation by others. Without this protection of each individual by the united force of whole community, it is impossible to conceive any con- the of the productive powers man, of land, and siderable development of at even conceive or existence of capital to all; for it of capital; the the safe- is nothing more than accumulated value, operating under of authority. This is the reason why no nation has ever guard at degree arrived of opulence, that has not been subject to a any are to political regular government. Civilized nations indebted for the innumerable and infinitely various productions, organization as fine arts as for the that satisfy their infinite wants, and the well of the opportunities leisure that accumulation affords, without which it not for * Probably, also, were in maritime wars, originating, sometimes puerile vanity, and sometimes in national errors of self-interest, commerce would be the best purveyor of timber for ship-building; so that, in reality, the abuse of the interference of to the growth of priyate timber, is public authority, in respect a of a previous abuse of a more destructive and less excusable only consequence character. [If no one knows so well as the proprietor, how (1) make the best use of to his property, as our author has just remarked, what advantage can result to society from the interference, in any case, of public authority, with the rights of individuals in the production. Nothing but the absolute maintenance business of instant, the be of for an social order should ever to violate the sacred permitted, right of private prooerty. Quite as specious, though equally unsound reasons variety may assigned lor imposing restraints upon a be of other employments besides mining., AMERICAN EDITOR.

135 ?,« ON PRODUCTION. BOOK J. of the mind could never cultivated, or man by their faculties be full dignity, whereof his is susceptible. means attain the nature his call nothing own, is equally interested can The poor man, that in upholding the inviolability with property. His personal the rich of available, without the aid of accumulations services would not be dissipation to, or previously made-and protected. Every obstruction material injury means of gaining of these accumulations, to his is a ruin and spoliation of the higher is as a livelihood; and the certainly by the misery and degradation of the lower classes. A followed of the advantages of this right of property has confused notion been equally conducive with personal interest of the wealthy, to make the and punish every invasion all civilized communities pursue of pro- crime. admirably study of political economy is as a perty The justify and confirm this act of legislation; inasmuch calculated to it explains why the happy effects, resulting from the right of pro- as are perty, in proportion as that right is well guarded more striking by political institutions. CHAPTER XV. OR MARKET FOR PRODUCTS. Or THE DEMAND oi is to IT in the different channels common hear adventurers industry assert, that their difficulty lies not in the production, but in the disposal of commodities; that products would always be abun- dant, if but a ready demand, or market for them. When there were for their commodities slow, difficult, and productive the demand is scarce; grand to be of little advantage, they pronounce money the their desire of consumption brisk enough to quicken sales object is, a up prices. But ask them what peculiar causes and circum- and keep stances facilitate the for their products, and you will soon demand of of these perceive that most them have extremely vague notions of facts is imperfect, matters; that their observation their ex- and planation still more so; that they treat doubtful points as matter of certainty, often pray for what is directly opposite to their interests, and importunately solicit from authority a of the most protection mischievous tendency. To enable form clear and correct practical notions in regard us to for the products of industry, to markets must carefully analyse we the best established and most certain facts, and apply to them the inferences we have already deduced from a similar way of proceed- ing; thus perhaps we may arrive at new and important truths, and that may serve to enlighten the views of the agents of industry, and to give confidence to the measures of governments anxious to afford them encouragement.

136 CHAP. XV. ON \ ft PRODUCTION. A man who applies his labour to the investing of objects with value by the creation of utility of some sort, can not expect such a value to be appreciated and paid for, unless where other men have the means of purchasing it. Now, of what do these means consist? Of other values of other products, likewise the fruits of industry, capital, and land. Which leads us to a conclusion that may at first sight appear paradoxical, namely, that it is production which opens a demand for products. Should a tradesman say, " I do not want other products for my woollens, I want money," there could be little difficulty in convinc- ing him that his customers could not pay him in money, without having first procured it by the sale of some other commodities of their own. "Yonder farmer," he may be told, "will buy your woollens, if his crops be good, and will bu^ more or less according to their abundance or scantiness; he can buy none at all, if his crops fail altogether. Neither can you buy his wool nor his corn yourself, unless you contrive to get woollens or some other article to buv withal. You say, you only want money; I say, you want other commodities, and not money. For what, in point of fact, do you want the money? Is it not for the purchase of raw materials or stock for your trade, or victuals for your support?* Wherefore, it is products that you want, and not money. The silver coin you will have received on the sale of your own products, and given in the purchase of those of other people, will the next moment execute the same office between other contracting parties, and so from one to another to infinity; just as a public vehicle successively transports objects one after another. If you can not find a ready sale for your commodity, will you say, it is merely for want of a vehicle to trans- port it? For, after all, money is but the agent of the transfer of values. Its whole utility has consisted in conveying to your hands the value of the commodities, which your customer nas sold, for the purpose of buying again from you; and the very next purchase you make, it will again convey to a third person the value of the pro- ducts you may have sold to others. So that you will have bought, and every body must buy, the objects of want or desire, each with the value of his respective products transformed into money for the moment only. Otherwise, how could it be possible that there should now be bought and sold in France five or six times as many commodities, as in the miserable reign of Charles VI.? Is it not obvious, that five or six times as many commodities must have been produced, and that they must have served to purchase one or the other ?" Thus, to say that sales are dull, owing to the scarcity of money, is to mistake the means for the cause; an error that proceeds from the circumstance, that almost all produce is in the first instance * Even when money is obtained with a view to hoard or bury it, the ultimata object is always to employ it in a purchase of some kind. The heir of the lucky finder uses it in that way, if the miser do not; for money, as money, has noothe* Use than to buy with.

137 134 ON PRODUCTION. BOOK L for money, before ultimately converted into other exchanged it is commodity, which recurs produce: in use, so and the repeatedly of the appears to vulgar apprehensions commodities, most important transactions, whereas and only the of all object the end and it is to be dull because money is medium. Sales cannot be said scarce, so. There always money enough but because other products are is circulation mutual interchange of other values, the to conduct and when those values really exist. Should the increase of traffic require to it, the want is easily supplied, and is a more money facilitate prosperity—a proof that great abundance of of strong indication a been created, which it is wished to exchange for other values has such cases, merchants know well enough In find values. how to product serving for the medium of exchange or substitutes as the and money:* in, for this reason, that all money itself soon pours produce naturally gravitates that place where it is most in demand. to is a good sign when business is too great for the money; just It the T same w ay as it is a good sign when the goods are the in too plentiful warehouses. the for superabundant article can find When vent, the scarcity of a no has so little to do with the obstruction money sale, that the of its sellers would gladly receive value in goods for their own con- its at the of the day: they would not ask for sumption current price or have any occasion for that product, since the money, use only they could make would be to convert of it forthwith into articles it of their own consumption.! This observation is applicable to all cases, where there is a supply of commodities or of in the market. They will universally services in those places, where most of find the most extensive demand the produced; because other places are the sole means are in no values of purchase created, that is, values. Money performs but a moment- this double exchange; and when the transaction ary function in is it be found, that one kind will always commodity finally closed, of for another. has been exchanged is It to remark, that a product is no sooner created, worth while than from that instant, affords a market for other products to the it, of the producer has put the finishing full extent its own value. When to his product, he is most anxious hand sell it immediately, lest to its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the way of getting rid of money is in only of or other. Thus, the mere circum- the purchase some product By bills at sight, or after date, bank-notes, running-credits, write-offs, &c. * HS at and Amsterdam. London of and de- +1 speak here their aggregate consumption, whether unproductive to signed of themselves and their families, or expended satisfy the personal wants in the sustenance of reproductive industry. The woollen or cotton manufacturer operates two-fold consumption of wool and cotton: 1. For his personal wear. a 2. For the supply of his manufacture; but, be the purpose of his consumption must needs what may, whether personal gratification or reproduction, he it buv •vhat he consumes with what he produces.

138 CHAP. XV. ON PRODUCTION. 135 of the creation product immediately opens a vent foi stance of one other products. a favourable, not on\y to th* good harvest For this reason, is to in all commodities generally. likewise the dealers but agriculturist, the The greater are the purchases of the growers. the crop, larger harvest, on the contrary, hurts the sale of commodities at A bad also with large. products of manufacture and com- And so it is the success branch of commerce supplies more The of one merce. purchase, and consequently opens a ample means for the of market of all the other branches; on the other hand, the stagnation products one channel of manufacture, or of commerce, is felt of in all the rest. it may be asked, this be so, how does it happen, that there But if times so great glut of commodities in the market, and so much at a is finding a vent for them 1 difficulty of these super- in Why cannot one be exchanged for another? I answer that the abundant commodities of glut a particular commodity arises from its having outrun the total demand ways; either because it has been pro- for it in one or two other in because the production of or duced excessive abundance, has fallen short. commodities is because the It of some commodities has declined, production that other commodities are superabundant. To use a more hackneyed phrase, people have bought less, because they have made less profit :* and they have made less profit for one or two causes; either they have found difficulties in the employment of their productive means, or these means have themselves been deficient. It observable, moreover, that precisely at the same time that one is a loss, another commodity making excessive commodity makes is since such profits must operate powerful stimulus And, as a profit.f cultivation of that particular kind of to the products, there must be some violent means, or some extraordinary cause, a politi- needs or natural convulsion, or the avarice or ignorance of authority, to cal the one hand, and consequent glut on the perpetuate this scarcity on No is the cause of this political disease removed, than other. sooner of production feel a natural impulse towards the vacant the means the replenishment of which restores activity to all the channels, One of others. production would seldom outstrip every other, kind and products be disproportionately cheapened, were production its left entirely free.J * Individual profits must, in every description of production, from the general merchant to the be- derived from the participation in the valued common artisan, The the subject of Book II., infra. produced. ratio of that participation will form The reader may easily apply these maxims to any time f country he is ac- or quainted with. We have had a striking instance in France during the years 1811, 1812, and 1813; when the high prices of colonial produce of wheat, and other articles, went hand-in-hand with price of many others that could the low find no adv mtageous market. | These considerations have hitherto been almost wholly overlooked, thougn forming the basis of correct conclusions in matters of commerce, and of its regu- lation/ by the national authority. The right course where it has, by good luck

139 13i5 ON PRODUCTION. BOOK I. Should a producer imagine, that many other classes, yielding no material products, are his customers and consumers equally with tho classes that raise themselves a product of their own; as, for example, public functionaries, physicians, lawyers, churchmen, &c, and thence infer, that there is a class of demand other than that of the actual producers, he would but expose the shallowness and superficiality of nis ideas. A priest goes to a shop to buy a gown or a surplice; he takes the value, that is to make the purchase, in the form of money. 1 From some tax-gatherer who has Whence had he that money taken it from a tax-payer. But whence did this latter derive it ? From the value he has himself produced. This value, first produced by the tax-payer, and afterwards turned into money, and given to the priest for his salary, has enabled him to make the purchase. The priest stands in the place of the producer, who might himself by accident, or, at been pursued, appears a con- to have been selected most, by propriety, without either self-conviction, or the ability to con- of its fused idea vince other people. Sismondi, who seems not to have very well understood the principles laid down Book in this and the three first chapters this work, instances the im- of II. of manufactured products with which England has late inun- of of mense quantity markets of other nations, as a proof, that dated impossible for industry the it is be too productive. (Nouv. Prin. liv. iv. c. 4.) But the glut thus occasioned to the feebleness of production proves nothing more than those countries that in have been thus glutted with English manufactures. Brazil produce where- Did to purchase English goods exported thither, those goods would not withal the market. Were England admit the import of the products of the her to glut would find United States, better market for her own in those States. The she a of its taxation upon import and consump- English government, by the exorbitance to its subjects many kinds of tion, virtually interdicts importation, thus obliging the merchant offer to foreign countries a higher price for those articles, whose to as import is practicable, sugar, coffee, gold, silver, &c. for the price of the precious metals to them is enhanced by the low price of their commodities, which accounts the ruinous returns of their commerce. for I would not be understood to maintain in not this chapter, that one product can in relation to all others; but merely that nothing be raised in too great abundance, to the demand of one product, than the supply of another; that is more favourable the import of English manufactures into Brazil would cease to be excessive and be rapidly absorbed, did on her side returns sufficiently ample; Brazil produce end it would necessary that the legislative bodies of either country to which be free production, free importation. other to the one to In should consent, the grasped is monopoly, and property is not exempt from the Brazil every thing by the government. In invasion of the heavy duties are a serious obstruc- England, tion foreign commerce of the nation, inasmuch as they circumscribe the to the and of I happen myself choice know of a most valuable returns. scientific to collection of natural history, which could not be imported from Brazil into Eng- land by reason of the exorbitant duties, (a) (a) The of Sismondi, in this particular, have been since adopted by our views and of our author by Ricardo. This difference of opinion own Malthus, those to an interesting discussion between our author and lias given rise to Malthus, whom ho has recently addressed a correspondence on this and other parts of the fccience. Were any thing wanting to confirm the arguments of this chapter, it Lettre would by a reference to his supplied 1, d M. Malthus. Sismondi has be vainly attempted to answer Kicardo, but has made no mention of his original 1 antagonist Vide Annales de Legislation, No. 1. art. 3. Genevo, 1820. J

140 CHAP. XV. ON PRODUCTION. 137 the value product on his own account, in ihe pur- have laid of his gown or but of some other more chase, perhaps, not of a surplice, of the consumption serviceable product. The the particular product, has but supplanted that of some other product. It gown or surplice, of purchase can be affected, is quite impossible that the one product of another.* by the otherwise than value deduced the following important From this important truth may be conclusions:— 1. every community the more numerous are the pro- That, in more various their productions, ducers, the and the more prompt, markets those productions; and, are the numerous, and extensive for natural consequence, the more profitable by they to the pro- a are ; for price rises with the demand. But this advantage is to be ducers not from derived from real production alone, and forced circulation a of products; value once created is not augmented in its passage for a one hand another, nor by being seized and expended by the from to individual. man, that lives upon of by an The government, instead other people, originates no demand for those pro- the pioductions of he merely puts himself in the place of the producer, to ; ductions of production, as we shall presently the great injury see. 2. is interested in trie general prosperity of That each individual and the success of one branch of industry promotes that of all, that the others. In all or line of business a fact, whatever profession man may devote himself to, he is the better paid and the more readily finds employment, in proportion as he sees others thriving equally around him. A man of in a talent, that scarcely vegetates of society, would find thousand ways of turning retrograde state a account thriving community that could afford to to in a his faculties reward his ability. A merchant established in a rich employ and much larger amount than one who sets and populous town, sells to a poor district, with a population sunk up indolence and apathv. in a in an active manufacturer, or an intelligent merchant, What could do in small deserted and semi-barbarous town in a remote corner of a or could 1 Though in no fear of a competitor, he Poland Westphalia but produced; whilst was sell at Paris, Amster- little, because little or dam, in spite of the competition of a hundred dealers in London, his own line, he might do business on the largest scale. The reason is obvious: he is who produce largely in an surrounded with people of and who make purchases, each with his respective infinity ways, is to say, with the money arising from the products, that of sale what have produced. he may is the This of the gains made by the towns' people ou* true source of the country people, and again by the latter out of the former; both * The capitalist, in spending the interest of his products raised the employment of that capital. The general rule* that regu* by the ratio he receive* will be investigated ate Book II., irtfrd. Should h«a ever in spend the principal, still he consumes products only; for capital consists of pro- ducts, to reproductive, but susceptible of unproductive consume devoted indeed wasted or dilapidated. to which it is in fact consigned whenever it is lion;

141 138 ON PRODUCTION. BOOK I. to ouy more largely, more amply they of them have wherewith the city, standing in the of a rich sur- themselves produce. A centre of and numerous customers • want rich rounding country, feels no the vicinity of an opulent city gives addi- and, on the other hand, of the country. The division of nation.? produce to the tional value commercial, is idle enough. into agricultural, manufacturing, and success the people in agriculture is a stimulus to its manu- For of a commercial prosperity; flourishing condition and and the facturing manufacture and commerce reflects a benefit upon its agri- of its culture also.* of a nation, in respect of its neighbours, is analogous The position the relation of one of its provinces to the others, to the country or of to town; it has an interest in their prosperity, being sure to profit the The government United States, therefore, by their opulence. of the their attempt, about year 1802, to civilize in acted most wisely, the Creek Indians. The design was to their savage neighbours, the industry amongst them, and make them producers of introduce habits carrying on a barter trade with capable States of the Union; of the is nothing to be got by dealing with a people that have for there to pay. It is nothing and honourable to mankind, that one useful so nation among many should conduct itself uniformly upon liberal principles. The brilliant results of this enlightened policy will de- and theories really destructive and falla- monstrate, that the systems are the cious, by the old exclusive and jealous maxims acted upon and by them most impudently styled European governments, prac- tical truths, for no other reason, as it would seem, than because they have the misfortune to put them in practice. The United States will have the honour of proving experimentally, that true policy goes and humanity.f hand-in-hand with moderation animate productive establishment on is sure to large scale the industry * a A whole neighbourhood. " In Mexico," says Humboldt, " the best culti- of the that which brings vated tract, recollection of the traveller the most to the and French scenery, is the level country extending- from Salamanca of beautiful part far as Silab, Guanaxuato, and Villa de Leon, and encircling the richest mines as of of the known world. Wherever the veins precious metal have been discovered in the most desert part Cordilleras, and in the most and worked, even of the and the working of the mines, instead of interrupting the barren insulated spots, of superficial cultivation, has business it more than usual activity. The given opening considerable vein is sure to be followed of a immediate erection by the of a town ; farming concerns are established in the vicinity; and the spot so lately insulated in the midst of wild and desert mountains, is soon brought into contact with the in tillage." Essai pol. sur. la Nouv. Espagne. tracts before It is by the recent advances of political economy, that these most f only important truths have been made manifest, not to vulgar apprehension alone, but to the most distinguished and even We read in Voltaire enlightened observers. that "such is the lot of humanity, that the patriotic desire for one's country's grandeur, is but a wish for the humiliation of one's neighbours; that it is clearly impossible for to gain, except by the loss of another." (DrH. one country Phil. Patrie.) By a continuation of the same false reasoning, he goes on to Art. declare, that a thorough citizen of the world cannot wish his country to bo greater less, richer or poorer. It is true, that he would not desire her to extend or va.fi own of her dominion, because, in so doing, she might endanger ber limits

142 CHAP. XV. ON PRODUCTION. 139 From this fruitful principle, we may 3. draw this further conclu- injury sion, that or national industry and pro- to the it is no internal for import commodities from abroad; nothing duction to buy and can be bought from strangers, except with native products, which in find it be objected, that thi* a vent this external traffic. Should answer, specie I foreign produce may have been bought with specie, always a native product, but must have been bought itself s not products with native industry; so that, whether the foreign the of paid the specie or in home products, be vent for articles for in is the in both cases.* national industry same 4. The same principle leads to the conclusion, that the encourage- of mere consumption is no benefit to commerce ; ment diffi- for the culty lies supplying the means, not in stimulating the desire of in and we have seen that production alone, furnishes consumption; good government stimulate those means. Thus, it is the aim of to bad government to encourage consumption. production, of same reason that the creation of a new product is the For the of a new market for other products, the consumption or opening of a product is the stoppage of a vent for them. This is destruction the end of the has been answered by its no evil where product end is the satisfying of some human want, destruction, which or the creation of some new product designed for such a satisfaction. Indeed, if the nation be in a thriving condition, the gross national re-production exceeds the The consumed pro- gross consumption. it is natural fitting they should • ducts have fulfilled their office, as and opened market, but just the has no new the consumption, however, reverse.f clear conviction, that the Having once arrived de- at the general for products is brisk in proportion to the activity of production, mand not trouble ourselves much to inquire towards what chan we need of nel may be most advantageously directed industry production of The products created give rise to various degrees demand, accord ing to the wants, the manners, the comparative capital, industry, ana but he will desire her to progress in wealth, for her well-being; progressive prosperity promotes that of all other nations. in * This effect has been sensibly experienced Brazil of late years. The large of European commodities, which imports freedom of navigation directed to the the markets of Brazil, has been so favourable to its native productions and commerce, that Brazilian products never found so a sale. So there is an good of a By the way, it might instance national benefit arising from importation. for Brazil if the prices of her products and have perhaps been better profits the of her producers had risen more slowly and gradually; for exorbitant prices never lead to the establishment of a permanent commercial intercourse ; it is better to gain by the multiplication of one's own products than by their increased price. •f If the barren consumption of a product be of itself adverse to re-production, and a diminution pro tanto of the existing demand or vent for produce, how shall we designate that degree of insanity, which would induce government delibe- a rately to burn and destroy the imports of foreign products, and thus to annihilate the sole advantage accruing from unproductive consumption, that is to s/v me 1 gratification of the wants of the consumer

143 U(V ON PRODUCTION. BOOK I. of each country; article most in request, natural resources the competition buyers, yields the best interest of money to the owing of capitalist, the largest profits to the adventurer, and the best to the labourer; to the agency of their respective services wages and tne these advantages towards those particular by is naturally attracted channels. In a community, city, province, or nation, that produces abun- and adds every moment to the sum of its products, almost dantly, all the branches commerce, manufacture, and generally of industry, of the is great, and because yield handsome profits, because demand is always a large quantity of products in the market, ready to there for new And, bid vice versd, wherever, by productive services. of or its of the nation reason government, production is the blunders or does not keep pace with consumption, the demand stationary, gradually declines, the value of the product is less than the charges of its production; no is properly rewarded; pro- productive exertion the employment capital becomes less fits and wages decrease; of more hazardous; and consumed piecemeal, not advantageous it is through extravagance, but through necessity, and because the sources are dried up.* The labouring classes experience a want of of profit in tolerable circumstances, are more cramped work; families before and des- in difficulties are left altogether and confined; those before titute. Depopulation, misery, returning barbarism, occupy the and place of abundance and happiness. Such are the concomitants of declining production, which are only to be by frugality, intelligence, activity, and freedom- remedied XVI. CHAPTER THE BENEFITS RESULTING PROM THE QUICK CIRCULATION OP OF AND MONEY COMMODITIES. Ii is common to hear people descant upon the benefits of an active circulation; that is to say, of numerous and rapid sales. It is mate- rial to appreciate them correctly. The values engaged in actual production cannot be realized and employed in production again, until arrived at the last stacje of com- pletion, and sold to the consumer. The sooner a product is finished and sold, the sooner also can the portion of capital vested in it be applied to the business of fresh production. The capital being engaged a shorter time, there is less interest payable to the capi- of this kind gives no encouragement to future production, Ht * Consumption devouu products already in existence. No additional demand can be crea+M is until there new products raised * there be only an exchange of one product tm mother. Neither can one branch of industry suffer without affecting the rest

144 CHAP. XVI. ON PRODUCTION. 141 is a saving charges of production; it is, therefore, talist; there in the the course an advantage, that the successive operations performed in rapidly executed. be of production should effects of this activity illustrating circulation, let By way of the of of a piece of printed calico.* in the us trace them instance cotton from Brazil. It is his interest the A Lisbon trader imports factors in that be expeditious in making purchases and his America and he meet no delay in selling his remitting cargoes, likewise, that to a French merchant; because thereby gets his returns cotton he sooner recommence a new and equally lucrative the sooner, and can operation. Portugal that benefits by the increased So far, it is activity circulation; the subsequent advantage is on the side of of If the French merchant keep Brazil cotton but a short France. the warehouse, before it to the sells in his cotton-spinner, if the time he immediately to the weaver, if the spinner after spinning sell it it forthwith to the calico printer, and he in his turn weaver dispose of it sell to (he retail dealer, from whom it quickly without much delay to the for passes consumer, this rapid circulation will have occupied a shorter period the capital embarked by these respective producers; of capital will have been incurred; consequently the less interest prime cost the article will be lower, and the capital will have'been of the sooner disengaged and applicable to fresh operations. All these different purchases and sales, with many others that, for brevity's sake, I not noticed, were indispensable before the have be worn shape of printed calicoes. They Brazil cotton could in the this product; more to are so many productive fashions given and the have been given, the more benefit will have been rapidly they may the if the same commodity be merely derived from production. But, sold several times over in a year in the same place, without under- be a loss instead going any fresh modification, this circulation would a of and would increase instead of reducing the prime cost t

145 142 ON PRODUCTION. BOOK 1 a new productive agent the instant receive a new modi- of it is fit to ultimately handed over to the the instant fication, and is consumer, bustle the All kind received activity and last finish. not it has of from giving additional activity to circulation, far tending to this end, impediment to the course of production—an obstacle to circu- is an by all means avoided. lation to be rapidity production arising from the more to the of With respect industry, it is an increase of rapidity not in cir- skilful direction of productive energy. The advantage culation, analogous; it but in is amount of capital employed abridges the no distinction between the circulation of goods I have made and of money, because there really none. While a sum of money lies is in a merchant's coffers, is an inactive portion of his capital, idle it same nature that part of his capital which is of the as precisely warehouse in the shape lying goods ready for sale. in his of of useful circulation is, the natural wish of all The best stimulus to incur classes, especially the producers themselves, least possi- the ble amount interest upon the capital embarked in their respective of is apt to be interrupted by undertakings. Circulation much more in its way, than by the want of proper encour- the obstacles thrown Its greatest obstructions are, wars, embargoes, oppressive agement. the dangers and duties, of transportation. It flags in difficulties times of alarm and uncertainty, when social order is threatened, and all undertakings are hazardous. It flags, too, under the general dread to conceal the"extent of arbitrary exactions, when every one tries of flags times of jobbing and speculation, it in his ability. Finally, sudden fluctuations caused when gambling in produce, make the by for a profit from every variation of mere relative price: people look are then held back in expectation of a rise, and money in the goods of a prospect in the interim, both these capitals remain fall; and, and to production. Under such circumstances, inactive useless is no circulation, but of such products as cannot be kept with- there out danger of as fruits, vegetables, grain, and all arti- deterioration; cles that spoil keeping. With regard to them, it is thought in the wiser to incur the loss of present sale, whatever it be, than to risk considerable or If the national money be deteriorated, it total loss. an to get rid of it in any way, and exchange it for becomes object was one of the causes of the prodigious circu- commodities. This the lation that took place during of the progressive depreciation assignats. French was anxious to find some employ- Everybody ment for a paper currency, whose value was hourly depreciating; it was only taken to be and one might have re-invested immediately, On it the supposed it passed through. burnt that occasion, fingers men plunged into business, of which they were utterly ignorant • manufactures were established, houses repaired and furnished, no expense spared even in-pleasure; until at length all the value was each individual possessed in assignats was finally consumed, invest eo or lost altogether.

146 CHAP. XVII. ON PRODUCTION. 143 CHAPTER XVII. OP THE EFFECT INTENDED TO INFLUENCE OF GOVERNMENT REGULATIONS PRODUCTION. speaking, there has is no act of STRICTLY government but what in shall confine myself this I some influence upon production. as are avowedly aimed chapter exertion of such in- to such at the monetary system, of loans, fluence ; reserving the effects of the and to be of in distinct chapters. of taxes, treated governments, their attempts to influence produc- of in The object prescribe the raising tion, is, either particular kinds of produce to of or to prescribe which they judge more advantageous than others, of production, which they imagine preferable to methods other methods. The effects this two-fold attempt upon national wealth of be investigated the two first sections of this chapter; in the will in shall apply the same principles particular I to the remaining two, privileged companies, and of cases of the corn-trade, both on accouni and for the purpose of further explaining of their vast importance, the principles. We and illustrating see, by the way, what shall reasons circumstances will require or justify a deviation from and of general principles. The grand mischiefs authoritative interference not from occasional exceptions to established maxims, but proceed of the nature of things, and the false maxims built from false ideas upon them. It is then that mischief is done by wholesale, and evil pursued upon system; for it is to beware, that no set of men well to system, than those who boast that they go upon are more bigoted none.* I. SECTION of Regulations prescribing the Nature of Products. Effect The natural wants and its circumstances for the time of society, a more or less lively demand for particular kinds of being, occasion in these branches of production, produc- products. Consequently, are tive services somewhat better paid than in the rest; that is to say, the profits upon land, capital and labour, devoted to those branches are somewhat larger. This additional profit naturally of production, The greatest sticklers for adhering to practical notions, set out with the * assertion of general principles: they begin, for instance, with saying, that no one can the position, that one individual can gain only what another dispute and one of by the sacrifices loses, another. What is this but nation profit only 7 and one so unsound, that its abettors, instead of possessing more prac system tical knowledge than other people, show their utter ignorance of many facts, the acquaintance with which indispensable to the formation of a correct judgment is No man, who understands the real nature of production, and sees how new wealth o>ay be and is daily created, would attempt to advance so gross an absurdity

147 Hi ON I PRODUCTION. Booi and thus nature of the products is always attracts producers, the wants regulated We have seen in a preceding of by the society. in to the more ample proportion are chapter (XV.,) that these wants and sum the aggregate is a larger of gross production, that society in proportion to its means purchaser, purchasing. in of the way of of When authority throws itself in this natural course says, product you are about to create, that which and the things, yields and is consequently the most in request, is the greatest profit, no means the most suitable to your circumstances, you must oy it undertake some other, a portion of the produc- evidently directs df the nation towards object of less desire, at the tive energies an another more urgent desire. of expense of year 1794, there were some persons perse- In France, about the and to the scaffold, for having converted corn- cuted, even brought land into pasturage. Yet the moment these unhappy people found to feed cattle than to it more profitable one might have grow corn, been sure that society stood more need of cattle than of corn, in be in one way than in the und that greater value could produced other. the public authorities, the But, said is of less value produced importance than the nature of the product, and we would rather have you raise 10 dollars worth of grain than 20 dollars worth of butcher's meat. In of this sim- this they betrayed their ignorance the greatest product always the best; and that an ple truth, that is in to pur- estate, which should produce butcher's meat wherewith chase twice as much wheat as could have been raised upon it, pro- in reality, twice as much wheat as if it had been sowed with duces, to twice the amount is to be got for its product. grain; since wheat way of you, does not increase its This getting wheat, they will tell it be introduced from abroad; but total quantity. True, unless nevertheless, this article must at the be relatively more plenti- time the ful than butcher's meat, because of two acres of wheat, product is given for that of one acre of pasture.* And, if wheat be suffi- ciently scarce, and in to make tillage more profita- sufficient request is ble than grazing, legislative interference superfluous altogether; for self-interest will make the producer turn his attention to the former. is, which The only question then most likely to know what is the kind of cultivation yields the largest returns, the cultivator or the government * and we may fairly take it for granted, that the culti- vator, residing spot, making it the object of constant study on the and inquiry, and more interested in success than anybody, is better informed this respect than the government. in * At the disastrous period in question, there was no actual want of wheat*, the growers merely felt a disinclination to sell for paper money. Wheat was •mid for real value at a very reasonable rate; and, though a hundred thousand acres of pasture land had been converted into arable, the disinclination to exchange wheat for a discredited paper-money would not have been a jot •educed

148 CIIAP. XVII. ON PRODUCTION. 145 Should it be insisted upon in argument, that the cultivator know- only the price-current of the day, and does not, like the government, provide for the future wants of the people, it may be answered, that one of the talents of a producer, and a talent his own interest obliges him assiduously to cultivate, is not the mere knowledge, but the fore- knowledge, of human wants.* An evil of the same description was occasioned, when, at another period, the proprietors were compelled to cultivate beet-root, or woad in lieu of grain: indeed, we may observe, en passant, that it is always a bad speculation to attempt raising the products of the torrid, under the sun of the temperate latitudes. The saccharine and colouring juices, raised on the European soils, with all the forcing in the world, are very inferior in quantity and quality to those that grow in profusion in other climates ;f while, on the other hand, those soils yield abundance of grain and fruits too bulky and heavy to be imported from a distance. In condemning our lands to the growth of products ill suited to them, instead of those they are better calcu- lated for, and, consequently, buying very dear what we might have cheap enough, if we would consent to receive them from places where they are produced with advantage, we are ourselves the victims of our own absurdity. It is the very of skill, to turn acme the powers of nature to best account, and the height of madness to contend against them; which is in fact wasting part of our strength, in destroying those powers she designed for our aid. Again, it is laid down as a maxim, that it is better to buy products dear, when the price remains in the country, than to get them cheap from foieign growers. On this point I must refer my readers to that analysis of production which we have just gone through. It will there be seen, that products are not to be obtained without some sacrifice,—without the consumption of commodities and productive services in some ratio or other, the value of which is in this way as completely lost to the community, as if it were to be exported.^ * Of course, in extraordinary cases, like that of a siege or a blockade, ordinary rules of conduct must be disregarded. However irksome the necessity, violent obstructions to the natural course of human affairs must be removed by counter* to as acting violence; poison is in dangerous cases resorted a medicine; but these remedies require extreme care and skill in the application. M. de Humboldt has remarked, that seven square leagues of land in a f as the utmost consumption of France, Topical climate, can furnish as much sugar in its best days, has ever required. } In the sequel of this chapter, it will be shown, that values exported give precisely the same encouragement to domestic industry, as if they are consumed at In the instance just cited, suppose that wine had been grown instead home. of the sugar of beet-root, or the blue dye of woad, the domestic and agricultural industry of the nation would have been quite as much encouraged. And, since the product would have been more congenial to the climate, the wine produced from the same land would have procured a larger quantity of colonial sugar and indigo through the channel of commerce, even if conducted by neutral« or enemies. The colonial sugar and indigo would have been equally the product of our own land, though first assuming the shape of wine; only the same space* of land would have produced them in iuperior quantity and quality. And the encouragement to domestic industry would ht- ; * ^:-^, or rattier would b#

149 146 ON PRODUCTION. BOOK 1. can hardly suppose government will be bold enough to I any indifferent about the be derived object, that it is profit, which might it a from would fall more advantageous production, because to tho The set up their individuals. of lot worst governments, those which to own interest of their subjects, in the most direct opposition that this time learnt, that the revenues of individuals are the by have public revenue; and that, even under despotic regenerating source of is mere organized spoliation, and military sway, where taxation the only what they have themselves acquired. subjects can pay to are equally we agriculture have been applying The maxims a government entertains a to applicable manufacture. Sometimes manufacture of a notion, that raw material is better for the native of a the national industry, than the manufacture foreign raw material conformity to is in we have seen instances of It this notion, that to the preference given and linen above the cotton manufac- woollen ture. this conduct we contrive, as far as in us lies, to limit the By of nature, which pours forth different climates a variety bounty in innumerable wants. Whenever human to our of materials adapted attaching to these gifts of nature a value, that is to efforts succeed in degree of utility, whether by their import, or by any modifi- a say, we may subject them to, a useful act is performed, and an cation item added to The sacrifice we make to foreigners national wealth. the raw is not a whit more to be regretted, in procuring material the sacrifice of advances and consumption, that must be than made in every branch production, before we can get a new product. of is, in all Personal interest the best judge of the extent of the cases, sacrifice, and of the indemnity we may expect for it; and, although this guide may us, it is the safest in the long-run, sometimes mislead as the least costly.* as well longer is no if individual a But personal interest safe criterion, of superior value would reward more amply the a greater; because product agency and industry, engaged in the production. of the land, capital, is obliged every moment to turn round and combat objections, that • Dne^ if the science of political economy had been more ne\er cotjld have been started, widely diffused. It for instance, in all probability, be said,—granting will here, the in the purchase of the raw flax for manufacture, and that that sacrifice made in the purchase of cotton, is to the made or merchant equal in the manufacturer one case and other,—still, in the one case, the amount of the sacrifice is ex the pended and consumed in the nation itself, and conduces to the national advan- tage ; other, the whole advantage goes to the foreign grower. I answer, in the to the in either case; for the foreign raw material, the advantage goes nation be purchased, except with a domestic product, which must bo cotton, cannot of the the bought merchant can go to market; whether national grower before Why may it be flax or any thing else, of domestic creation. must some value he no* buy with money 1 Money itself must have been originally purchased with some other product, which must have employed domestic industry, as much you as of flax. Turn it which way growth will, it comes to the same thing the in the end. Wealth can only be acquired by the production of value, or lost by consumption; and, putting absolute robbery out of the question, the whole its consumption of a nation must always be supplied from its internal resources, its land, capital, and industry, even that portion of it which falls upor external sbjects

150 CHAP XVII. ON PRODUCTION. 14 are not left counteract and control each other. If on^ interests to class, individual, in the aid of authority to ward off can or one call it the prejudice and a privilege to competition, the effects of acquires of the whole community; it can then make sure of profits cost at the productive services rendered, but composed due to the not altogether actual tax upon consumers for its in part of an private profit; which it the authority that thus unjustly lends tax commonly shares with its support. has in resisting the importu- The legislative body great difficulty this kind of privileges; the applicants are the pro- nate demands for benefit thereby, ducers that represent, with much are to who can gains own gain to the industrious classes, plausibility, that their are a to the and at large, their workmen and themselves being nation members industrious classes, and of the nation.* of the the cotton manufacture first introduced in France, all When was of &c. joined in loud merchants Amiens, Rheims, Beauvais, the. represented, that the industry remonstrances, these towns and of Yet they do not appear less industrious or rich was annihilated. ago; while the opulence than they were fifty years Rouen and of all Normandy been wonderfully increased by the new fabric. has was The outcry infinitely greater, when printed calicoes first came into fashion; all the chambers of commerce were up in arms; and depu- meetings, discussions everywhere took place; memorials tations poured in and great sums were spent in from every quarter, the opposition. Rouen stood forward to represent the misery now about to assail her, and painted, in moving colours, "old men, women, and the best cultivated lands children, rendered destitute; the kingdom lying waste,, and whole of a rich and beautiful in the city Tours urged the lamentations The of province depopulated." deputies of the whole kingdom, and foretold of commotion the " a the frame of social order itself." Lyuns could not that would shake in silence a view " which filled all her manufactories with project alarm." Never important an occasion had Paris presented on so at the tears of a throne, " watered with the itself of commerce." foot Amiens viewed the of printed calicoes as the gulf that introduction up all the manufactures of the kingdom. must inevitably swallow The memorial of that city, drawn up at a joint meeting of the three corporations, and in theseterms: "To signed unanimously, ended it is for the eternal prohibition of the use of printed conclude, enough the whole kingdom is calicoes, that at the news chilled with horror of their proposed toleration. Vox populi vox dei." Hear what Roland de la Platiere, who had the presentation of these remonstrances in quality of inspector-general of manufactures, says on " Is there a single individual at the present this subject, No one cries out. against them, because very few know nrho it is that pays * the gains of the monopolist. The real sufferers, the consumers themselves, often first feel pressure, without being aware of the cause of it, and are the the w .bu9e the enlightened individuals, who are really advocating their interests.

151 148 ON PRODUCTION. BOOK i who \s enough to'deny, that the fahric of printed caii moment, mad dressing coes employs an, immense number of* hands, what with the and printing? This of cotton, spinning, weaving, bleaching, the the art of in a few years, more than all improved article dyeing has the other manufactures together have done in a century." to pause a moment, and reflect, what firm- my readers I must beg extensive information respecting the sources of public pros- ness and uphold to administration against so general perity were necessary an principal agents a clamour, supported, amongst by of the authority, public utility. of other motives, besides that too often presumed upon their power Though governments have to benefit by prescribing to agriculture and the general wealth, the raising of particular products, they have interfered manufacture in the concerns of commerce, especially of much more particularly bad external commerce. These a consequences have resulted from by the name exclusive or mer- general system, distinguished of the to which attributes of a nation profits what is system, the cantile favourable balance of technically called Before we enter a trade. the investigation of the real effect of regulations, intended to upon to a secure in its favour, it may be as well to nation this balance form some notion what it really is, and what is its professed of I in the following object; which shall attempt DIGRESSION, IS CALLED THE BALANCE UPON WHAT TRADE. OF The comparison a nation makes between the value of its exports to, and that of its imports from, foreign countries, forms what is called the of its trade. If it have exported more commodi- balance it has imported, taken for granted that the nation has ties than it is and the the gold and silver; in balance of trade to receive difference to be in its favour; and when the case is reversed, the is then said is to be balance against it. said 1. the The exclusive system proceeds upon these maxims: That of a nation is advantageous, in proportion as its exports commerce its imports, and as there is a larger cash balance receivable exceed or in the in specie, 2. That by means of duties, precious metals: prohibitions, and bounties, the government can make that balance more in of, or less against, the nation. favour two be analysed minutely in the first place; These maxims must let us see what is the course of practice. then, a merchant sends goods abroad, he causes them to be there When sold receives, by the hands of his foreign correspondents, the and ; price of his goods, in the money of the country. If he expects to \nake profit upon t^e return cargo, he causes that price to be laict a out in foreign produce, and remitted home to him. The operation other V* the same, when he begins at the with little variation end: that is to saj, by making purchases abroad, which he pays for ov

152 CHAP. XVIL ON PRODUCTION. 14$ remitting domestic products thither. These operations are not always executed on account of the same merchant. It sometimes happens that the trader, who undertakes the outward, will not under- take the homeward adventure. In that case he draws bills payable after date, or upon sight, upon his correspondents, by whom the goods have been sold; these bills he sells or negotiates, to somebody, who sends them to the place they are drawn upon, where they are made use of in the purchase of fresh goods, which the last mention- himself.* ed person imports In both cases, one value is exported, another value is imported in return; but we have not to stop to inquire, if any part of the value either exported or imported consisted of the precious metals. It may reasonably be assumed, that merchants, when left the free choice of what goods they will speculate in, will prefer those that offer the largest profit; that is to say, those which will bear the greatest value when they arrive at the place of destination. For example, a French merchant has consigned brandies to England, and has to receive from England for such his consignment, 1000/. sterling: he naturally sits down to calculate the difference between what he will receive, if he import his 1000/. in the shape of tho precious metals, and what he will receive, if he import that sum in the shape of cotton manufactures/)" of one trader, may be been said of two—three,—in * What has said equally short, in the nation. As far as concerns the balance of com- of all the traders the of the whole will resolve themselves into what I have merce, operations folly knavery the just stated. Individual losses may occur on either side, from or traders engaged; few of the may take it for granted, that they of some but we be inconsiderable, will, on the average, comparison with the total of business in done; events, the losses on the one side will commonly balance those on at all the other. It to our purpose to inquire, by whom the charge very little importance is of borne: usually, the English trader pays the freight of the good? is Df transport the same upon hia he buys, and imports ftom France, and the French trader does for purchases from England; both of them look of this outlay the reimbursement to the by the circumstance of transport. to the value added articles It may t well here to point out a manifest blunder of some partisans of the be exclusive system. They look upon nothing that a nation receives from abroad at* a national gain, except what is is in effect, received in the form of specie; which a hatter who sells hat for 5 dollars gains the whole 5 dollar? to maintain, that a receives specie. But this cannot be; money, like other things, he it in because commodity. A French merchant consigns to is itself to a England, brandies fr.: his commodity was equivalent in France to that sum in the amount of 20,000 if specie; in England for 1000J. sterling, and that sum remitted in gold or it sell silver be worth 24,000 there is a gain of 4000 fr. only, although France has fr. fr. in specie. And, should the merchant lay out his 1000/. received 24,000 sterling in cotton goods, and be able to sell them in France for 28,000 fr. then? would then be a to the importer and to the nation of 8000 fr., although no gain specie whatever had been brought into the country. In the gain is pre- short, cisely the excess of the value received above value given for it, whatever be the the form in which the import is made. It is curious enough, that more lucrative external commerce is, the greater the must be the excess of the import above the export; and that the very thing, which the partisans of the exclusive system deprecate as a calamity, is of alt

153 156 ON PRODUCTION. fiooic f If the merchant find it more advantageous to get his returns in goods than in specie, and if it be admitted, that he knows his own •nterest better than anybody else, the sole point left for discussion is, whether returns in specie, though less advantageous to the mer- chant, may not be better for the nation, than returns of any other article: whether, in short, it be desirable in a national point of view, that the precious metals should abound, in preference to any othe. commodity. What are the functions of the precious metals in the community 1 If shaped into trinkets or plate, they serve for personal ornament, for the splendour of our domestic establishments, or for a variety of domestic purposes; they are converted into watch-cases, spoons, dishes, coffee-pots; or rolled out into leaves for the embellish- forks, ment of picture frames, book-binding, and the like; in which case, they form part of that portion of the capital of the community, which yields no interest, but is devoted to the production of utility or plea- It is doubtless an advantage to the nation, that the material, sure. whereof this portion of its capital consists, should be cheap and abun- dant. The enjoyment they afford in these various ways is then obtained at a lower rate, and is more widely diffused. There are many establishments on a moderate scale, which, but for the disco- very of America, would have been unable to make the show of plate that is now seen upon their tables. But this advantage must not be over-rated; there are other utilities of a much higher order. The desired. I will explain why. When there has been an export of things to be an and of 11 millions, there is in the nation a value of 1 mil- 10, import in return the interchange. And, spite of the specious statements lion more than before in the commerce, this must almost always be so, otherwise the traders of balance of In fact, the would gain nothing. of the export is estimated at its value value before shipment, which increased by the time it reaches its destination: with is is purchased, which also receives like acces- this augmented value the return a this import value transport. The of of by the is estimated at the time sion value entry. Thus, the result is the presence of a value equal to that exported, of plus the gains outward homeward. Wherefore, in a thriving country, the value and the of the exports. What then are of total imports should always exceed that to think of the we of the French Minister of the Interior of 1813, who Report makes the total exports to have been 383 millions of francs, and the total imports, exclusive of a statement upon which he felicitates a specie, but 350 millions ; as the most favourable that ever been presented. Whereas, thia nation, had contrary, what everybody felt knew, that the com- on the and balance shows, merce in consequence of the blun- of France was then making immense losses, of her administration, and the total ignorance of the first principles of poli- ders tical economy. In tract upon the kingdom of Navarre in Spain, (Annales des Voyages, torn. a the .. I find it stated, that, on 312,) comparison of the value of the exports with p. that of the imports of that kingdom, there is found to be an annual excess of the :ormer above the of 120,000 dollars. Upon which the author very sagely latter " this, if there be one truth more indisputable than another, it is '.bserves, that a is !hat growing rich cannot be importing more than it is export- nation which for then its capital must diminish perceptibly. And, since Navarre is in a ing, state of gradual improvement, as appears from the advance of pDpulation and x,omfort, clear,"—that I know nothing about the matter, he might, ha/e it is tdded;—" for I am citing an established fact to give the lie to an indisputable brincip*e." We are every day witnessing contradictions of the same kind.

154 CHAP. XVII. ON PRODUCTION. 151 out the inclemency weather, is of window-glass, that keeps of the comfort, than much more importance of platu any to our species of yet no one has import whatsoever, encouraging ever thought its exemptions. special favour by or production or is, to act as the material The other utility of the precious metals of the of money, that is to say, of that portion national capital, in employed of existing values is which facilitating the interchange individual and between For this purpose, is it any one another. the be abundant and cheap? advantage that material selected should nation, that Is is a more amply provided with that material, richer which more scantily supplied ? one than is anticipate a I must here take leave in to position, established XXI. this book, wherein the subject of money is considered, Chap. of namely, that total business of national exchange and circulation, the requires given quantity of the commodity, money, of some amount a is in France daily sale of so much wheat, cattle, or other. There a immovable, which sale requires and fuel, property movable the given value in the form of money, because daily intervention of a first converted into money, as a step towards its every commodity is further conversion into other objects of desire. Now, whatever be or scarcity of the article money, since a given the relative abundance quantum is for the business of circulation, the money must requisite in as it declines in quantity, and decline of course advance value, as it advances in quantity. Suppose in value money of France the to amount now to 3000 millions of francs,* and that by some event, no matter what, it be reduced to 1500 millions; the 1500 millions will be as valuable as the 3000 millions. The demands of quite the agency actual value of 3000 millions; circulation require of an say, pounds value equivalent to 2000 millions of is to of sugar, a that sous per lb.) or to 180 millions of hectolitres of at 30 (taking sugar at 20 fr. the hectolitre). Whatever be the wheat (taking wheat or weight of the material, whereof it is made, the total value of bulk at in the latter the national money will still remain that point; though that material will be twice as valuable as in the former. case, An ounce silver will buy eight instead of four lbs. of sugar, and so of of all other commodities; and the 1500 millions of coin will be equiva- lent to the But the nation will be neither richer nor former 3000. A man to market with a less quantity poorer than before. who goes be able to buy with it the same quantity of commodities. of coin, will for A nation that has chosen gold of its money, is equally the material one that rich with made choice of silver, though the volume of has its money be much less. Should silver become fifteen times as an scarce as is to say, as scarce as gold now is, present, that ounce at of silver would perform the same functions, in the character of money, as an ounce of gold now does ; and we should be equally rich in we money. should it fall to a par with copper, Or, should not be a r •• ,—, — - i m *564 millions of dollars.

155 152 ON PRODUCTION. BOOK I. the richer article of money; we should merely be encum- ?ot in the more bulky medium of bered with a circulation. of and the other utilities the precious metals, On me score, then, of on that score only, their abundance makes a nation richer, because it of those utilities, extends diffuses their use. In the the sphere and money, that abundance no wise contributes to national of cnaracter habits of the vulgar lead them to pronounce an enrichment;* but the proportion to the quantity of money he is possess- individual rich, in this notion ed to national wealth, which has of; and been extended of individuals' wealth. Wealth, how- up of is made the aggregate before observed, consists, not in the matter or substance, ever, as but the of that matter or substance. A value of large, is worth in money a money no more than small volume; neither is a money of small, of of less value than large volume. Value, in the form of com- one of is equivalent value to the same amount in the form of modities, to money. may be is money It generally preferred to so asked, why, then, the on both sides is equal 1 This requires commodities, when value I come to treat of money, it will be a little explanation. When of equal value commands a preference, shown, that the coined metal it insures to the holder the attainment the objects of desire because of one exchange instead of two. He is not, like the holder by means of any other commodity, obliged, in the first instance, to of exchange his commodity, money, for the purpose of obtaining, by a own the object of his desire; one act of exchange suf- second exchange, fices ; and this it is, combined with the extreme facility of apportion- ment, afforded by of the coin, which ren- graduated denominations it so ders exchanges of value. Every individual, who has useful in make, becomes an exchange of the commodity, a to consumer in the community; which is to say, money; that every individual universal preference of money to accounts at for the commodities the is equal. large, where value It is a a nation gains in wealth * necessary inference from these positions, that T the of its bj specie, because the residue is of equal value to the partial export and the an equivalent for the portion ex- total previous amount, nation receivers How is this to be accounted for] By the peculiar property of money ported. its utility in the exercise, not of its physical or material qualities, but to exhibit of its value alone. A less quantity of bread will less satisfy the cravings those of hunger; but a less quantity of money may possess an equal amount of utility; for its the diminution of its volume, and its value is the value augments with of bole ground its employment. Whence it is evident, that governments should shape their course in the op- to that pursued at present, and encourage, instead of discouraging, posite direction of so the export they assuredly will, when they shall understand specie. And or one the their business better: nor the other, rather, they will attempt neither it is impossible that any considerable portion of the national specie can leave for 1 he country, without raising the value of the residue. And when it is raised, are less in exchange for commodities, which given then low in price, so of it is Ha to make it advantageous again to import specie and export commodities, by is, in which action reaction the quantity of the precious metals and spite of nil '•^illations, kept pretty nearly at the amount required by the wants of the uat on.

156 CHAP. XVII. ON PRODUCTION. 15J of money, interchange between indi- But this superiority in the extend viduals, does and nation. In tH to not that between nation bullion, lose advantage of their fortiori, all the latter, money, and, d, and are dealt with as peculiar character, as money, mere commodi- merchant, who has remittances to make from abroad, The ties. nothing but the gain to be made on those remittances, and looks at precious metals treats commodity he can dispose of with the as a less benefit. eyes, an exchange more or less is no or In his more business to negotiate exchanges, object; for it is his so as to get a An to receive profit upon them. ordinary person might prefer of it is an article, whose value he is money instead goods, because but a merchant, who is better acquainted with: of the apprised prices current most of the markets of the world, knows how to in the value receives in return, whatever shape it may appreciate he appear under. may be the necessity of liquidating, An individual for the under or of giving new direction to his capital, of partition, or the purpose a A nation is never obliged to do so. This liquidation is effected like. the with of the nation, which it occupies only for circulating money the to operate the time; same money going almost immediately another act of liquidation or of exchange. the abundance of specie We have seen above (Chap. XV.) that is not even necessary national facilitation of exchanges and for the for that buyers really buy with products,—each with his sales; respective portion of the products he has concurred in creating: that with this he but to buy some further pro- buys money, which serves and that, this operation, money affords but a temporary duct; in vehicles employed convey to market the the convenience; like to farm, and to bring back the articles that have been pur- produce of a the produce. Whatever amount money may have chased with of in the of liquidation, it has passed for as been employed purchase as it was taken for: and, at the close much transaction, the of the individual neither richer nor poorer. The loss or profit arises out is the of the transaction itself, and has no reference to the of nature in the course of it. medium employed In no one way do the causes, that influence individual preference to of money commodities, operate upon international commerce. the nation When smaller stock than its necessities require, its has a value within the nation is raised, and foreign and native merchants are equally interested in the importation of when it is redundant, more: to at large is reduced, and it becomes its relative value commodities to export to that spot, where advantageous command of commo- its dities may be greater than at home. To retain it by compulsory measures, is to force individuals to keep what is a burthen to them.* * No one but an to these matters would here be inclined to entire stranger object, that money never be burthensome, and is always disposed of easily can enough. So it may be, indeed, by such as are content to throw its value away altogether, or at least, to make a disadvantageous exchange. A confectioner

157 154 ON PRODUCTION. 1 BOOK of the balance And here 1 might, perhaps, now dismiss tho subject such but on this topic, and S6 is of trade; the prevailing ignorance I to persons of the bet- the views novel have been taking, even are ter classes, to writers and statesmen of the purest intentions and well it may be worth while to put the other points, that informed on reader are often set up in on his guard against some fallacies which to and are unfortunately the ground- opposition liberal principles, prevailing policy European States. most of the of the I work of the to the simplest terms possible, shall uniformly reduce objections that their weight may be the more easily estimated. the It is said, that, by increasing the currency through of a means favourable balance of trade, the total capital of a nation is augmented, on the contrary, diminishing it, that capital is reduced. But and, by always kept mind, that capital consists, not be of so much it must in or of the values devoted to reproductive consump- silver gold, but an infinite variety of succes- tion, which values necessarily assume it is sive forms. When to vest a given capital in any intended or to to it out at interest, the first step is undoubtedly concern, place the by realize converting* into ready money the different amount, or eat them himself; but in that case he loses may give away his sugar-plums, he value of them. It should be observed, that the abundance of specie is com- oatible with national misery; for to buy bread, must have the money, that goes oeen bought itself with other products. And, when production has to contend with adverse circumstances, individuals for money, not are in great distress scarce, which oftentimes is not, but because the creation is because that article it procurable, can not be effected with advantage. it is of the products, wherewith for two successive years may show him richer in the * A merchant's leger of the second, than at the end of the first, although possessed of a smallei end amount of specie. Suppose the first year's amount to stand thus:— Volhn. Ground and build'Jigs 8000 tables 4000 Machinery and m'_ hand 3000 in Stock of good credits 1000 Balance - - Cash 4000 Total 20,000 And the second year's thus:— Dollars. Ground and buildings 8000 and movables ------------ 5000 Machinery Stock in hand 6000 Balance of credits 2000 good 1000 Cash 22,000 Total an increase of 2000 dollars, although Exhibiting cash be reduced to U&G his quarter of the former amount. A similar account, differing only in the ratios of the different items, might be be made whole of the individuals in the community, who *vouid then out for the pvidently richer, though possessed of much less specie or cash.

158 CHAP. XVII. ON PRODUCTION. 155 values one has at command. The value of the capital, thus assuming the transient form of money, is quickly transmuted by one exchange after another into buildings, works, and perishable substances requi- site for the projected enterprise. The ready money employed for the occasion passes again into other hands, for the purpose of facili- tating fresh exchanges, as soon as it has accomplished its momentary duty; in like manner as do many other substances, the shape of which this capital successively assumes. So that the value of capi- tal is neither lost nor impaired by parting with its value, whatever material shape it happens to be under, provided that we part with it in a way that ensures its renovation. Suppose a French dealer in foreign commodities to consign to a foreign country a capital of 10,000 dollars in specie for the purchase of cotton; when his cotton arrives, he possesses 20,000 dollars value in cotton instead of specie, putting his profit out of the question for the moment. Has anybody lost this amount of specie Certainly ? not: the adventurer has come honestly by it. A cotton manufac- turer gives cash for the cargo; is he the loser of the price? No, surely: on the contrary, the article in his hands will increase to twice its value, so as to leave him a profit, after repaying all his advances. If no individual capitalist has lost the 20,000 dollars exported, how can the nation have lost them? The loss will fall on the consumer, they will tell you: in fact, all the cotton goods bought and consumed will be so much positive loss; but the same consumers might have consumed linens or woollens of exactly the same value, without one dollar of the 20,000 being sent out of the country, and yet there would equally be a loss or consumption to that amount of value. The loss of value we are now speaking of is not occasioned by the r export, but by the consumption, w hich might have taken place without any export whatever. I may, therefore, say, with the strictest truth, that the export of the specie has caused no loss at all to the nation. It has been urged, with much confidence, that, had the export of 20,000 dollars never been made, France would remain in possession of that additional value; in fact, that the nation has lost the amount twice over; first, by the act of export; secondly, by that of con- sumption : whereas, the consumption of an indigenous product would have entailed a single loss only. But I answer as before, that the export of specie has occasioned no loss; that it was balanced by equivalent value imported; and that it is so certain, that nothing has been lost except the 20,000 dollars worth of imported commodities, that I defy any one to point out any other losers than the consumers of those commodities. If there has been no loser, it is clear there can have been no loss. Would you put a stop to the emigration of capital ? It is not to be prevented by keeping the specie in the country. A man resolved to transfer his capital elsewhere can do it just as effectually by the con- signment of goods, whose export is permitted.* So much the bet • The transfer of capital by bills on foreign countries, comes precisely to too

159 IMS ON PRODUCTION. BOOK I. we may be told; manufacturers will benefit by the ter, for our their value exists exports. True; in the nation, since no but longer to new purchases; there return wherewith they bring back no make of so much capital from amongst you, to give has been a transfer own, but to your activity not to some other nation's industry. This of real ground to those a is apprehension. Capital naturally flows security and lucrative employment, and gradu- places that hold out such advantages: ally retires from countries offering no but it may easily enough retire, without being ever converted into specie. the of specie causes no diminution of national capital, If export followed by a corresponding return, on the other provided it be import brings its accession of capital, For, in reality, no nand, imported, it must have been purchased by an can be before specie equivalent value exported that purpose. for On this point been alleged, that by sending abroad goods it has of specie, demand is created for goods, and the producers Instead a make profit upon their production. I answer, that, to enabled a sent abroad, that specie must have been first even when specie is export of some indigenous product; for, we may obtained by the the of it did not give it to the French rest assured, that foreign owner for nothing; and importer had nothing to offer in the first France instance domestic products. If the supply of the precious but her in the be more than sufficient for the wants of the metals country it is a fitter object of country, and, export than another commodity; if more of the specie be exported than the excess of the supply above the demand for the purposes of circulation, we may calculate with certainty, that, since, the value of specie must have been necessarily by the exportation, other specie will imported to replace raised be been withdrawn; purchase of which last, home has what for the products must have been sent abroad, which will have yielded a home producers. In a word, every value sent out of profit to the purchase for the foreign returns for the French market, France, of be a product of domestic industry, given either may resolved into for France has nothing else to procure them with. first or last, it has Again, it is better to export consumable been argued, that as, for and to keep at home those articles, instance, manufactures, not liable to consumption, or, at least, not to quick con- products sumption, such as Yet objects of quick consumption, if more specie. are more profitable to keep than objects of slower con- in demand, sumption. It would often* be doing a producer a very poor service, to make him a quantity of commodities of slow consump- substitute for an of his capital of more rapid consumption. tion, equal portion an ironmaster were to contract for the delivery If to him of a quantity coal at a day certain, and of the day came the coal when could not be procurable, and he should be offered the value in money f «n stead, it would its somewhat difficult to convince him of the be same thing. It is a mere substitute in the place of the individual making the right export commodities, who transfers his of to receive their proceeds, the value of which remains abroad.

160 CHAP. XVII. ON PRODUCTION. 157 him by the delivery money; which is an object of service done of coal much slower consumption than for. Should he the contracted for it would be a order a dyer send dying woods from abroad, an him gold, on the plea, that, with equal value, positive injury to send of has the He had no occasion for greater durability. it advantage substance, which, a a durable article whatever; what he wanted was vats, would quickly re-appear in the though decomposed in his stuffs.* colours of his were it to import any but the most durable items advantage no If as other very durable objects, such are of productive capital, there iron, that ought to stone in our partiality with silver and or share But the point of real importance is, the durability, not of any gold. but of the value particular substance, capital. Now the value of of capital perpetuated, notwithstanding the repeated change of the is in which vested. Nay, it cannot yield either material shape it is profit, unless that shape continually varied. To con- or be interest single shape of money would be to fine it to re- it to the condemn main unproductive. But I will go a step further, and, having shown that there is no in importing gold and silver more than any other article advantage I of merchandise, it were desirable to will assert, that, supposing the of trade always in our favour, yet it is morally have balance it should be so. impossible Gold and silver are all the other substances that, in the aggre- like gate, are useful to the community no compose national wealth; they longer than while they do not exceed the national demand for them. Any such excess must make the the sellers more numerous than the price proportion, and thus Duyers; consequently must depress in powerful inducement home market, in the a to buy in the create majring a profit upon the export. This expectation of may be by an example. illustrated Suppose for a moment the internal traffic and national wealth of a to be such as to require the constant employ of a given country thousand carriages of by some different kinds. Suppose, too, that, of we should succeed in getting more peculiar system commerce, carriages annually imported, than were annually destroyed by wear so that, at the year's end, there should be 1500 instead of and tear; is it not 1000; be in that case 500 lying obvious, that there would in the by and that the owners of them, repositories quite useless, rather than suffer their value to lie dormant, would undersell each other* and if it were practicable, in the even smuggle them abroad of to better account 1 In vain would the govern- hope turning them In Book III, which treats * consumption, it will be seen, that the slowei of kinds of unproductive consumption are preferable to the more rapid ones. But, in the reproductive branch, the more rapid are the better; because, the more" of quickly is effected, the less charge reproduction interest is incurred, and the the oftener the same capital can repeat its productive agency. The rapidity of consumption, moreover, does affect external products in particular; its d*- not advantages foreign growth. equal, whether the product be of home or are

161 158 ON PRODUCTION. BOOK I. for the encouragement their ment conclude commercial treaties of vain would import: its efforts in stimulating the export it in expend of in the shape purpose getting returns of other commodities, for the the public authorities favoured the import, of carriages; the more export. be to the more anxious would individuals As it is with carriages, so is it with specie likewise. The de- limited; mand form but a part of the aggregate wealth of is it can can not of specie ; the nation. That wealth possibly consist entirely requisite besides specie. extent of the de- are The for other things that peculiar article is proportionate to mand for the general wealth; the same manner, as a greater number of carriages is wanted in a in in a poor country. Whatever brilliant or solid qualities rich than the precious metals may the use possess, their value depends upon of them, that use is limited. Like carriages, they have a made and them; value that diminishes in proportion to the to a value peculiar their relative plenty, in comparison with the objects of increase of increases exchange, proportion to their relative scarcity. and in told, that every thing may be procured with gold or silver. One is but upon what terms? The terms True; less advantageous, when are these metals forcibly multiplied beyond the demand; hence their are to emigration under such circumstances. strong tendency The ex- silver from Spain was of yet Spain supplied all port prohibited; it. In 1812, the paper money of Europe with England having rendered superfluous gold money of that country, and made all the too abundant for its other remaining uses, its relative that metal value fell, and her guineas emigrated to France, in spite of the ease with which the of an island may be guarded, and of the de- coasts of capital punishment against exporters. nunciation the governments labour turn the do To what good purpose, then, to commerce in favour of their respective nations? To balance of to exhibit show of financial none whatever; unless, perhaps, the by or experience.* How can maxims advantages, unsupported fact to plain common sense, and to facts attested by so clear, so agreeable all who yet been rejected in have made commerce their study, have by all the of Europe,f nay, even have been practice ruling powers The returns of British commerce from the commencement of the 18th cen- * to the establishment of the existing paper money of that nation, show tury down of or by Great Britain a regular annual excess, more shape less received in the specie, amounting altogether to the enormous total of 347 millions sterling (more than 1600 millions of dollars.) If to this be added the specie already in Great Britain at the to have possessed a circulating me- outset, England ought of it, then, that the most dium very near 400 millions sterling. How happens a larger total of specie exaggerated ministerial calculations have never given greatest abundance 47 at the period of its millions, even 1 Vide Supra, than Chap. III. t All of them have acted under the conviction, 1. That the precious metals axe the of wealth, whereas they perform but a secondary only desirable kind part production: 2. That they have it in their power to cause their regular in its 'nflux by compulsory measures. The example of England (Vide note pre- pre-eminent wealth ceding,) the little success of the experiment. The will show of that nation, then, is derived from some other cause than the favourable to. I-

162 CHAP. XVII. ON PRODUCTION. 159 by a number writers, that have evinced both genius attacked of other subjects and information speak the truth, it is because 1 on To are as yet but political economy the first principles of little known; because ingenious systems and reasonings have been built upon hol- of, on the one hand, by in- low foundations, and taken advantage employ prohibition as a of offence 01 terested rulers, who weapon on the ether, by the personal avarice of an instrument revenue; and, manufacturers, who have of merchants private interest in ex- and a and but little pains to inquire, whether their clusive measures, take from simultaneous loss or a profits arise from actual production, thrown upon other classes of the community. maintain a favourable balance of trade, that A determination to is say, to and receive returns of export goods is, in fact, a to specie, to have no determination at all; for the nation, with foreign trade whom trade is to be carried on, can only give in exchange what the has to give. party will receive nothing but the precious it If one other party may come similar resolution; and, when the metals, to a same commodity, there is no possibility of both parties require the practicable to monopolize the precious any exchange. Were it nations in the world that would not be cut off metals, there are few all hope of mutual commercial relations. from one country afford If to another what latter wants in exchange, what more would she the X what respect would gold be preferable ? for what else have or in it be wanted, than as the means can subsequently purchasing the of objects desire 1 of The will come, sooner or later, when people will wonder at day the necessity of taking all this trouble to expose the folly of a system, so and absurd, and yet so often enforced at the childish of the bayonet.(l) point DIGRESSION THE BALANCE OF TRADE.] [END UPON OF THE commerce. But what other cause J ance from the immensity of of her Why But to what does she owe that immensity 7 To the frugality her production. in the accumulation of individual capital; to the national turn for in- exerted and to the dustry security of person and property, the practical application; of and freedom of individual agency, which, limited facility internal circulation, as it is, is yet, on the whole, superior to that and fettered other European of the states. In a in the earlier editions of this work, the American (1) note, here inserted, editor referred laudable exertions made by Mr. Huskisson, with the sup- to the port of Mr. Canning and other then prominent members of the British govern- ment, to the impolicy and injustice of restrictions and prohibitions on expose and to the the of some of their measures to relieve commerce, industry success the shackles imposed the of in a less enlightened age. We also country from then quoted observations of the Edinburgh Review, " that Mr. Huskisson, the in particular, against whom every species of ribald abuse had been cast, had done more improve the commercial policy of England during the short period to Jhat he was President of the Board of Trade, than all the ministers who had preceded him last hundred years. And it ought to be remembered to hi« for the honour, that the measures he suggested, and the odium thence arising, were not proposed and incurred by him in the view of serving any party purpose, but solely

163 I GO ON BOOK 1 PRODUCTION. To resume our subject.—We have seen, that the very advantages aimed at by the means of a favourable balance of trade, are altogether illusory; and that, supposing them real, it is impossible for a nation permanently to enjoy them. It remains to be shown, what is the actual operation of regulations framed with this object in view. By the absolute exclusion of specific manufactures of foreign fabric, a government establishes a monopoly in favour of the home producers of these articles, and in prejudice of the home consumers; that is to say, those classes of the nation which produce them, being entitled to their exclusive sale, can raise their prices above the natu- ral rate; while the home consumers, being unable to purchase else- where, are compelled to pay for them unnaturally dear.* If the the Principles of Political Economy and Taxation, * Ricardo, in his Essay on on this passage, that a government can 1817, has justly remarked in published prohibition, elevate a product beyond its natural rate of not, for in that by price: the home producers'would betake themselves greater numbers to its pro- case, in profits upon to the general level. To the duction, and, by competition, reduce it must therefore explain, that, by natural rate make myself better understood, I a I lowest rate at which the commodity is procurable, whether of price, mean or other branch of industry. by commerce commerical can procure it cheaper If than manufacturing industry, government take upon itself to compel its and the by the way manufacture, it then imposes upon the nation a more production of procurement. Thus, it wrongs the consumer, without giving chargeable mode of domestic producer the profit, equivalent to the extra charge upon the con- to a ; for competition soon brings that profit down to the ordinary level sumer profit, of and monopoly is thereby rendered nugatory. So that, although Ricardo is the am reprobating far in his criticism, he thus the measure I correct to only shows be more mischievous; inasmuch as it augments the natural difficulties in the way of the satisfaction of human wants, without any counteracting benefit to any class or any individual whatever. he believed, most justly, that these measures were sound in prin- because and country." calculated promote the and and lasting interests of his to ciple, real all the successive administrations in England, both Tory and Since that time at least uniformly recognized the soundness of the doctrines of free Whig, have them, trade, and some of by various important commercial enactments, have given to and such, too, has been the a still wider application these beneficial truths; of their liberal measures upon the state of opinion effect legislation and of throughout Great Britain, that both parliament, a most gratifying in and out of change taken place. Commercial questions everywhere now occupy a has large share of attention, are discussed with the greatest ability and acuteness in almost all the and must therefore lead to the emancipation of public journals, the it commerce from fetters which have so long and so perniciously bound and other countries which might be named, the state of In France, however, not and the of opinion, are state yet in favour of liberal commercial knowledge, views. " For thirty years," we are told by the English Commissioners, Messrs. Villiers and Bowring, " nearly every law on Custom House matters had passed to establish been intended either consolidate the system of protection and or to prohibition. Under the encouragement of the legislature, much capital has been invested establishment and extension of protected manufactures, whose in the now tottering and uncertain position (the natural and necessary consequence o1 'he system itself) has made their proprietors most feelingly alive to any change wnich might affect them." AMERICAN EDITOR

164 CHAP. XVII. ON PRODUCTION. 16\ articles be not wholly prohibited, but merely saddled with an impjn duty, the home producer can then increase their price by the whole amount of the duty, and the consumer will have to pay the differ- ence. For example, if an import duty of 20 cents per dozen be laid upon earthenware plates worth 00 cents per dozen, the importei whatever country he may belong to, must charge the consumer 30 cents; and the home manufacturer of that commodity is enabled to ask 80 cents per dozen of his customers for plates of the same qual- ity; which he could not do without the intervention of the duty because the consumer could get the same article for 60 cents: thus, a premium to the whole extent of the duty is given to the home manufacturer out of the consumer's pocket. Should any one maintain, that the advantage of producing at home counterbalances the hardship of paying dearer for almost every arti- cle that our own capital and labour are engaged in the production, ; and the profits pocketed by our own fellow-citizens; my answer is, that the foreign commodities we might import are not to be had gratis: that we must purchase them with values of home production, which would have given equal employment to our industry and capital; for we must never lose sight of this maxim, that products are always bought ultimately with products. It is most for our ad- vantage to employ our productive powers, not in those branches in which foreigners excel us, but in those which we excel in ourselves; and with the product to purchase of others. The opposite • course would be just as absurd, as if a man should wish to make his own coats and shoes. What would the world say, if, at the door of every house an import duty were laid upon coats and shoes, for the lauda- ble purpose of compelling the inmates to make them for themselves ? Would not people say with justice, Let us follow each his own pur- suits, and buy what we want with what we produce, or, which comes to the same thing, with what we get for our products. The system would be precisely the same, only carried to a ridiculous extreme. Well may it be a matter of wonder, that every nation should manifest such anxiety to obtain prohibitory regulations, if it be true that it can profit nothing by them; and lead one to suppose the two cases not parallel, because we do not find individual householders solicitous to obtain the same privilege. But the sole difference is this, that individuals are independent and consistent beings, actuated by no contrariety of will, and more interested in their character of consumers of coats and shoes to buy them cheap, than as manufac- turers to sell unnaturally dear. Who, then, are the classes of the community so importunate for prohibitions or heavy import duties? The producers of the par- ticular commodity, that applies for protection from competition, not the consumers of that commodity. The public interest is their plea, but self-interest is evidently their object. Well, but, say tnese gentry, are they not the same thing ? are not our gains national gains ? By no means: whatever profit is acquired in this manner is so

165 }62 ON PRODUCTION. BOOB I out of the pockets neighbour and fellow-citizen much taken of a the excess of by the mono- and, if charge thrown upon consumers it be found, that the loss of correctly computed, would poly could be of the the consumer exceeds the gain monopolist. Here, then, public interest are in direct opposition to each other; and individual understood by the enlightened few alone, and, since public interest is it at all surprising, that prohibitive system should find so is the opponents many partisans ? and so few far too little attention paid There serious mis- general is in to the raising prices upon the consumers. The evil chief not apparent of is it and is felt in ii to cursory observation, because operates piecemeal, every purchase or act of consumption: but it very slight degree on on account of its constant recurrence is really most serious, and universal pressure. whole fortune of every consumer is affect- The by every fluctuation price in the articles of his consumption; ed of richer vice versa. If a single are, the he is, and the cheaper they price, he is so much the more poor in article rise of that in respect if all rise together, he is poorer in respect to the whole. article; the whole nation And, since comprehended in the class of the is consumers, whole nation must in that case be the poorer. Be- the it is in the extension of the variety of its en- sides which, crippled it stands joyments, and prevented from obtaining products whereof in exchange for those wherewith it might procure them. in need, It no use to assert, that, when prices are raised, what one gains is of another loses. For the position is not true, except in the case oi monopolies; nor to the full extent with regard to them; foi even to the full amount loss to the the monopolist never profits of the rise occasioned by taxation or import-duty If the be consumers. shape whatever, the producer gains nothing under any by the in of price, but just the reverse, as we shall see by and by (Book crease Chapter VII.:) so that, in fact, he is no richer in his capacity III. of producer, though poorer quality of consumer. This is one in his the of national impoverishment, or at least of most effective causes of the most powerful checks to the progress of national wealth. one it may be perceived, that it is an absurd distinction For this reason, the foreign objects of to view with more jealousy of barren import of raw materials for home manufacture. consumption, than that Whether the products consumed be of domestic or of foreign growth, a of wealth is destroyed in the act of consumption, portion a the wealth of the community. and proportionate inroad made into is the result of the act of consumption, not of the But that inroad of dealing with the foreigner; and the resulting stimulus to act is the same in either case. For, wherewith national production, was the purchase of the foreign product made ? either with a do- mestic product or pro- with money, which must itself have been a cured with In buying of a foreigner, the nation domestic product. really does no more than send abroad a domestic product in lieu of foreign product consuming home, and consume in its place the it at received ir exchange. The individual consumer himself, piobably,

166 CHAP XVIL ON PRODUCTION. 163 does not conduct this operation; commerce conducts it for him. No one country can buy of another, except with its own domestic, products. In defence of import duties it is often urged, "that when the inte- rest of money is lower abroad than at home, the foreign has an ad- vantage over the home producer, which must be met by a counter- vailing duty." The low rate of interest is, to the foreign producer, an advantage, analogous to that of the superior quality of his land. It tends to cheapen the products he raises; and it is reasonable enough that our domestic consumers should take the benefit of that cheap- The same motive will operate here, that leads us rather to ness. import sugar and indigo from tropical climates, than to raise them in our own. " But capital is necessary in every branch of production: so that the foreigner, who can procure it at a lower rate of interest, has the same advantage in respect to every product; and, if the free im- portation be permitted, he will have an advantage over all classes of home producers." Tell me, then, how his products are to be paid mischief." And how is for. " Why, in specie, and there lies the ? the specie to be got to pay for them " All the nation has, will go in that way; and when it is exhausted national misery will be com- plete." So then it is admitted, that before arriving at this extremity, the constant efflux of specie will gradually render it more scarce at home, and more abundant abroad; wherefore, it will gradually rise 1, 2, 3, per cent higher in value at home than abroad; which is fully sufficient to turn the tide, and make specie flow inwards faster than i* flowed outwards. But it will not do so without some returns; and of what can the returns be made, but of products of the land, or the commerce of the nation For there is no possible means of pur- ? chasing from foreign nations, otherwise than with the products oi the national land and commerce; and it is better to buy of them what they can produce cheaper than ourselves, because we may rest assured, that they must take in payment what we can produce cheaper than they. This they must do, else there must be an end of all interchange. Again, it is affirmed, and what absurd positions have not been advanced to involve these questions in obscurity? that, since almost all the nation are at the same time consumers and producers, they gain by prohibition and monopoly as much in the one capacity as they lose in the other; that the producer, who gets a monopoly-pro- fit upon the object of his own production, is, on the other hand, the sufferer by a similar profit upon the objects of his consumption; and thus that the nation is made up of rogues and fools, who are a match r or each other. It is worth remarking, that every body thinks him- self more rogue than fool; for, although all" are consumers as well as producers, the enormous profits made upon a single article are much more striking, than reiterated minute losses upon the number- less items of consumption. If an import duty be laid upon calicoes, the addition al annual charge to each person of moderate fortune, may.

167 1*54 ON PRODUCTION. I. BOOK m 2\ or 3 dollars at most; and probably he perhaps, not exceed dollars very well comprehend does of the loss, or feel it the not nature some degree or he much, though repeated in other upon every thing a manufac- is consumes; whereas, possibly, this consumer himself hat-maker; and should a turer, be laid upon the import say a duty he see that it will raise the price of foreign hats, will immediately hats, and probably increase his annual profits by several of his own It is this delusion that makes private interest thousand dollars. so warm advocate for prohibitory measures, even where the whole an by them consumers, than it gains as community loses more as producers. pregnant of But, even the exclusive system is this point in view, It is impossible that every class of production should with injustice. by the exclusive system, supposing it to be universal, which, profit of in point it never is in practice, though possibly it may be in fact, or things, the nature of law intention. Some articles can never, from for or be derived from abroad; fresh fish, horned cattle; instance, to as be inoperative in raising them, therefore, import duties would the price. The same may be said of masons and carpenters' work, and of the on within the numberless callings necessarily carried as those shopmen, clerks, carriers, retail dealers, community; of producers of The and many others. immaterial products, public functionaries, and fundholders, lie under the same disability. These can none of them be invested with a monopoly by means of classes are import duties, though they to the hardship of many subjected in producers.* way to other classes of monopolies granted that of are Besides, the profits not equitably divided amongst monopoly the different classes even those that concur in the production of of the commodity, which is the subject of monopoly. If the master* adventurers, whether in agriculture, manufacture, or commerce, have at and subordinate pro- the consumers their mercy, their labourers are still more exposed to their extortion, ductive agents reasons for that will be explained in Book II. So that these latter classes par- ticipate in the loss with consumers at large, but get no share of the unnatural gains of their superiors. the of the con- Prohibitory measures, besides affecting pockets to sumers, often subject them I am ashamed to severe privations. * There is a sort of malicious satisfaction in the discovery, that those who impose these restrictions are usually among the severest sufferers. Sometimes they attempt to indemnify themselves by a further act of injustice; the public functionaries augment their own salaries, if they have the keeping of the public purse. At other times they abolish a monopoly, when they find it press pecu- liarly on themselves. In 1599, the manufacturers of Tours petitioned Henry IV. to prohibit the import of gold and silver silk stuffs, which had previously been entirely of foreign fabric. They cajoled the government by the statement, that '.hey could furnish the whole consumption of France with that article. The king granted their request, with his characteristic facility ; bit the consumers, who were chiefly the courtiers and people of condition, were loud in their remon- strances at the consequent advance of price; and the edict was revoked in six months. Memoires de Sully, liv. ii.

168 CHAP. XVII. ON PRODUCTION. lG/i few years, have had the hat-makers oi say, that, within these we prohibition Marseilles petitioning of foreign of the for the import on of their own chip hats, straw or the plea that they injured the sale the country people felt hats;* a measure that would have deprived to much exposed of a and labourers in husbandry, who are so the sun, and cheap covering, admirably adapted,,to their wants, a light, cool, which it was highly desirable to extend the encourage. use of and of it mistakes for profound policy, or to gratify In pursuit what supposes laudable, a government will sometimes it to be feelings divert the course of a prohibit and thereby do or particular trade, the productive powers of the nation. When irreparable mischief to II. became master of Portugal, and Philip all intercourse forbade between subjects and the Dutch, whom he detested, what his new the consequence The Dutch, who before resorted to Lisbon was 1 manufactures which they took India, of the off an immense for of quantity, finding this avenue closed against their industry, went straight India for what they wanted, and, in the end, drove out to and, what was meant as the the Portuguese from that quarter; of out the deadly blow main source of inveterate hatred, turned " Commerce," says Fenelon, like the their aggrandizement. " is of the to flow altogether, if native springs rock, which often cease be attempted to alter their course."f it are the Such of impediments thrown in the way of principal evils are carried import, which extreme point by absolute prohibi- to the tion. There have, indeed, been instances of nations that have thriven under such a system ; but then it was, because the causes of national prosperity were more powerful than the of national impover- causes the human frame, which contains vital ishment. Nations resemble a repair inroads of excess and to the principle, that incessantly labours health and constitution. Nature is active in dissipation upon its wounds closing healing the bruises inflicted by our own and the intemperance. In like manner, states maintain and awkwardness nay, often increase in prosperity, in spite of the themselves, infinite injuries every description, which friends as well as enemies indict of And it is worth remarking, that most industrious upon them. the those, which are most subjected to such outrage, nations are the The cry is then " our because none others could survive them. sys- tem must true one, for the national prosperity is advancing. be the we to take an enlarged view of the circumstances, Whereas, were that, for the last three centuries, have combined to develope the power and of man; to survey with the eye of intelligence faculties Bulletin de Societe

169 166 ON PRODUCTION. ROK I. the ] rogress of navigation and discovery, of invention in every branch of art and science; to take account of the variety of useful animals and vegetables that have been transplanted from one hemi- sphere to the other, and to give a due attention to the vast augment- ation and increased scope both of science and of its practical appli- cations, that we are daily witnesses of, we could not resist the conviction, that our actual prosperity is nothing to what it might have been; that it is engaged in a perpetual struggle against the obstacles and impediments thrown into its way; and that, even in those parts of the world where mankind is deemed the most enlight- ened, a great part of their time and exertions are occupied in destroying instead of multiplying their resources, in despoiling instead of assisting each other; and all for want of correct know- ledge and information respecting their real interests.* But, to return to the subject, we have just been examining, the nature of the injury that a community suffers by difficulties thrown in the way of the introduction of foreign commodities. The mischief occasioned to the country that produces the prohibited article, is of the same kind and description ; it is prevented from turning its capital and industry to the best account. But it is not to be supposed that -the foreign nation can by this means be utterly ruined and stripped of all resource, as Napoleon seemed to imagine, when he excluded the products of Britain from the markets of the continent. To say nothing of the impossibility of effecting a complete and actual blockade of a whole country, opposed as it must be by the universal motive of self-interest, the utmost effect of it can only be to drive its production into a different channel. A nation is always competent to the purchase and consumption of the whole of its own products, for products are always bought with other products. Do you think it possible to prevent England from producing value to the amount ? of a million, by preventing her export of woollens to that amount You are much mistaken if you do. England will employ the same capital and the same manual labour in the preparation of ardent spirits, by the distillation of grain or other domestic products, that were before occupied in the manufacture of woollens for the French market, and she will then no longer bring her woollens to be barter- ed for French brandies. A country, in one way or other, direct or indirect, always consumes the values it produces, and can consume nothing more. If it cannot exchange its products with its neighbours, it is compelled to produce values of such kinds only as it can con- sume at home. This is the utmost effect of prohibitions; both parties are worse provided, and neither is at all the richer. * It is not my design to insinuate by this, that it is desirable that all minds should bo imbued with all kinds of knowledge; but that every one should have just and correct notions of that, in which he is more immediately concerned. NW is the general and complete diffusion of information requisite for the bene- ficial ends of science. The good resulting from it is proportionate to the extent »>f its progress: and the welfare of nations differs in degree, according to the correctness of their ideas upon those p )ints, which most intimately concern them •Hspectively,

170 CHAP. XVII. ON PRODUCTION. ]f>7 Napoleon, doubtless, occasioned much injury, both to England and to the continent, by cramping their mutual relations of com- merce as far as he possibly could. But, on the other hand, lie diet the continent of Europe the involuntary service of facilitating the. communication between its different parts, by the universality of dominion, which his ambition had well-nigh achieved. The frontier duties between Holland, Belgium, part of Germany, Italy, and France, were demolished; and those of the other powers, with the exception of England, were far from oppressive. We may form some estimate of the benefit thence resulting to commerce, from the discontent and stagnation that have ensued upon the establishment of the present system of lining the frontier of each state with a douaniers. triple guard of All the continental states so guarded have, indeed, preserved their former means of production; but that f ageous. production has been made less advan It cannot be denied, that France has gained prodigiously by the suppression of the provincial barriers and custom-houses, consequent upon her political revolution. Europe had, in like manner, gained by the partial removal of the international barriers between its dif- ferent political states; and the world at large would derive similar benefit from the demolition of those, which insulate, as it were, the various communities, into which the human race is divided. I have omitted to mention other very serious evils of the exclusive system; as, for instance, the creation of a new class of crime, that of smuggling; whereby an action, wholly innocent in is made itself, legally criminal: and persons, who are actually labouring for the general welfare, are subjected to punishment. Smith admits of two circumstances, that, in his opinion, will justify a government in resorting to import-duties:—1. When a particular branch of industry is necessary to the public security, and the ex- ternal supply cannot be safely reckoned upon.. On this account a government may very wisely prohibit the import of gun-powder, if such prohibition be necessary to set the powder-mills at home in activity; for it is better to pay somewhat dear for so essential an article, than to run the risk of being unprovided in the hour of need.* 2. Where a similar .commodity of home produce is already saddled with a duty. The foreign article, if wholly exempt from duty, would in this case have an actual privilege; so that a duty imposed has not the effect of destroying, but of restoring the natural equi- librium and relative position of the different branches of production. Indeed, it is impossible to find any reasonable ground for exempt- ing the production of values by the channel of external commerce from the ^ame pressure of taxation that weighs upon the production effected in those of agriculture and manufacture. Taxation is, doubt * There is no threat weight in this plea of justification. For experience haa shown, that saltpetre is stored against the moment of need, in the largest quan- tity, when it is most an article of habitual import. Yet the legislature of France has saddled it with duties amounting to prohibition.

171 168 ON PRODUCTION. BOOK I. an evil, which should be reduced to the lowest possible less, and one when once degree; of taxation is admitted to be a but given amount to lay it on all three common justice equally it is but necessary, The error branches wish to expose to reprobation is of industry. I this kind are favourable to the notion that taxes A of production. can be favourable to the public welfare,, except by the tax never that made of its proceeds. use is good lost sight of in the framing of These points should never be com- are really good for nothing but to protect mercial treaties, which industry and capital, diverted into improper channels by the blunders it would be far wiser to remedy than to per- of legislation. These petuate. The of industry and wealth is the state of healthy state in which each interest left to take care of itself. absolute liberty, is afford them that against can is The only useful protection authority violence. Taxes and restrictive measures never can be a fraud or best a necessary evil; to suppose them useful at the benefit: they are the subjects at large, is to mistake the foundation of national pros- to and to set at naught the principles of political economy. perity, and to as a Import duties prohibitions have often been resorted means of retaliation: * Your government throws impediments in the of the introduction of our national products: are not way we, then, justified equally impeding the introduction of yours?" This in is the favourite plea, and the basis of most commercial treaties; but people mistake their object: granting that nations have a right to do one another as by the way, 1 can much mischief as possible, which, I am not here disputing their rights, discussing hardly admit; but their interests. a from all commercial nation that excludes you Undoubtedly, as far as in her injury;—robs you, intercourse with her, does you an the benefits lies, external commerce; if, therefore, by the dread of of can induce her to abandon her exclusive measures, of retaliation, you is no question about the expediency of such retaliation, there as a matter mere policy. But it must not be forgotten that retaliation of as it operates, not defensively hurts yourself as well your rival; that her selfish measures, but offensively against yourself, in the against for the of first instance, indirectly attacking her. The only purpose in point is this, what degree of vengeance you are animated question by, and how much will you consent to throw away upon its gratifi- cation.* I not undertake to enumerate all the evils arising from will of or to apply the principles enforced throughout treaties commerce, The transatlantic colonies, that have within these few years thrown off their * of La Plata, and St. Domingo colonial dependence, amongst others, the provinces of reciprocity, or Haiti, have opened their ports to foreigners, without any demand and more rich and prosperous than they ever were under the operation of tiie are exclusive system. We are told that the trade and prosperity of Cuba have doubled since its to the flags of all nations, by a concur- ports have been opened rence imperious circumstances, and in violation of the system of the mother- of country. The elder states of Europe go on lrke wrong-headed farmers, in a bigoted attachment their old prejudices and. methods, whne they havo exam to ti'«s around then\ good effects of an improved system all of the

172 XVII. ON PRODUCTION. 1G9 work to all the clauses and provisions usually contained in them, this i will confine myself to the remark, that almost every modern treaty commerce has had for its basis the imaginary advantage ana of possibility of the liquidation of a favourable balance of trade by an specie. If these turn out to be chimerical, whatever import of advantage may have resulted from such treaties must be wholly referred to the additional freedom and facility of international com- munication obtained by them, and not at all to their restrictive or provisoes, unless either of the contracting parties has clauses itself of its superior power, to exact conditions savouring of availed tributary character; as England has done in relation to Portugal. a such case, it is mere exaction and spoliation.(l) In (1) Mr. Villiers and Dr. Bowring, in their very valuable report on the com mercial relations between France and Great Britain, presented to both Houses of Parliament, during the present year, (1834,) in remarking upon the disappoint- ments which had been experienced from treaties of commerce between France and Great Britain, point out the true causes of the failure of these arrangements, however usefully they were intended; and as it is of importance in other coun- tries to guard against a recurrence to similar experiments which might present a formidable barrier against any permanent or solid change to a more liberal in- ternational intercourse, we cannot do better, in this place, than to copy their ex- cellent observations on this head. " These arrangements, however usefully intended, were productive of so much inconvenience and suffering from the sudden shifting of capital, as to induce an unwillingness to await patiently for their ultimate but somewhat remote advan- Every treaty of commercial change must, it is certain, affect some interest tages. or other, and by these treaties, particularly the treaty of 1786, so many interests were suddenly and severely affected, that they were enabled, by combining together, to overthrow all the expectations of future good which would have in- evitably followed the removal of restrictions and prohibitions." " It may also be observed, that treaties of commerce are generally agreements for mutual preferences; and in so far, are encroachments upon sound commercial principles. They are intended to benefit the contracting parties by common intercourse, to the exclusion (and consequently to the detriment) of other nations. They ordinarily propose exclusive advantages, which, if they open some chan- nels of commercial profit, necessarily close others, and prevent the negotiating nations from availing themselves of the improvements or accommodating them- selves to the changes which the fluctuations of agriculture, manufactures, or trade demand. The Methuen treaty, for example, bound Great Britain to take the produce of a particular country at diminished duties, whatever superior ad- vantages any other country might chance to offer; while Portugal was, at the same time, compelled to receive the manufactures of England, whether or not she might have supplied herself more profitably elsewhere. A treaty, therefore, with France, proffering reciprocal advantages, that is to say, giving to France peculiar privileges in the English market, or obtaining peculiar privileges for England in the markets of France, did not appear to offer any prospect of permanent utility; but, if it were possible that each country should, for itself, and, with a special view to its own interests, remove those impediments to intercourse which had grown out of hostile feelings or erroneous calculations, and by comparing the fact3 which each government was enabled to furnish for the elucidation of the inquiry, each should find that it could safely and judiciously prepare for more extended transactions; if, in a word, it could be shown that each possessed sources of wealth which might be made productive to the other, while they lost nothing of their productiveness to the nation that possessed them, we believed that, in selecting such topics for our examination, and such objects for their result, we were bes* discharging the duty which had devolved on us." AMERICAN EDITOR.

173 17U ON PRODUCTION. BOOK I I would observe, that offer of peculiar achantages by Again. the another, one nation of a treaty of commerce, if not an in to the way is at extreme odium of hostility, in the eyes of other act least one of to one can only be rendered effectual concession nations. For the others. Hence the germ of discord and of war, with by refusal to mischiefs. all infinitely more simple, and I hope to have its It is treat nations as friends, and to all shown, more profitable also, higher duties on the introduction of their products, than impose no as necessary place them on the same footing to those of are what domestic growth. all Yet, notwithstanding the mischiefs resulting from the exclusion of foreign products, which have been depicting, it would be an act I to change even ruinous a of unquestionable rashness suddenly so eradicated moment; it requires is not to be in a policy. Disease nursing and management, to dispense even national benefits. Mono- abuse, but an abuse in polies is vested, are an which enormous capital to be and numberless industrious agents employed, which deserve treated with consideration; for this mass of capital and industry all at once find a more advantageous channel cannot national of production. Perhaps cure of all the partial distresses that must the the of that colossal monster in politics, the exclusive follow downfall be as much as the talent of any single statesman could system, would vet when one considers calmly the wrongs it entails accomplish; it is established, and the distresses consequent upon its over- when throw, we are insensibly led to the reflection, that, if it be so difficult to set at liberty again, with what caution ought shackled industry not to receive proposition for ensjaving her! we any been content with checking the import not But governments have In the firm conviction, that national prosperity of foreign products. selling without buying, and blind to the utter impossibility consists in the thing, they have gone beyond mere imposition of a tax of the of and have in many instances or fine upon purchasing foreigners, in the shape offered rewards bounties for selling to them. of This expedient been employed to an extraordinary degree by has the the British government, which until recently always evinced to enlarge the market for British commercial anc/ greatest anxiety It is obvious, that a manufactured produce.* who ro- merchant, * The political circumstances of England, during- the late war, and her prac- tice of supporting and subsidizing military operations on the continent, furnished her with a for attempting to export, in the shape of manu- more plausible excuse she But factured produce, those values, which thus expended without return. had no need to be at any expense for that purpose. Had England charged she as she the of gold and silver, coinage ought to have done, she a seignorage upon needed not to have given herself any trouble about the form of the values she exported to her foreign subsidies and expenditure: guineas would them- meet an of selves have been manufacture.(a) object So (a) the imposition of a seignorage, which, however, they were without should have been charged. But England had no occasion to give bounties with The a to facilitate her foreign expenditure. vio.v discount oi her bills was a

174 CHAP. XVII. ON PRODUCTION. 171 a bounty upon export, can, without personal loss, afford ceives to se.l foreign market his goods lu at a in a lower rate than prime cost, " We cannot force foreigners of the pithy language Smith, to bu) countrymen; as we may our own own workmen, of our the goods the next best expedient, has been thought, therefore, is to pay them it for buying." by the particular commodity, it has reached the In fact, if a time 20 dollars, his trouble, the French market,, costs English exporter and the &c. be bought in France included, same commodity could the or a less rate, there is nothing to give him exclusive at same market. British government pays a of the But if the possession dollars upon the export, and bounty him to of 2 thereby enables his demand from 20 to 18 dollars, he may safely reckon upon lower Yet what is this but a free gift of two a preference. dollars from the British government French consumer? It may be con- to the the merchant objection to this mode of dealing; ceived, that has no profits same as if the French consumer paid the full his are the for cost price, of the commodity. The British nation value, or is the in in the ratio of 10 this transaction, cent, upon the French loser per and France remits in return a consumption; of but 18 for value what cost 20 dollars. has but at the a paid, not at the moment of export, is When bounty of productive creation, the home consumer partici- commencement the foreigner pates with advantage of the bounty; for, in that in the case, article can be sold below cost price in the home as well as the in the foreign market. And if, as is sometimes the case, the producer pockets the and yet keeps up the price of the commodity, bounty, is then present of the government to the producer, over the bounty a ordinary profits industry. the of his and above means of a bounty, a product is raised either for When, by the foreign consumption, which would home have been raised or not effect the injurious production, one that costs without one, is, an it is worth. Suppose an article, when completely finished more than off, to be for 5 dollars and no more, but its prime cost, in- saleable of the profits of productive industry, to a'nount to 6 cluding course it is quite clear that nobody will volunteer the production, dollars, for fear of a of 1 dollar. But, if the government, with a view loss of industry, be willing to defray this loss— to encourage this branch in other words, if it offer a bounty of 1 dollar to the producer, the production can go on, and the public revenue, that is to say, the then at precisely be a loser of 1 dollar. And this is nation large, will of nation gains a the kind by encouraging a branch advantage that sufficient premium manufacturer; and, where that expenditure was laige, to the greatly exceeded either drawbacks or bounties. Had specie been directly pro- curable, perharps it might have saved something" to the government, in the re- duced profit payable to the a mere complex operation. But the merchants upon The merchants must have made their profit upon bullion. sole difference occa- by the absurdity of sioned the expense incurred in that gratuitous coinage was, coinage; but the imposition of a seignorage would neither have promoted the transport import bullion, nor facilitated its of to the scene of expenditure. "*\

175 ON PRODUCTION. BOOK i itself: it is in the of production which cannot support fact urging losing concern, prosecution of which is exchanged, the of a produce but for the by the state. pther produce, not for bounty given to be made by a particular employ- Wherever there is any thing it wants no encouragement; where there is nothing ment of industry, it made, is no truth in the argument, be to deserves none. There state may gain, though individuals cannot; for how that perhaps the state gain, except through can medium of individuals ? Per- the the said, that state receives more in duties than it it may be the haps bounties; but suppose it does, it merely receives with pays in one and let the duties be lowered to the whole hand pays with the other: bounty, and production will stand precisely where it amount of the in its did before, with this difference viz. that the state will favour, save whole charge of management of the bounties, and part of the of the duties. that chargeable, dead loss to the gross Though bounties and a are cases in which it is politic national wealth, there incur that are to a particular product is necessary to public security, loss;(l) as when and must be had at any rate, however extravagant. Louis XIV., a view to restore the marine of France, granted a with of 1 bounty dollar upon every ship fitted out in France. His object was per ton up So likewise when the bounty is the mere refund- to train sailors. of a duty previously exacted. The bounty paid ing Great Britain by upon export of refined sugar is nothing more than the reimburse- the of the import duties upon muscovado and molasses. ment Perhaps, too, it may be wise in a government to grant a premium on a it make a loss in the outset, particular product, which, though out a fair prospect profit in a few years' time. Smith holds of says subject. " No regula- he on the thinks otherwise: hear what commerce can increase the quantity tion industry in any of of its capital can maintain. It can only divert a society, beyond what of it into a direction, into which it might not otherwise have part gone; and it is by no is means certain, that this artificial direction to be more advantageous society, than that into which likely to the its own of The statesman, who should it would have gone accord. to direct private people in what manner they ought to em- attempt not pioy their capitals, would a most unne- only load himself with but be an authority, which could safely cessary attention, assume (1) already have had occasion to remark (note 1, page 104) that there can We be few or no cases in which it would ever be politic to incur a loss by the pay- ment of bounties, the expectation of insuring the production of objects even with to the For the end aimed at never can be attained by necessary public safety. The naval preponderance of such means. as we before observed, was England, not owing to any act of parliament, but can satisfactorily be traced to those causes we have mentioned in the note referred to. Holland, besides, rose to the highest point of any navigation laws, or European maritime power, without to her bounties and France, it must be remembered, notwithstanding shipping; the famous Ordonnance in 1664, of Louis XIV., "to engage builders and mer chants construct French vessels," never obtained the so much desired super> to ont> EDITOR ships and in seamen. AMERICAN in

176 CHAP. XVII. ON PRODUCTION. 173 not only single person, but to no council or senate trusted, to no which would nowhere be so as in the whatever; and dangerous, and to fane) folly presumption enough of a man who had hands it. himself for want of such regulations, the fit to exercise Though proposed manufacture, it would n«x society should never acquire the poorer in any one period of its upon that account necessarily be the every period duration, its whole capital and in- In of its duration. dustry might still have been employed, though upon different ob- manner that was jecl'v at the time."* in the most advantageous is certainly right in the main; though perhaps there Ai.a Smith are circumstances that may form exceptions to the general rule, that one is the best judge how to employ every industry and capital. his Smith wrote period and in a country, where personal interest is at a and where profitable mode of investing capital well understood, any likely every nation long overlooked. But is not and industry to be noi so far in intelligence. How many countries are is advanced of the best employments of capita] are altogether there, where many by the excluded government alone can remove! prejudices that and How many cities provinces, where certain established invest- ments of capital have prevailed from time immemorial! In one in landed property, in another, in houses, place, every body invests in and in public offices or national funds. Every unusual others still, of the application of capital is, in such places, contemplated power with distrust or disdain ; so that partiality shown to a profitable mode of employing industry or may possibly be productive of capital national advantage. Moreover, of industry may ruin an unsupported a new channel yielding enormous profit, when the speculator, though capable of novelty has once been and the labourers shall have acquired practice, overcome. France present contains the most beautiful manufac- at of silk and of woollen in the world, and is probably indebted tures for them to the of Colbert's administration. wise encouragement to fr. for every loom at work ; He advanced the manufacturers 2000 by the way, this species of encouragement and, very peculiar has a advantage. ordinary cases, whatever the government levies upon In of the product is wholly lost to future produc- individual exertion tion ; but, in this instance, a part was employed in reproduction; a portion of was thrown into the aggregate pro- individual revenues of the was a degree of wisdom one ductive capital nation. This (1) could hardly have expected, even from personal self-interest.j- Wealth of Nations, book iv. c. 2. * f from equally approving all the encouragements of this kind held I am far out by this minister; particularly the sums lavished on several establishments of pure ostentation, which, like that of the Gobelin tapestry, have constantly cost more than they have produced. (I) author, here, has permitted, although with some slight qualification Our k to escape from his pen, in direct contradiction with his own gene- an observation ral principles, and which, therefore, it is necessary to point out and refuto ** France," he remarks, in speaking of her manufactures of silk and woollen, "

177 174 ON PRODUCTION. BOOK I. be out of place here inquire, how wide a field boun- It woulJ to peculation, partiality, ties open of abuses In- and the to whole tribe of public affairs. most enlightened to the management cident The them wise encouragement of Colbert's administra- for indebted probably to the v this but admitting that beneficial consequences to manufactures tion.' What is 1 system 1 Now, this we protecting in support a necessarily flow from deny, and, present invoke the highest authority. of this denial, fortunately can at In the the we report on commercial relations between France and Great Britain, which often refer cannot of sound principles, Mr. Villiers and Dr. to in too support and regarding the merits and character of Colbert's on Bowring, both this point, with the following admirable strictures, which we administration, supply us presenting have great satisfaction our readers. They will be found to con- in to a to the gratuitous assumption of M. Say, of the wisdom tain complete answer by Colbert " herein displayed of encouragement" to manu- by this species factures. the country which adopted still exhibits the conse- " France thus became and large scale. Its quences of a protecting system on a introduction maybe traced, minister as far as to extension a possible, to whose name its or rather Colbert, great portion of applause has been given, but whose system and administration a complete ignorance on a true principles of of encouragement was based of the small manufacturing prosperity amount of How commercial legislation. an and how an amount of agricultural, commercial,.and Colbert produced, great manufacturing wealth he either destroyed or checked natural progress, will in its be obvious any observer who looks at the immense natural resources and the to of It may be safely asserted, that the whole of the active intelligence France. by which he induced adventurers to enter into remote speculations, as bounties as the he well imposed on cheaper foreign articles, were excessive duties which on the of the manufactures almost uncompensated sacrifices; while, other hand, he transplanted into France, which which he protected by the exclusion of and rival productions, scarcely one took permanent root; and of those which still exist, and he intended to support, there is perhaps none which would not which and extensive, those regulations with which have been more prosperous but for early march of The popularity his zeal encumbered the manufacturing industry. and the erroneous deductions of in France Colbert's commercial legislation, consequences of his interference, have produced a most prejudi- drawn from the minds the large portion of the French public. Colbert's sys- cial effect on of a vain attempt a force capital in new directions. Thus, in order to tem was to the establishment of a trade with compel West Indies, he made the French the people premium of thirty francs upon every ton of goods exported, and of pay a for ton of goods imported, independently of other encourage- fifty francs every In the same spirit, he incited manufacturing settlers, by large rewards, to ments. having establish themselves of France, and boasted of his different parts set in up more than 40,000 looms, whose produce was protected by legal enactments; and no one was found to estimate the counterbalance of loss, while the most flat- tering pictures were drawn of He began in miscalculation; he enormous gain. the to support his errors; and, if their conse- brought most despotic interference be faithfully traced, they will be found little creditable to his own saga- quences to the nation for whose benefit they were intended. city, while greatly ruinous of the and pernicious regula- The French Revolution broke down many absurd had introduced, tions which Colbert vestiges of others remain; and but the although they have become habitual, they interfere with improvement, and give superiority to countries where the action of industry and capital is unfettered." " Having stated thus much, it be unjust to withhold from Colbert the would to credit he is entitled for the admirable order he established in the which finances, the efforts which he rhade to improve, in many particulars, the system trf taxation, opposition to the inconsiderate plan of funding adopted and his Hv Luivois. "vim commercial and maritime legislation of France owes to The

178 CHAP. XVII. ON PRODUCTION. 175 statesman is often obliged to abandon a scheme of evident public utility, by the unavoidable defects and abuses in the execution. Among these, one of the most frequent and prominent is, the risk of paying a premium, or granting a favour to the pretensions, not of merit, but of importunity. In other respects, I have no fault to find with the honours, or even pecuniary rewards publicly given to artists or mechanics, in recompense of some extraordinary achieve- ment of genius or address. Rewards of this kind excite emulation, and enlarge the stock of general knowledge, without diverting in- dustry or capital from their most beneficial channels. Besides, they cost nothing in comparison of bounties of another description. The bounty on the export of wheat has, by Smith's account, cost England in some years as much as a million and a half of dollars. I do not believe that the British or any other government ever spent the fiftieth part of that sum upon agriculture in any one year. II. SECTION of Production. of Of the Effect Regulations fixing the Manner public authority, with regard to the details of the The interference of agricultural production, of a beneficial kind. has generally been of in the minute and various details The impossibility intermeddling vast number agents the it occupies, often widely of agriculture, of locality and pursuits, from the largest farming concerns separated in the little garden of the cottager, the small value to the produce in of comparison with volume,'are so many obstacles that nature has its in the way of authoritative restraint interference. All placed and least regard public to the for the governments, that have pretended 1681, a the compilation of the ordonnance of maritime law unrivalled to of body this moment." is, also, another error, in the same paragraph, As there must be allowed we briefly notice it. By advancing to the manufacturers 2000 francs for every to loom work, our author thinks Colbert displayed a degree of wisdom hardly to at be expected, inasmuch, as in this instance, *' a part of the advance would be employed in " in ordinary cases, what- reproduction," whereas, according to him, the government levies upon products of individual exertion is wholly the ever future production." Now, nothing can be more clear, than that the tax to lost for the payment of this advance, is a pure loss to the tax-paying people, levied, a and with this peculiar aggravation, that of the tax-payers are not large class in the of the " even it exactly true, that consumers encouraged" product. Nor is "ordinary cases whatever the government levies is wholly lost to future produc- *ion," for whether the tax be advanced for every loom at work, or for the work of

179 176 ON PRODUCTION. BOOK I. to the granting welfare, nave consequently confined themselves of encouragements, premiums of knowledge and to the and diffusion often contributed largely to progress of this art. The has the \* hich the experimental farm veterinary college Ramboullet, of Alfort, of Merino breed, are real benefits to the agri- of the the introduction France, the enlargement and perfection of which she culture of providence owes different rulers that her political to the of the tioubles have successively brought into power. the A national administration that guards with vigilance facility of communication and the quiet prosecution of the labours of hus- punishes acts of culpable negligence, as the destroying bandry, or other noxious insects, does of caterpillars* service analogous and a preservation the civil order and of property, without which to of production must cease altogether. to the felling The regulations relative trees in France, however of indispensable preservation of their growth, at least in many for the a discourage- of their provisions, appear in others rather to operate as cultivation, which, though particularly adapted of ment of that branch and conducive to the and of atmo- sites, to certain soils attraction spheric moisture, to be daily on the decline. yet seems is no branch of industry that lias suffered so much from But there of authority in its details, as that of manu- the officious interference facture. Much that interference has been directed towards limiting the of of by confining them to one trade exclu- number producers, either or by exacting specific terms, on which they shall carry on sively, their business. This system gave rise tp establishment of char- the and tered companies The effect is always the incorporated trades. same, whatever be the means employed. An exclusive privilege, a species of is created, which the consumer pays for, and of monopoly, the privileged persons derive benefit. The monopo- which all the prosecute their plans self-interest with so much the more can of lists concert, because they have legal meetings ease regular and and a At such meetings, the prosperity of the corporation organization. for that of commerce and of the nation at is mistaken and the large; last thing considered whether the proposed advantages be the is, of or merely a transfer from one pocket result actual new production, the consumers to the privileged producers. This to another, from the true reason why those engaged in any particular branch of is are so anxious to have themselves made the subject of regula- trade * Under the old regime of the canton of Berne, every proprietor of land was required to in the proper season of the year, so many bushels of cock- furnish, in to the extent of his property. The rich landholders were chafers, proportion the habit of buying their contingents from the in of people, who poorest sort made it their business to collect them, and did it so effectually, that the district was ultimately cleared of them. But the extreme difficulty, that even the most provident government meets with in by its interference in the busi- doing good fact of ness judged of by a production, may of which I am credibly assured, be viz. that this act of paternal care gave rise to the singular fraud of transporting of the these insects sacks from the Savoy side in Leman lake into the Pays fa Yaud.

180 CHAP. XVII. ON PRODUCTION. 177 tion ; and the public authorities are commonly, on their part, verv ready to indulge them in what offers so fair an opportunity of raising a revenue. Moreover, arbitrary regulations are extremely flattering to the "fore- vanity of men in power, as giving them an air of wisdom and sight, and confirming their authority, which seems to derive addi- tional importance from the frequency of its exercise. There is, per- haps, at this time, no country in Europe where a man is free to dis- pose of his industry and capital in what manner he pleases ; in most places he cannot even change his occupation or place of residence at pleasure. It is not enough for a man to have the necessary quali- fications of ability and inclination to become a manufacturer or dealer in the woollen or silk line, in spirits or calicoes; he must besides have served his time, or been admitted fo the freedom of the craft.* Freedoms and apprenticeships are likewise expedients of police, not of that wholesome branch of police, whose object is the maintenance of public and private security, and which is neither costly nor vexatious; but of that sort of police which bad govern- ments employ to preserve or extend their personal authority at any expense. By the dispensation of honorary or pecuniary advantages, authority can generally influence the chiefs and superiors it has appointed to the corporations, who think to earn those honours and emoluments by their subservience to the power that confers them. These are the ready tools for the management of the body at large, and volunteer to denounce the individuals, whose firmness may be formidable, and report those whose servility may be reckoned upon, and all under the pretext of public good. Official harangues and public addresses are never wanting in plausible reasons for the con- tinuance of old restrictions on liberty of action, or for the establish- ment of new ones; for there is no cause so bad as to be without some argument or other in its favour. The chief advantage, and the one most relied upon, is, the insu- rance of a more perfect execution of the products raised for con- sumption, and of a superiority in them highly favourable to the na- tional commerce, and calculated to secure the continued demand of foreigners. But does this advantage result from the system in ques- ? What security is there that the corporate body itself will al- tion ways be composed of men not merely of integrity, but of scrupulous delicacy, such as would never be disposed to take in either their own countrymen or foreigners ? We are told that this system facilitates the enforcement of regulations for the warranty and verification of the quality of products; but are not such regulations illusory in practice, * When industry made its first start in the middle ages, and the mercantile classes were exposed to the rapacity of a grasping and ignorant nobility, incorpo- rated trades and crafts were useful in extending to individual industry the pro tection of the association at large. Their utility has ceased altogether of latft years: for governments have, in our days, been either too enlightened to encroach upon the sources of financial prosperity, or too powerful to stand, in awp of such associations.

181 178 ON PRODUCTION. BOOK I. the corporate system and, supposing them absolutely even under ? there necessary, way of enforcing them ? no is more simple of be a better guarantee of length apprenticeship Neither will the ; the only thing to be depended upon the perfection of the work foi skill of the workman, and that is best attained is the that perfection proportion to his by paying " To teach any him in superiority. " in the how to apply young man," says Smith, completest manner construct the instruments, of the common the machines and how to a few lessons of more than mechanic trades, cannot well require the days might weeks, perhaps those sufficient. The dex- of a few be of hand, indeed, even in common trades, cannot be acquired terity without much practice and experience, but young man would prac- a tise with much more diligence attention, if from the beginning and as a journeyman, being paid proportion to the little he wrought in could execute, mate- paying in his turn for the he work which and he and in- rials which might sometimes spoil through awkwardness experience."* Were apprentices bound out a year later, and the interval spent on the plan of mutual instruction, I can hardly in schools conducted think the products would be all doubt, worse executed; and, beyond be a stage in civilization. the labouring class would advanced a sure means of obtaining a greater perfec- Were apprenticeships Britain. tion of Spain would be as good as those of products, those of It was not before incorporated trades and compulsory apprentice- ships had been abolished in France, that she attained that superiori- ty of she has now to boast of. execution is no one mechanic nearly so difficult as that Perhaps there art field labourer; this is almost the only one that or yet of the gardener apprenticeship. Are vegetables has nowhere been subjected to and in less abundance or perfection ? Were cultivators fruits produced I suppose it a corporate body, be asserted, that high- would soon flavoured peaches white-heart lettuces could not be raised with- and a of some hundred well penned-articles. out code all, regulations of this nature, even admitting their utility, After now it is be as evasion is allowed; must notorious nugatory as soon that there is no manufacturing towns where money will not pur- chase exemption. So that they are more than merely useless as ? warranty of as they are the engine of the mos» quality; inasmuch and extortion. odious injustice these opinions, the In support for the corporate sys of advocates to the example of tern appeal is we!-, Great Britain, where industry known greatly shackled, and yet manufactures prosper. Bui to be of the real causes of that pros- in this they expose their ignorance perity. " These causes," Smith tells us, " seem to be the general I'berty of is at least trade, which, notwithstanding some restraints, «;qual, perhaps superior, what it is in any other country; the to liberty of exporting, duty free, almost all sorts of goods, which are foreign country; the produce domestic industry, to almost any of * Wealth of Nations, book i. c. 10.

182 CHAP. XVII. ON PRODUCTION. £. 17 and, what perhaps is of still greater importance, the unbounded liberty of transporting them from any one part of our own country to any other, without being obliged to give any account to any pub- lic office, without being liable to question or examination of any kind," &c* Add to these, the complete inviolability of all property whatever, either by public or private attack, the enormous capital accumulated by her industry and frugality, and lastly, the habitual exercise of attention and judgment, to which her population is trained from the earliest years; and there is no need of looking farther for the causes of the manufacturing prosperity of Britain. Those who cite her example in justification of their desire to enthral the exertions of industry, are not perhaps aware that the most thriving towns in that kingdom, those on which her character for manufacturing pre-eminence is mainly built, are the very places where there are no incorporations of crafts and trades; Manchester, Birmingham, and Liverpool,f were mere villages a century or two but now rank in point of wealth and population next to London, ago, and much before York, Canterbury, and even Bristol, cities of the greatest antiquity and privileges, and the capitals of her most thriv- ing provinces, but still subjected to the shackles of these Gothic institutions. " The town and parish of Halifax," says Sir John Nickols,J a writer of acknowledged local information, " has, within these forty years, seen the number of its inhabitants quadrupled : whilst many other towns, subjected to corporations, have expe- rienced a sensible diminution of theirs. Houses situated within the precincts of the city of London hardly find tenants, and numbers of them remain empty ; whilst Westminster, Southwark, and the other suburbs are continually increasing. These suburbs are free, whilst London supports within itself four-score and twelve exclusive com- panies of all kinds, of which we may see the members annually adorn, with a silly pageantry, the tumultuous triumphal procession of the Lord Mayor." The prodigious manufacturing activity of some of the suburbs of Paris is notorious; of the Faubourg St. zlntoine, in particular, where industry enjoyed many exemptions. Some products were made no- where else. How happened it, that without apprenticeships, or the necessity of being free of the craft, the manufacturer acquired a greater degree of skill, than in the rest of the city, which was subject to those institutions that are held up as so indispensable 1 For a very simple reason: because self-interest is the best of all instructors. An example or two will serve better than all reasoning in the world, to show the impediments thrown in the way of the develop- * book iv. c. 7. + Baert. vol. 1. p. 107. Wealth of Nations, | Remarks on the Advantages and Disadvantages of France and of Great Britain, 12mo. 1754, $ 4, p. 142. (a) (a) This work was originally published in French in 1752, with great success, nnder the fictitious name of Sir John Nickols, and is supposed to have oeen the production of a foreigner employed about the court of VersaLles. It contain* many judicious remarks upon the internal policy of Britain. T.

183 180 ON PRODUCTION. BOOK I if industry incorporations of trades and crafts. Argand, ment by the lamps that go by at the same the inventor of his name, and yield, of the Park- amount light, was dragged before expense, triple the by the company of tinmen, locksmiths, ironmongers, ment de Paris, making of and journeymen farriers, who claimed the exclusive right lamps.* Lenoir, the celebrated Parisian philosophical and mathe- small furnace for the con- matical instrument maker, had set up a working of metals used in his business. The syndics venience the founders' company came he person to demolish it; and the of in apply king to for protection. Thus was talent to the was obliged manufacture of japanned hard The dependent upon court favour. the era of the revo- ware was altogether excluded from France until lution, by the of its requiring the skill and implements circumstance and the necessity being admitted to the of many different trades, of on. them an individual could carry it before It would of all, freedom fill be easy volume with the recapitulation of the disheartening to a to encounter in the city of Paris vexations that personal industry had the corporate system; and another with that alone, under the suc- of cessful efforts made, since that system was abolished by the revolution. the same reason that free suburb of a chartered town, or For the midst of a country embarrassed by the officious- a free town in the ness meddling government, will exhibit an unusual degree of of a prosperity, a nation that enjoys the freedom of industry, in the midst of others following the corporate system, would probably reap simi- iar advantages. Those have thriven the the most, that have been by the observance formalities, provided, of course, least shackled of secured from exactions of power, the chica- be the that individuals attempts of dishonesty nery violence. Sully, of law, and the or was spent in the study and practice of measures whose whole life the prosperity of France, entertained this opinion.") for improving In his he notices the multiplicity of useless laws and ordi- memoirs, as a to the national progress.^ nances, direct barrier " Why not get himself made free of the company?" * those who are ever say ready to palliate or justify official abuse. The corporation, which had the con- trol over admissions, was itself interested in thwarting* a dangerous competitor. Besides, why compel the ingenious inventor to waste in a personal canvass, that time which would be in his calling! so much more profitably occupied xix. t Lfv. in the counting-house of the Messrs. Mascrani, of early education X Colbert's very considerable mercantile establishment, very early imbued him a Lyons, of the manufacturers. Commerce and manufacture thrived with the principles prodigiously under his powerful and judicious patronage; but, though he liberated them from abundance oppression, he was himself hardly sparing enough of of ; ordinances and regulations encouraged manufactures at the expense of agri- he culture, and saddled the people at large with the extraordinary profits of monopo- lists. We cannot shut our eyes to the fact, that to this system, acted upon ever the since of Colbert, France owed days striking inequalities of private for- the tune, the overgrown wealth of some, and the superlative misery of others; the ot contrast splendid establishments of industry, with a wide wae'e of a few |K>verty and degradation. This is no ideal picture, but one of sad reality, ^iach .ne study of principles will help us to explain.

184 CHAP. XVII. ON PRODUCTION. 1S1 be alleged, that, were occupations quite Tree, It may, perhaps, all those who engaged in a sacri- a large proportion of them would fall of in some eagerness fice to the competition. Possibly they might, be a great few instances, although it is not very likely there should of in line, that held out but little prospect n gain ; of excess candidates casual occurrence of this evil, it would be of yet, admitting the up the prices infinitely less magnitude, than permanently keeping of rate that must limit produce and abridge the its at a consumption, in the great body of consumers. of power purchasing measures of If the free disposition the authority, levelled against and are criminal in the eye of each man's respective talents capital, still more difficult to justify them upon the of sound policy, it is of natural right. " The patrimony of a principles phor man," says the author Wealth of Nations, " lies in the strength and dex- of the of his hands: hinder him from employing this strength terity and to r w hat manner he thinks proper, without injury tc in and dexterity plain violation of his most sacred property." his neighbour, is a society is possessed of a natural right to regulate the as However, of any class of industry, that without regulation might pre- exercise the rest of the community, physicians, surgeons, and apothe- judice are with perfect justice subjected to an caries, examination into their lives The their fellow-citizens are dependent professional ability. of and a test of that skill may upon their skill, be established ; fairly but does not seem advisable to it the number of practitioners limit nor the plan of their education. Society has no interest further than to ascertain their qualification. On the same grounds, regulation useful and proper, when aimed is the prevention fraud or contrivance, manifestly injurious to at of production, public safety, and not at pre- of or to the other kinds nature of the products and the methods of scribing the fabrication/ a manufacturer must not be allowed to advertise his goods to the Thus, public as of better than their actual quality: the home consumer is to the public protection against such a breach of faith; and entitled indeed, so, mercantile character of the nation, which must suf- is the in the and demand of foreign customers from such fer estimation And this is an exception to the general'rule, that the best practices. of all guarantees is the of the manufacturer. For, personal interest to give possibly, when about business, he may find it answer to up increase his profit by a breach of faith, and sacrifice a future objec' he is to relinquish for a present benefit. A fraud of this kind about the the in the Levant market, about ruined yeai French cloths since when and German 1783; British have entirely supplanted the them.* still further. An article often derives a value We may go from the name, or from the place of its manufacture. When wo judge from long experience, that cloths of a denomination, and such The * of this trade has been erroneously imputed to the liberty of com- loss merce, consequent upon the revolution. But Felix Beaujour, in his Tableau du be Commerce la Grece, has shown that it must de referred to an earlier period, when restrictions were still in force.

185 182 ON PRODUCTION. BOOK I at sri< place, will be of a certain breadth and substance, it made h a fraud is the same name and at the same place, to a fabricate, under and to the ordinary stand- inferior substance quality of a commodity to send ard, into the world under a false certificate. and thus it form an opinion of the extent Hence which govern- we may to may its interference with benefit. The correspondence ment carry sample conditions, express or implied, must be rigidly the with of government should meddle with production no further. enforced, and impress upon my readers, that the mere interference ] would wish to is itself an evil, even where it is of use :*first, because it harasses and and, secondly, because it distresses individuals; costs money, either to nation, if it be defrayed by government, that is to say, charged the the public purse, consumer, if it be charged upon the upon or to the the latter case, the charge must course enhance in of specific article; additional tax upon the price., thereby laying home consumer, an the pro tanto discouraging the foreign demand. and be an evil, a paternal government will be most If interference of its It sparing will not trouble itself about the certifica- exercise. of as the purchaser must understand better tion such commodities, itself; or of such as cannot well be certified by its agents; than for, unfortunately, government must always reckon upon the negli- a gence, incapacity, misconduct of its retainers. But some arti- and cles may well admit of certification ; as gold and silver, the standard of which can be ascertained by a complex operation of chem- only few purchasers know execute, and which, if istrv, which how to would cost them infinitely more than executed did, it can be they government in their stead. for by the individual inventor of a new product or of a the In Great Britain, may obtain the exclusive right to it, by obtaining what new process a in is called force, the absence 01 patent. While the patent remains him to his price far above the ordinary competitors enables raise of his outlay with interest, and the wages of his own in- return dustry. Thus he a premium from the government, charged receives the upon of the new article; and this premium is often consumers very large, as may be supposed in a country so immediately produc- tive as are consequently abundance of Great Britain, where there on the for some new object of affluent individuals, ever look-out a man invented a spiral or worm spring enjoyment. Some years ago the leather braces of carriages, 10 ease their for insertion between for invention. an motion, and made his fortune by the patent so trifling of Privileges no one can reasonably object to; for they this kind neither interfere with, nor cramp any branch of industry, previously in operation. Moreover, the is purely voluntary; expense incurred it, renounce the satis- to and those who choose to incur are not obliged of any faction of necessity or of amusement. previous wants, either * " Every restraint, imposed by legislation, upon the freedom of human action and must inevitably extinguish portion of the energies of the community, a abridge its annual product."— Verri. Rejl. sur VEcon. Pol. c. 12.

186 CHAP. XVII. ON PRODUCTION. 183 as it is the duty every government to aim aL the However, of subjects' condition, it constant amelioration of its cannot deprive other of the to employ part of their industry eternity right producers to and capital in this particular channel, which perhaps they might or preclude the con- later have themselves discovered, or sooner very long period from the advantages of a competition sumer for a jurisdiction, would out of its course price. Foreign nations being of privilege inventor, and would, therefore, in this par- no to the grant operation ticular, during patent, be better off than the the of the the invention originated. nation where has imitated the France* of England, in assigning a wise example limit duration of these patent rights, after which the invention to the for all the world avail themselves of. It is also provided, is free to the process if capable of concealment, it shall be divulged at that, be of the term. And the patentee, who in this case, it the expiration be do may without the patent, has this advantage: supposed, could if in be discovered by any body that the interim, it cannot his secret the expiration of the term. be made available till Nor is it at all necessary that the government snouid inquire into the novelty or utility of the invention; for, if it be useless, so much the worse for the and, if it be already known, every body inventor, to plead prove that fact, and the previous right of is competent and that been only sufferer is the inventor, who has so the public; the the expense patent for nothing. Thus the public is no loser at of a of encouragement, but, on the contrary, may by this species derive prodigious advantage. to direct either object or the method The regulations tending the by no of production, which have been above observed upon, means comprise all the measures adopted by different nations with those views. I to specify them all, my catalogue would Indeed, were soon be incomplete; for new ones are every day brought into prac- tice. The great point is, to lay down certain principles, that may enable us to judge of their consequences. But there are beforehand of of more two other branches commerce, that have been the subject and are, therefore, worthy of more special than usual regulation, their investigation. the two succeeding sections to shall devote I exclusive examination. SECTION III. Of Privileged Trading Companies. A government sometimes grants to individual merchants, and much oftener to of buying trading companies, the exclusive privilege for example; and selling specific articles, tobacco trafficking or of with a particular country, as with India. * Vide the laws dated 7th Jan. and 25th May, 1791, and 20th Sept. 1792 Also the anet of the government, dated 5 Vandemaire, an. ix.

187 J84 ON PRODUCTION. Boot L The privileged traders, being thus exempted from all competition by the exertion of the public authority, can raise their prices above the level that could be maintained under the operation of a free ..rade. This unnatural ratio of price is sometimes fixed by the which thus assigns a limit to the partiality it ex- itself, government ercises towards the producers, and the injustice it practises upon the consumers: otherwise, the avarice of the privileged company would be bounded only by the dread of losing more by the reduction of the gross amount of its sales, in consequence of increased prices, than it would gain by their unnatural elevation. At all events, the consumer pays for the commodity more than its worth; and govern- ment generally contrives to share in the profits of the monopoly. It has been said, for the most ruinous expedient is sure to find some plausible argument or other to support it, that the commerce with certain nations requires precautionary measures, which privi- leged companies only can enforce. At one time the plea is, that forts must be built, and marine establishments kept up; as if in truth it were worth while to traffic sword in hand, or an army were neces- sary to protect plain dealing; or as if the state did not already main- tain at great charge a military force for the protection of its subjects! At another, that diplomatic'address is indispensable. The Chinese, for instance, are a people so bigoted to form and prone to suspicion—. so entirely independent of other nations, by reason of their remote position, the extent of their territory, and the peculiar character of their wants, that is a matter of special and precarious favour to be allowed to deal with them. We must, therefore, elect either to go without their teas, silks, and nankeens, or be content to submit tc precautions, which can alone insure the continuance of the trade; for the dealings of individuals might endanger the continuance of that good humour, without which the mutual intercourse of the two nations would be at an end. But, let me ask, is it so certain that the agents of a company, who are too apt to presume upon the support of the military power, either of the nation or at least of the company,—is it quite certain, that such agents are more likely to keep alive an amicable feeling than private traders, in whom more deference to local institutions might be expected, and who would have an immediate interest in keeping clear of any misunderstanding that should endanger both their persons and their property 1* But, supposing the worst that could happen, and granting, for argument's sake, that the trade with China can not be conducted otherwise than by a privileged company, does it follow, that with out one we must needs give up the taste for Chinese productions? * This has been exemplified in the commercial relations of the United States with China. The American traders conduct themselves at Canton with more discretion, and are regarded by the Chinese authorities with less jealousy than the asrents of the English company. The Portuguese, for upwards of a century, rarried on the trade with the Eastern seas, without the intervention of a com- oany, and with greater success than any of their contemporaries.

188 CHAP. XVII. PRODUCTION. 1$», ON not. The trade Chinese goods will always exist, fur Certainly in suits both parties, this plain reason, that and their the it Chinese we not pay for those goods? There is shall dearer customers. But so. Three-fourths of the no ground for thinking European states single ship to China, and yet are abundantly sup- a have never sent with nankeens, and that too at a plied with teas, with silks, and very cheap rate. another argument of more general application, and still There is that company, having the exclusive viz. a more frequently urged; given country, is exempt from the effects trade competi- of any of and, therefore, buys at a less price. But, in the first place, it tion, not true that the exclusive privilege exempts from the effect of is the only competition it removes, is that of the national competition: be of the utmost benefit nation; but it traders, which would to the competition foreign companies, nor of foreign the of excludes neither next place, there are many articles that private traders. In the rise in price in consequence of the competition, which not would to be alarmed at, though in truth it is a mere some people affect bugbear. Suppose Marseilles, Bordeaux, L'Orient, were vessels all to fit out all tea have no reason to believe that we their to bring from China, tea into France, than France ventures together would import more or dispose of. All we have could consume fear is, that they should to not import enough. they were to import no more than other Now, if for them, the demand for tea in merchants would have imported China will have been just the same in both cases; consequently, the commodity will not Our merchants have become more scare there. to pay dearer unless the price should rise would hardly have for it, what sensible effect could purchases of a few itself; and in China the France have upon the price of an article consumed in merchants of itself, to one hundred times amount of the whole consump- China the of ? tion Europe But, granting that European competition would operate to raise of some commodities in the the price is that a suffi- eastern market, cient motive excepting the trade to that part of the world from for are in all other branches of com- the general rules that acted upon ? Are we to invest an exclusive company with merce sole con- the duct of the import or export trade between Germany and France, for the sole purpose of getting our cottons and woollens from Germany at a ? If the commerce of the East were put upon the cheaper rate as article in general, the price of any one same footing foreign trade its of the cost of pro- produce could never long remain much above in duction for the rise of price would operate as a stimulus to Asia; •ncreased production, and the competition of sellers would soon be on a par of purchasers. with that the But, admitting of buying cheap to be as substantial advantage as it is represented, the nation at large has a right to participate lr that cheapness; home consumers ought to buy cheap as well as the and, for a in practice it is just the reverse, the company. Whereas

189 66 ON PRODUCTION. BOOK I sim])e reason: the not exempt fiom competition as \evy company is other nations are its but as a seller it is a purchaser, for competitors: of can buy the articles it deals in no- the rest the nation exempt; for by where else, It the import foreigners being wholly prohibited. command the market, especially if it be and can asks its own price, keep the market always understocked, as the English attentive to that it; the supply be just so far short of the demand, as to call is, if competition purchasers.* the keep alive of only extort exorbitant In this manner, trading companies not consumer, him moreover saddle the with all the profits from but mismanagement inseparable from the conduct of these fraud and of directors and unwieldy bodies, with their cumbrous organisation of factors without end, dispersed from one extremity to the the globe The only check gross abuses of these privileged other. to the smuggling contraband trade, which, in this point of is the or bodies claim to some degree of utility. view, may lay of point question; are the gains in us to the This analysis brings not; for they the privileged company, national gains'? Undoubtedly the pockets of the nation itself. The are wholly taken from whofe excess value, paid by the consumer, beyond the rate at which free of the is not a value produced, but so much trade could afford article, by the government to the trader at the con- existing value presented least It be urged, that it must at sumer's expense. be will probably admitted, that this profit remains and is spent at home. Granted. but by whom is it spent ? that is the point. Should one member of a family possess himself of the whole family income, dress himself and devour best of every thing, what consolation in fine clothes, the rest family, were he to say, what signifies it be to the of the would spend the money? the income spent is the same, it whether you or I make so difference. it can no well as excessive profits of monopoly would soon The exclusive as the privileged companies with wealth, could they depend upon glut the good management of but the cupidity of agents, their concerns; of distant adventures, difficulty of bringing tne long pendency the account, and the incapacity of those interested, are factors abroad to of ruin causes constant activity. Long and delicate operations of in commerce require superior exertion intelligence in the parties and And how can such qualities be expected in shareholders, interested. amounting sometimes to several hundreds, all of them having other matters of to look after ?f more personal importance of to trading compa- Such are the consequences privileges granted It is well known, that, when the Dutch were in possession of the Moluccas, * sake they were of burning part of the spices they produced, for the habit in the 1 of keeping up the price in Europe. f The answer of La Bourdonnais to one of the directors of the French East India Company, who how it was, that he had managed his own interests asked of the company, will long be remembered:—" Be- 60 much better than those cause," said he, " I manage my own affairs according to the dictates of my own regard judgment obliged to follow your instructions in but am to those of the company "

190 CHAP. XVII. ON PRODUCTION. 81 and these consequences, it must be observed, are in the nature nies: of things inseparable; circumstances may reduce their efficacy, but can never remove them altogether. The English East India Com- pany has met with more success than the three or four French ones that at different times made the experiment.* This company is sovereign as well as merchant; and we know, by experience, that the most detestable governments may last for several generations; wit- ness that of the Mamelukes in Egypt. (1) There are some minor evils also incident to commercial privileges. The grant of exclusive rights frequently exiles from a country a branch of industry and a portion of capital that would readily have taken root there, but are compelled to settle abroad. Towards the close of the reign of Louis XIV. the French East India Company, being unable to support notwithstanding its exclusive rights, itself, transferred the exercise of its privileges to some speculators at St. in consideration of a small share in their profits. The trade Malo, began to revive under the influence of this comparative liberty, and would, on the expiration of the company's charter, in 1714, have been as active as the then melancholy condition of France would have permitted: but the company petitioned for a renewal, and ob- tained one, pending the ventures of some private traders. Soon afterwards, a vessel of St. Malo, commanded by a Breton of the name of Lamerville, appeared upon the French coast, on its return from the East Indies, but was refused permission to enter the har- bour, on the plea, that it was in contravention of the company's rights. Consequently, he was compelled to prosecute his voyage to the nearest port in Belgium, and carried his vessel into Ostend, where he disposed of the cargo. The governor of the Low Coun- hearing of the enormous profits he had made, proposed to the tries, captain a second voyage, with a squadron to be fitted out for the express purpose; and Lamerville afterwards performed many simi- * The first French East India Company was established in the reign of Henry Gerard Leroi. IV. A D. 1604, at the instance of a Fleming of the name of It met with no success. (1) The commercial monopoly of the English East India Company was finally abolished by three acts of Parliament, passed during the year 1833, namely, chapters 85, 93, and 101 of the 3d and 4th William IV. The first is entitled, an act for effecting an arrangement with the East India Company, and for the better government of His Majesty's Indian territories, till the 30th day of April, 1854; the second, an act to regulate the trade of China and India; and the third, an act to provide for the collection and management of duties on tea. By these acts the trade with both China and India is thrown open, for the first time, to British enterprise and capital, and British subjects are also permitted to take up their residence in these countries. It is needless to point out the vast importance of these enactments, and the great advantages that must result from them, not only to British subjects, but to the whole commercial world. The "osources of regions of rich countries that have hitherto lain dormant will now oe called into activity, and the general wealth of the country, and its capacity of absorbing foreign commodities, immensely increased. AMERICAN EDITOR.

191 168 ON PRODUCTION, BOOK I for different employers, laid the foundation of the lai voyngey and Ostenu Company.* the French consumer must necessarily have suffered Thus, by he did. But, at any it will be fact, this monopoly: rate, and so, in the contrary: supposed, the company must have benefited. Just in spite of the monopoly of tobacco, itself ruined; the company was other subsidiary grants bestowed on them by the the lotteries, and short," says Voltaire,J government.-)- all that remained to " In " East forty regret of having, in the course of in the France was the squandered enormous sums, to up a company that years, bolster a any dividend from the never made six-pence profit, never made resources commerce, either to its share-holders or creditors; of its and supported establishments in India, solely by the underhand its of pillage extortion upon the natives." practice and which com- establishment of an exclusive in The only case the justifiable, is when there is no other way of commencing a pany is, or barbarous nations. In new trade with distant the that case, charter kind of patent of invention, and confers an advantage, is a to the extraordinary risk and expense of the first commensurate experiment. consumers have no reason to complain of the The dearness of products, which, but for the grant of the charter, they would either not at all, or have enjoyed at a still have enjoyed But such grants should, like patents, limited to such dearer rate. be will repay adventurers fully indemnify the as for duration only, and risk incurred. Any thing further is a mere free the advances and to the company, at the expense of the nation at large, who haye gift a natural right to get and at the what they want wherever they can, lowest possible price. What been said with respect to commercial is equally applica- has to manufacturing privileges. The reason why governments are ble of so easily entrapped into measures is, partly because they this kind a see of large profits, and do not trouble themselves to in- statement quire whence they are derived; and partly because this apparent profit is to numerical calculation, no matter whether easily reduced or or incorrect; whereas the loss and mischief wrong right, correct to the nation are infinitely subdivided amongst resulting mem- the bers of the community, and operate after all in a very indirect, com- plex, and general way, so as to escape and defy calculation. Some writers maintain arithmetic to be the in political only sure guide for my part, economy; many detestable systems built upon I see so arithmetical statements, that I am rather inclined to regard that science as the instrument of national calamity. * Taylor's Letters on India f Raynah Hist. phil. et polity des Eslabl. des Europeens, dans les deux It des IV. iv. { 19. } Siecle de Louis XV.

192 CHAP. XVII. ON PRODUCTION. 189 SECTION IV. Of regulations affecting the Corn Trade. n the com- IT would seem that the general principles, which govei merce of all other commodities, should be equally applicable to the commerce of grain. But grain, or whatever else may happen to be the staple article of human subsistence to any people, deserves more particular notice. It is universally found, that the numbers of mankind increase, in proportion to the supply of subsistence. The abundance and cheap- ness of provisions are favourable to the advance of population; their scarcity is productive of the opposite effect but neither cause ope- ;* rates so rapidly as the annual succession of crops. The crop of one year may, perhaps, exceed or fall short of the usual average, by as much as one-fifth or one-fourth ; but a country, that, like France, has thirty millions of inhabitants one year, cannot have thirty-six mil- lions the next; nor could its population be reduced to twenty-four millions in the space of one year, without the most dreadful degree of suffering. Therefore it is the law of nature, that the population shall one year be superabundantly supplied with subsistence, and another year be subjected to scarcity in some degree or other of intensity. And so, indeed, it is with all other objects of consumption; but, as the most of them are not absolutely indispensable to existence, the temporary privation of them amounts not to the absolute extinction of life. The high price of a product, which has wholly or partially failed at home, is a powerful stimulus to commerce to import it from a greater distance and at a greater expense. But it is unsafe to leave wholly to the providence of individuals the care of supplying an article of such absolute necessity: the delay of which, but for a few may be a national calamity; the transport of which exceeds days, the ordinary means of commerce; and whose weight and bulk would make its distant transport, especially by land, double or triple its average price. If the foreign supply of corn be relied upon, it may happen to be scarce and dear in the exporting and importing country at the same moment. The government of the exporting country may prohibit the export, or a maritime war may interrupt the transport. But the article is one the nation cannot do without; or even wait for a few days longer. Delay is death to a part of the population at least. For the purpose of equalizing the average consumption to the average crop, each family ought literally to lay by, in years of plenty for the deficiency of years of scarcity. But such providence canno' be reckoned upon in the bulk of the population. A great majority, to say nothing of their utter want of foresight, are destitute of the means of keeping such a store in reserve sometimes several vears * Vide infra. Book II. chap. 11.

193 190 ON PRODUCTION. BOOK I. the accommodations housing it, or together, neither have they for taking the means on a casual change of abode. it of along with them for depended upon this reserve Can speculative commerce be ? At first sight it might appear that against could, a deficiency it adequate motive; for the difference of an that self-interest would be corn in years of abundance and those the price scarcity is very of of But the of the oscillation is too irregular in dis- gieat. recurrence time, and too infrequent also, give rise to a regular traffic, of to tance that can be repeated 01 pleasure. The purchase of the grain, one at of the storehouses, require a very large advance the number and size and a heavy arrear of interest: it is an article that must of capital and be repeatedly shifted and is much exposed to fraud and turned, as well popular violence. All these are to be covered damage, as to profit the rare occurrence. Wherefore, it is possible, that a by of hold sufficient temptation may not to the speculator, article out most commendable kind of speculation, although this would be the the principle of buying from the producer when being framed upon he is to sell, and selling to the consumer when he finds it diffi- eager to cult purchase. of the individual providence of the consumer, and of In default of it would seem speculative accumulation and reserve, neither which be safely depended upon, can the can as represent- public authority, ing the aggregate interest, undertake the charge of providing against a scarcity with any prospect of success ? I am aware, that, in a few very limited communities, blessed with a very economical govern- of the Swiss cantons, public granaries storing a ment, like some for should casual surplus have answered the purpose well enough. But I The in large and populous countries. pronounce them impracticable advance of and its accruing interest would affect the govern- capital same manner as ment and even in a in the private speculators, for there are few governments, that can borrow on gieater degree; low terms as such in good credit. The difficulties of individuals managing commercial concern, of buying, storing, and re-selling a so an extent, would be still more insuperable. Turgot, in to large on the commerce of grain, his letters clearly proved, that, in has matters of this kind, a government never can expect to be served at a reasonable rate; all its agents having an interest in swelling its expenditure, and of them in curtailing. It would be utterly im- none to to the for the tolerable conduct of a business left possible answer of any adequate control, whose actions are, discretion agents without the most part, governed by the for of the state, superior dignitaries who seldom have either the knowledge or condescension requisite for such details. A sudden panic in the public authorities might prematurely empty the a political measure, or a war, granaries; to a divert their contents different destination. quite Generally speaking, appears that there is no safe dependence for it a reserve of supply against a season of scarcity, unless the business be confided the discretionary management of mercantile houses of to the and intelligence, willing to undertake the first capital, credit,

194 CHAP. XVII. ON PRODUCTION. 19] purchase, and the filling and replenishment of the granaries upon cer- tain stipulated terms, and with the prospect of such advantages, an may fairly recompense them for all their trouble. The operation would then be safe and effectual, for the contractors would give secu- rity for due performance; and it would also be cheaper executed in this way than in any other. Different establishments might be con- tracted with for the different cities of note; and these being thus supplied in times of scarcity from, the stores in reserve, would no longer drain the country of the subsistence destined to the agricul- tural population, (a) Public stores and granaries are after all but auxiliary and tempo- rary expedients of supply. The most abundant and advantageous supply will always be that furnished by the utmost freedom of com- merce, whose duties in respect to grain consist chiefly in trans- porting the produce from the farmyard to the principal markets, and thence in smaller quantities from the markets of the districts where it is superabundant to those of others that may be scantily supplied; or in exporting when cheap, and importing when dear. Popular prejudice and ignorance have universally regarded with an evil eye those concerned in the corn-trade ; nor have the deposi- tories of national authority been always exempt from similar illibe- rality. The main charge against them is, that they buy up corn witlj the express purpose of raising its price, or at least of making an unreasonable profit upon the purchase and re-sale, which is in effect so much gratuitous loss to the producer and consumer. First, I would ask, what is meant by this charge 1 If it be meant to accuse the dealers of buying in plentiful seasons, when corn is cheap, and laying by in reserve against seasons of scarcity, we have just seen that this is a most beneficial operation, and the sole means of accommodating the supply of so precarious an article to the regu- larity of an unceasing demand. Large stores of grain laid in at a iow price contribute powerfully to place the subsistence of the popu- lation beyond risk of failure, and deserve not only the protection, but the encouragement of the public authorities. But, if it be meant to charge the corn-dealers with buying up on a rising market and on the approach of scarcity, and thereby enhancing the scarcity and the price, although I admit that this operation has not the same (a) It is singular, that, after the very careful revision which this section has undergone in the last edition, this paragraph should have been suffered to stand. Indeed, one would almost suspect that our author had left it rather in compli- ment to the popular notions of his own country, than from personal conviction of the propriety of the measure he suggests; which is impugned by the whole con- text of the remaining part of the section. The best security against famine is, the total absence of all official interference whatever, whether permanent or temporary, as the example of Great Britain will testify. There the government has at all times abstained from taking a personal part in the supply either of town or country, and has limited its interference to the mere export and import, which have only been cramped and impeded by ill-advised operations. Another important ground of security is, the variety of the national food. Upon this ou' author has observed.— Vide, infra. T.

195 192 ON PRODUCTION. BOOK I of utility, that the consumer is saddled with recommendation and operation without any the additional cost of the direct equivalent the of one year is not made this instance deficiency benefit, for in of a preceding one; good cannot think by the hoarded surplus yet I ever been attended with any very alarming or fatal conse- has it commodity of most extended production; and quences. Corn is a be arbitrarily raised, without disarming the competi- its price cannot of an infinity and without an extent sellers, dealing and of tion of of individuals. It is, besides, agency scarcely practicable most to a and in comparison with its price, inconvenient article cumbersome troublesome in the carriage and and, consequently, most expensive A store of and warehousing. can not escape any considerable value observation.* liability to damage or decay often makes sales And its and exposes larger speculators to immense loss. compulsory, the little and Speculative monopoly is, therefore, extremely difficult, dreaded. The kind of engrossment most prejudicial, as well be to prevention, is that practised by the domestic pru- as most difficult of of in apprehension of a scarcity. Some, from dence individuals of precaution, lay by rather more than they want; while farm- excess ers, farming proprietors, millers, bakers, who habitually keep a and on hand, take care somewhat swell that stock, in the idea to stock profit whatever surplus there may be; and to a that they shall sell of these petty acts of the infinite number engrossment makes them greatly exceed, in the aggregate, united efforts of speculation. all the if it But what out, after all, that even the selfish and should turn odious views of such speculators are productive of some good ? When corn is it is consumed with less providence and fru- cheap, and used food for the domestic animals. The distant gality, as scarcity, is even a slight rise of price, of insufficient to prospect or the great holders shut If their check this improvidence betimes. up however, the consequent anticipation rise of price imme- stores, of a the public on their guard, and awakens diately puts particular the frugality care of the little consumers, of whom the great mass and is is set at work to find a sub- of consumption composed. Ingenuity for the scarce article of food, stitute particle is wasted. and not a Thus, the avarice of one part of mankind operates as a salutary check upon the improvidence of the rest; and, when the stock with- held at in the market, its quantity tends to lower the length appears in of the consumer. price favour to the tribute which the dealer is supposed to exact With regard from both producer and consumer, it is a charge that will attach with of equal justice upon every branch commerce whatsoever. There be some meaning in it, would the hands of the could products reach consumer without any advance of capital, without warehouses, trou * who was a great advocate for the interference of authority in these Lamarre, matters, and was commissioned by the government, in the scarcities of the years 1699—1709, to discover all concealed hoards, and bring to light the monopol isis, 100 quar frankly confesses, that was not able to make seizure of so much as he it*rs altogether.— Traite de la Police, Supplement au tome 11.

196 CHAP. XVII. ON PRODUCTlOxN. 193 combination, or any kind of difficulty. But, so ong as diiTicui ble, ties shall exist, nobody will be able to surmount them so cheaply, as those who make it their special business. Legislation should take •- an enlarged view of commerce in the aggregate, small and great it will find its agents busied in traversing the whole surface of tne territory, watching every fluctuation of demand and supply, adjusting the casual or local deficiency of price to meet the charges of pro- duction and excess of price above the capacity of consumption. Is it to the cultivator, to the consumer, or to the public administration that we can safely look for so beneficial and powerful an agency ? Extend, if you please, the facility of intercourse, and particularly the capacities of internal navigation, which alone is suited to the transport of a commodity so cumbrous and bulky as grain; vigilantly watch over the personal security of the trader; and then leave him to follow his own track. Commerce cannot make good the failure of the crop; but it can distribute whatever there may be to distribute, in the manner best suited to the wants of the community, as well as to the interests of production. And doubtless it was for this reason that Smith pronounced the labour of the corn dealer to be favourable to the production of corn, in the next degree to that of the cultivator himself. The prevalence of erroneous views of the production and com- merce of articles of human subsistence, has led to a world of mis- chievous and contradictory laws, regulations, and ordinances, in all countries, suggested by the exigency of the moment, and often ex- torted by popular importunity. The danger and odium thus heaped upon the dealers in grain have frequently thrown the business into the hands of inferior persons, qualified neither by information nor ability for the business; and the usual consequence has followed; namely, that the same traffic has been carried on in secret, at far greater expense to the consumers; the dealers to whom it wa3 abandoned being of course obliged to pay themselves for all the risk and inconvenience of the occupation. Whenever a maximum of price has been affixed to grain, it has immediately been withdrawn or concealed. The next step was to compel the farmers to bring their grain to market, and prohibit the private sales. These violations of property, with all their usua, accompaniments of inquisitorial search, personal violence, and in- justice, have never afforded any considerable resource to the govern- ment employing them. In polity as well as morality, the grand secret is, not to constrain the actions, but to awaken the inclinations of mankind. Markets are not to be supplied by the terror of the bayonet or the sabre.* When the national government attempts to supply the population * The French minister of the interior, in his report, presented in December, 1817, the markets were never so ill supplied as immediately attei admits that the decree of May 4, 1812, prohibiting- all sales out of open market. The con- sumers crowded thither, having nowhere else resort to; while the farmers to have nothing for sale to sell below the current price, pretended to teing obliged

197 |!)4 ON PRODUCTION. BOOE I it is sure fail in satisfying the nationa by becoming itself a dealer, to and at the wants extinguish all the resources that same time itself, to for of freedom nobody else will knowingly commerce would offer; embark may. the losing trade, though in a government of During the scarcity prevalent throughout many parts France, year 1775, the municipalities of Lyons and some other towns the in relieve the wants attempted the inhabitants, by buying up corn to of the and re-selling it at a loss in the towns. To defray in country, this operation, they an in- same time obtained of the expense at the octroi The tolls upon goods entering their gates. of the crease or for a the ordi- scarcity grew worse and worse, very obvious reason; nary dealers naturally abandoned markets where goods were sold the cost price, and which they could not below to without resort paying extra toll upon entry.* an article more dangerous it is to The more necessary is, the price below reduce An accidental dearness of the natural level. its is commonly most unwelcome occurrence, corn, though doubtless a causes out of all human power to brought about by remove.f There no in heaping one calamity upon another, and wisdom is passing has been a bad season. bad laws because there met Governments have no better success in the matter of with importation, than conduct of internal commerce. The enor- in the by the of Paris and the general mous sacrifices made commune to provision the metropolis in the winter government, 1816-17 of with grain imported from abroad, not protect the consumer from did in the price an exorbitant advance bread, which was besides de- of ficient both in weight and quality; and the supply was found inade- quate after all.J * ages and in all places this effect will follow. The Emperor Julian, In all to be sold Antioch 420,000 modii of wheat irhported from A. D. 362, caused at Egypt purpose, at a price lower than the average of the and for the Chalsis supplies of private commerce were immediately stopped market; conse- the in the Vide Gibbon, c. famine was aggravated. The principles of quence, and 24. are eternal and immutable; but one nation political economy acquainted with is them, another not. and of the Roman empire always destitute of subsistence, The metropolis was the the gratuitous largesses of grain drawn from a when government withheld and tributary world; the real cause of the scarcity these very largesses were felt and complained of. of the most frequent causes of f One is, indeed, of human creation, famine and that is war, which both interrupts production, and wastes existing products. This cause is, therefore, within human control; but we can it to hardly expect be effectually exerted, until governments shall entertain more accurate notions of their own, well as of the national interests; and nations be weaned of the as of attaching sentiments of admiration and puerility to perils encountered glory without necessity reason. or It is mere mockery } talk of the paternal care, solicitude, or beneficence to of government, which are never of any avail, either to extend the powers of authority, or to the suffering of the people. The solicitude of the diminish can never be doifbted; a sense of intense personal interest will government always guide it to the conservation of social order, by which it is sure to be the exert principal gainer. beneficence can have little merit; /or it tin And its •none but at the expense of its subjects.

198 CHAP. XVII. ON PRODUCTION. 195 the subject bounties on import, it is hardly necessary to On of most effectual bounty touch. of the article in is the The high price to as scarcity occurs, amounting sometimes the country where the If this be not sufficient to tempt the much as 200 or 300 per cent. of no adequate inducement that the government know I importer, could hold out to him. less subject to famine, were they to employ Nations would be a of the whole population depends greater variety aliments. When single product subsistence, the misery of a scarcity is a for upon deficiency of corn in extreme. is as bad as one of rice in A France of many articles, as butcher's Hindostan. When their diet consists meat, poultry, esculent roots, vegetables, fruits, fish, &c, according the supply to local circumstances, less precarious; for these arti- is cles seldom fail time.* all at a be of less frequent occurrence, more atten- Scarcity would also if dissemination tion were paid of the art of and to the perfection of cheap rate, such kinds as are offered in at a preserving, food, particular seasons superabundance places; fish, for instance; at and in this way be made to serve for times their periodical excess might of international maritime intercourse of scarcity. A perfect freedom would enable the of the temperate latitudes to partake inhabitants of in such pro- cheaply those productions, that nature pours forth a tropical sun.f I know not how far it would be possi- fusion under but the ble and transport the fruit of the banana; preserve expe- to * Custom, the tyrant of weak minds, and of such, unfortunately, is the great mass of mankind, and of the lower classes in particular, is always a formidable opponent to the of a new article of food. I have observed in some introduction of France, decided distaste for the paste prepared in the Italian provinces a most nutritious substance, and well calculated the keeping a method, although for frequent recurrence of scarcity but the flour sound and good. Probably, nothing during political agitations of the nation could have extended the cultivation the of the potatoe, so as to have made it a staple article of food in and consumption The many districts. for that vegetable would be still more general, appetite a and ameliorating the were little more attention bestowed upon preserving and the practice of raising it from the species, the root more seed rather than strictly observed. Humboldt tells us, in his t pol. sur la Nouvelle Espagne, c. ix. that an Essai equal area of land in that country will produce bananas, potatoes, and wheat, in the following proportions of weight:— Kilogrammes. Bananas 106,000 Potatoes 2,400 Wheat 800 The product of bananas is, therefore, weight, 133 times that of wheat, and in of potatoes. But a 44 times that for the aqueous large deduction must be made particles banana. of the demi-hectare of fertile land A Mexico, by proper cultivation of the larger in species of banana, may be made to feed more than 50 individuals; whereas tho same extent of in Europe, supposing it to yield eight-fold, will give an surface annual product of more than 576 kils. of wheat flour, which is not enough for no the sustenance of two persons. It is natural thai Europeans, on their first arrival of in tropical region, should be surprised at the very limited extent a cultivated ground, encircling the crowded cabins of the native population.

199 KH ON PRODUCTION. BOOK L iaa m a great measure succeeded with respect sugar- rnnent to the in a cane, agreeable and thousand shapes, which furnishes, an and is so abundantly by all parts diet, produced wholesome article of 38° of latitude, that, but for our present of the world, lying within be had absurd legislative provisions, it might much cheaper than same price many indigenous fruits and for the butcher's meat, as and vegetables.* corn-trade, I must protest against To return indiscrimi- to the the and of the arguments I have adduced to nate universal application benefits liberty. Nothing is more dangerous in prac- the of show an obstinate, unbending adherence to system, particularly tice, than of application wants and errors to the mankind. The wiser its in is, to approximate invariably to the standard course sound and of acknowledged principles, lead towards them by the never-failing to of gradual insensible attraction. It is well to fix influence and maximum price beyond which exportation of grain a of beforehand prohibited, or subjected to shall either for, as smug- be heavy duties; be prevented entirely, it is better that those who are gling cannot to practise it should pay the insurance of the resolved to the risk state than individuals. to the of grain as the only We have hitherto regarded inflated price to be apprehended. But England, in 1815, was alarmed by a evil of prospect its price would be reduced too an opposite evil; viz. that by the low of foreign grain. The production of this article influx is, like that of every other, much more costly in England than in the neighbouring states, owing to a of causes, which it is im- variety to explain; amongst others, chiefly exorbitance material here to the taxation. Foreign grain could sold in England at two- her be of its cost price to the thirds It, therefore, became of English grower. it were better to permit the freo a most important question, whether and thus, by exposing the home producer to a ruinous importation, the foreign grower, to render him incapable of competition with from his taxes, to divert him and the cultivation oi paying* rent and place England in a state wheat altogether, dependence for of subsistence upon foreign, perhaps hostile nations; excluding or, by her market, foreign grain from give a monopoly to the home pro* to ducer, at the expense of the consumer, thereby augmenting the diffi- culty of to the labouring classes, and, by the advanced subsistence of the necessaries life, indirectly raising that of all the price of the country, and proportionately disabling manufactured produce of to sustain the competition of it other nations. This great question given rise to the most animated contest has of the both and the pen; and the obstinate contention of two tongue parties, each of which had much of justice on its side, leaves the by- * The same author informs us, that, in St. a superficial square 01' Domingo, toises, is 51403 at an average capable of producing 10,000 lbs. weighi reckoned of tiugar; and that the total consumption of that commodity in France, taking it at the fair average of 20,000,000 kite, might be raised upon a superficial irea of seven square leagues.

200 CHAP. XVII. ON PRODUCTION. 19? to infer, that neither chosen to notice the grand cau?e standers has that of of supporting the arrogant is to say, the mischief; necessity to and dominion, by sacri- England universal influence pretensions of to her territorial extent. fices out events, of all proportion At all intelligence, displayed by the combatants on and the great acuteness light upon the either side, have thrown of authority new interference the of the supply of grain, and have tended to strengthen in business favour commercial liberty. in of the conclusion argument of the prohibitionists may be re- The substance of the this; that it is expedient to encourage domestic agriculture, to duced at the expense of even to avoid the risk of starvation the consumer, by external means; which seriously to be apprehended on two is in particular; first, when power or, influence of a bel- occasions the able intercept or check the import, which might become is ligerent to corn-growing countries themselves necessary; secondly, when the the a obliged to retain and are whole of their experience scarcity, for their own subsistence.* crops It was by the partisans of free-trade, that if England were replied a one, and constant importer of grain, not to become but regular a of many foreign countries would grow into supplying her: habit of the raising for her market in Poland, Spain, Barbary, and corn North America, would be more extensively practised, and the sale of their produce would become equally indispensable to as the them, be to England : that even Bonaparte, the most bitter purchase would ever encountered, had her money for the had enemy England taken at the same time all over to license export corn: that crops never fail the world; an extensive commerce of grain would lead to and that of large stores and depots, which will offer the best the formation of scarcity; and that, accord- possible security against the recurrence ingly, as are no countries less subject to that they asserted, there or to violent fluctuations of price, than those that calamity, even no corn at all; for which they cited the example of grow Holland and other nations similarly circumstanced.f it countries best able be disputed that, even in However, cannot on commercial supply, there are many serious inconve- to reckon niences to be apprehended from the ruin of internal tillage. Sub- sistence is the of a nation, and it is neither prudent primary want to nor safe become dependent upon distant supply. Admitting that laws, which, for the protection of the agricultural prohibit the im- of grain to the prejudice oort the manufacturing interest, are both of unjust impolitic, it should and recollected that, on the other hand, be excessive taxation, loans, overgrown establishments, civil, militaiy, or diplomatic, are equally impolitic and unjust, and fall more heavily ipon agriculture than upon manufacture. Perhaps one may abuse to make another necessary, the equilibrium of production, restore * Malthus.— Inquiry into the Nature and Progress of Rent. Grounds of an Opinion, on Foreign Corn. &c. f Ricardo.— Essay on the Influence &c. the Low Price of Corn of

201 19S ON PRODUCTION. BOOK L one branch, and take exclusively otherwise ir dusr'ry would abandon the* to existence of society. (1) evident peril to another, of the such magnitude of a corn is itself of in and im- question free trade (1) The not be practicable to portance, that it within the compass of a it would discuss in this paragraph intimated at least doubts of As our author, however, has note. trade the superior advantages of entire freedom grain, and even speaks in the in " to be apprehended from the ruin of internal of the many serious inconveniences deems neither prudent nor safe to become dependent upon dis- and it " tillage," would not be proper to withhold from the reader some notice of tant supply," it more recent political economists the labours practical inquirers, who of the and a of light over this whole inquiry, and satisfactorily demon- have poured flood the entire inexpediency, as well as injustice, of restrictions and strated prohi- bitions on importation of foreign corn. the to which refer, is the " Essay on the External Corn Trade, The first work we P. R. S., fourth edition, London, 1827." It is entitled "M. by R. Torrens, Esq. F. profound and masterly investigation of the principles to distinguished notice, as a in trade to the and explains the manner in which restrictive and relating grain, to create revulsions and embar- prohibitive laws on this subject haVe contributed has experienced so much suffering in her com- rassments, from which England in relation merce and manufactures. The doctrines unfolded by Colonel Torrens, the foreign trade corn, have been sanctioned and confirmed by the authority to in principal writers of political economy, who have all the late directed their on of He condemns these laws as unwise, unjust, topic. attention to the same important and wholly inexpedient. in order we name Mr. James Mill, the Next of the " Elements of author Political Economy," History of British India." In a pamphlet, which and the " he published London, in 1823, entitled an "Essay on the Impolicy of a Bounty in on the Exportation of Grain, and on the Principles which ought to regulate the Commerce of he has given a most able examination of these questions. Grain," in favour of restrictions and prohibitions He notices most of the arguments urged corn trade, and successfully combats them. He, moreover, presents many in the the whole subject with and fairness and new luminous views, and discusses a produce conviction in any unprejudiced mind. candour that cannot fail to in Among the numerous works, to which this important subject has given birth more extensive circulation England, none has awakened more attention, or had a Catechism on the the " by T. Perronet Thompson, of Queen's than Corn Laws, It was first published in 1827, »»nd we believe College, Cambridge." has now passed through editions. The author has given a candid and complete exhi- ten of to time, have been advanced by any writer bition the fallacies that, from time of celebrity in support of the English corn laws, and has annexed or journalist the at to them respectively most triumphant and conclusive answers. No point in the to the free- issue controversy has been left untouched, and every objection of dom in grain, we think, removed. trade We must not omit to mention the " Address to the Landowners of England on the by Viscount Milton, (now Earl Fitzwilliam,) published in Corn Laws, in is an appeal by Lord Fitzwilliam to his fellow proprie- London 1832." This for he is said to be one of the largest landowners in England, against the tors, course they are by every pursuing on this great question, and beseeching them, to to the abolition of t'onsideration of their country's peace and welfare, consent he what to be a vicious system. Passing over the anti- so satisfactorily proves commercial character of the corn laws and their effects upon the expenses of government, he to exposing the pernicious consequences which confines himself large, of a higli price population at corn produces upon and upon the opera- the tions of industrious capitalists, abridging the comforts of the former, frustrating the exertions of latter, and not even promoting the welfare of the agricultur- the ists themselves. The impartial review this author has taken of the controv« rsy, * no careful manner in which he has sifted the arguments on either side, and the

202 CHAP. XVffl. PRODUCTION. 199 ON CHAPTER XVIII. % OF THE EFFECT UPON NATIONAL WEALTH, RESULTING FROM THE PRO UCTIVfc PUBLIC AUTHORITY. EFFORTS OF THERE can be no production of new value, consequently no in- crease of wealth, where the product of a productive concern does not exceed the cost of production.* Thus, whether government or individuals be the adventurers in the losing concern, it is equally ruinous to the nation, and there is so much less value in the country. It is of no avail to pretend, that, although the government be a loser, its agents, the industrious people, or the workmen it employs, have made a profit. If the concern cannot support itself and pay its own way, the receipt must fall short of the outlay, and the difference fall upon those, who supply the expenditure of the state; that is to say, the tax-payers.f not be forgotten, that the consumption of the value of the productive * must It course of agency, exerted is quite as real as that of the raw in the production, I of capital as material. And under this term, productive agency, comprise that human beings. as of well is equally true, when the government speculates with its own private t This as with the produce of the national lands; for whatever is thua or peculiar funds, expended might have gone towards alleviating the public burthens. of the order which he belongs in favour of the corn laws, must known bias to honest inquirer, that the same process which convince every dispassionate and England, from in changed his opinions must change theirs. Years may elapse of the landed aristocracy in legislation, before these restric- the undue influence can be repealed; but the force of truth is too great tive laws be resisted very to long, must ultimately prevail. and we shall refer William Jacobs, Esquire, F. R. S., the The last writer to is of to the Corn Trade and Corn Laws: including the author the "Tracts relating to Second Report ordered by the two Houses of Parliament," publish- be printed ed in London, in 1828. Mr. Jacobs has peculiar claims to the reader's attention on this subject. He has been for many years devoted to the examination of the corn trade, is the of Corn Returns, and, from his great knowledge Comptroller was selected English Board of Trade to proceed to the and experience, by the and the actual condition of the agriculture continent, there carefully examine and trade in corn of the principal grain-growing countries in the North of Europe. the results of his observations and laborious researches, and This work contains a practical view of the past and present state of the trade in corn, is entirely by a curious of supported and entirely authentic documents. In this variety place would be impracticable to give any detailed account of its great merits it as a statistical view of the subject; and this is not its only excellence. From the comprehensive and the author took of the actual condition of careful survey of the and in corn, agriculture Europe, he became thoroughly satisfied trade in inexpediency of the corn laws, and declares it to be his deliberate conviction iJiat the fair and honest trade of speculation in corn should be by Jaw restored, as only means by which the due price between the producer and consumer the nan be equitably adjusted; and he adds, that the destruction of this trade has in i.een chief cause of the depression of the agricultural proprietors both the England and on the continent of Europe. AMERICAN EDITOF.

203 200 ON PRODUCTION. BOOK T. of Gobelin tapestry, carried govern- The manufacture on by the France, consumes ment of wool, silk, and dyeing- a of large quantity consumes rent of the ground and build- it the diugs; furthermore, as the wages of ings, all which should as well workmen employed; product, which they are very far from being. by the be reimbursed source This establishment, instead wealth to the nation at of a of for the is fully aware of the loss to itself, is, on large, government source annual perpetual impoverishment. The a the contrary, of nation of the whole excess to the annual consumption of is the loss item of consumption, are one the concern, including wages, which the annual product.- The same may be said above manufac- of the ture porcelain at Sevres, and I fear of all manufacturing concerns of on upon account governments. carried of told, that this We the is a are necessary sacrifice; that otherwise unprovided with objects royal bounty and of be sovereign would of place royal splendour. This inquire how far the munificence is no to the monarch and the splendour of his palaces contribute to the of of the people. I take good government granted that these things for are necessary; admitting them to be so, there is no reason why yet, to and the national sacrifices, requisite support this magnificence be aggravated by the losses incurred by a mis- liberality, should of the nation A direction had much better buy out- public means. right what thinks proper to bestow; it would probablv obtain for it less money an obiect full as precious; for individuals can always undersell the government.* is a further evil attending productive efforts of the There the individual industry, government; they counteract it not of the those they take good care losers, but of its com- for deais with, to be no production. The petitors is too formidable a rival in agri- in state and commerce; it has too much wealth and culture, manufacture, at command, and too little care of its own interest. power It can submit loss of selling below prime cost; it can consume, pro- to the or in very little time so large a quantity of pro- duce, monopolize as violently to derange the relative prices of commodities: ducts, and every violent fluctuation price is calamitous. The producer calcu- of the probable value of his product when ready for market; lates upon nothing discourages him so much, as a fluctuation that defies all calculation. The he suffers is equally unmerited, as the acci- loss His dental gains that may be thrown into his hands. unmerited gains, iCany there be, are so much extra charge upon the consumer. are some concerns, I know, which the There of government must necessity keep hands. The building in its own ships of war can- of * The same may be observed of commercial enterprises undertaken by the public authority. During the scarcity of the French government bought 1816-17, exorbitant rate in the price of up Corn to an foieign markets; in th< corn rose home market, and the jrovernment resold at a very high rate, although somewhat below the average of the market. Individual traders would have found this a 'erv profitable venture; government was out of pocket 21 millions jf but the r 1818. and upwards.— Rapport au Roi du 24 Dec. runr.s

204 CHAP. XVIII. ON PRODUCTION. i 20 o'* not safely be left to individuals; nor, perhaps, the manufacture gunpowder. However, in France, cannon, muskets, caissons, and- tumbrils are bought of private makers, and seemingly with benefit Perhaps the same system might be further extended. A government must act by deputy, by the intermediate agency of a set of people whose interest is in direct opposition to its own; and they will of course attend to their own in preference. If it be so circumstanced as to be invariably cheated in its bargains, there is no need to mul- tiply the opportunities of fraud, by engaging itself in production and adventure; that is to say, embarking in concerns, that must infinitely multiply the occasions of bargaining with individuals. But, although the public can scarcely be itself a successful pro- ducer; it can at any rate give a powerful stimulus to individual pro- ductive energy, by well-planned, well-conducted, and well-supported public works, particularly roads, canals, and harbours. Facility of communication assists production, exactly in the same way as the machinery, that multiplies manufactured products, and abridges the labour of production. It is a means of furnishing the same product at less expense, which has exactly the same effect, as raising a greater product with the same expense. If we take into account the immense quantity of goods conveyed upon the roads of a rich and populous empire, from the commonest vegetables brought daily to market, up to the rarest imported luxuries poured into its harbours from every part of the globe, and thence diffused, by means of land-carriage, over the whole face of the territory, we shall readily perceive the inestimable economy of good roads in the charges of production. The saving in carriage amounts to the whole value the article has derived gratuitously from nature, if, without good roads, it could not be had at all. Were it possible to transplant from the mountain to the plain the beautiful forests that flourish and rot neglected upon the inaccessible sides of the Alps and Pyrenees, the value of these forests would be an entirely new creation of value to mankind, a clear gain of revenue both to the landholder and the consumer also. Academies, libraries, public schools, and museums, founded by enlightened governments, contribute to the creation of wealth, by the further discovery of truth, and the diffusion of what was known before; thus empowering the superior agents and directors of pro- duction, to extend the application of human science to the supply of human wants.* So likewise of travels, or voyages of discovery, mdertaken at the public charge; the consequences of which have of late years been rendered particularly brilliant, by the extraordinary merit of those who have devoted themselves to such pursuits. It is observable, too, that the sacrifices made for the enlargement of human knowledge, or merely for its conservation, should not be "eprobated, though directed to objects of no immediate or apparent utility. The sciences have an universal chain of connexion. One * Supra, Chap. 6.

205 202 ON PRODUCTION. Bt OK 1 which seems purely speculative must advance a step, before another of great and obvious practical utility can be promoted. Besides, it is impossible to say what useful properties may lie dormant in an object of mere curiosity. When the Dutchman, Otto Guericke, struck out the first sparks of electricity, who would have supposed they would have enabled Franklin to direct the lightning, and divert it from our edifices; an exploit apparently so far beyond the powers of man 1 But of all the means, by which a government can stimulate pro- duction, there is none so powerful as the perfect security of person and property, especially from the aggressions of arbitrary power.* This security is of itself a source of public prosperity, that more than counteracts all the restrictions hitherto invented for checking its progress. Restrictions compress the elasticity of produption; but want of security destroys it altogether. («) To convince ourselves of this fact, it is sufficient to compare the nations of western Europe with those subject to the Ottoman power. Look at most parts of Africa, Arabia, Persia, and Asia Minor, once so thickly strown with cities, whereof, as Montesquieu remarks, no trace now flourishing remains but in the pages of Strabo. The inhabitants are pillaged alike by bandits and pachas; wealth and population have vanished; and the thinly scattered remnant are miserable objects of want and wretchedness. Survey Europe on the other hand; and, though she is still far short of the prosperity she might attain, most of her king- doms are in a thriving condition, in spite of taxes and restrictions innumerable; for the simple reason, that persons and property are there pretty generally safe from violence and arbitrary exaction. There is one expedient by which a government may give its sub- jects a momentary accession of wealth, that I have hitherto omitted to mention. I mean the robbery from another nation of all its inoveable property, and bringing home the spoil, or the imposition of enormous tributes upon its growing produce. This was the mode practised by the Romans in the latter periods of the republic, and inder the earliest emperors. This is an expedient of the same * Smith, in his recapitulation of the real causes of the prosperity of Great Britain, places at the head of the-list, "That equal and impartial administration of justice, which renders the rights of the meanest British subject respectable to the greatest; and which, by securing to every man the fruits of his own in- dustry, gives the greatest and most effectual encouragement to every sort of industry."— Wealth of Nations, b. iv. c. 7.— Poivre, who was a great traveller, tells us, that he never saw a country really prosperous, which did not enjoy the freedom of industry as well as security of person and property. (a) This security is in fact the main duty of all government. Were it not for the imperfections of human nature—the propensity of mankind to vice—society mignt exist without government, for no man would injure another. Jt is to pro- tect one against the vices of another that the forms and institutions of society are established or supported; thus arming individual right with the aggregate of social strength. But the same moral imperfections which drive mankind into tue bonds of society, undermine and vitiate its institutions. The very engine erected to protect, is directed to the injury and spoliation of indh iduals, u^ becomes occasionally more dangerous than individual wrong. T.

206 CHAP. XIX. ON PRODUCTION. 203 as the acquirement wealth by individual acts of illegal nature, of fraud. There violence but a mere appro is no or actual production, of the products I mention this method of acquiring of priation others. all, without meaning to recommend it as either safe wealth, once for Romans followed or honourable. contrary system with Had the the they studied spread civilization among had to equal perseverance, establish a their savage neighbours, tha and to friendly intercourse the Roman power would might have engendered reciprocal wants, to this day. probably have existed XIX. CHAPTER AND THEIR PRODUCTS. OF COLONIES settlements formed distant countries by an elder COLONIES are in mother-country. When the latter wishes to enlarge nation, called the country, already populous and civilized, whose its intercourse with a territory it has, therefore, no hopes of getting into its own possession, the establishment of a factory or it commonly contents itself with in mercantile residence, where its factors may trade, conformity with the local regulations, as the Europeans have done in China and Japan. When colonies shake their dependence upon the mother country, off they become substantive and independent states. is common It nations to colonize, when their population be- for comes crowded in its ancient territorial limits; and when particular classes of society are exposed to the persecution of the rest. These appear to the only motives for colonization among the have been the moderns have been actuated other views. The ancients; by navigation have opened new in to their vast improvements channels enterprise, and discovered countries before unknown; they have way to another hemisphere, and to the most inhospitable found their not with the intention of there fixing themselves and their climates, but to commerce, of posterity, and return to obtain valuable articles the fruits of a forced, but yet their native countries, enriched with very extensive production. It is worth while to note this difference of motive, which has made so marked a in the consequences of the two systems of difference I am strongly tempted to call one the colonial system colonization. of the ancients, and the other the colonial system of the moderns; although there have been many colonies modern times established in on the ancient plan, of which those of North Amerca are the most distinguished, (a) (a) The distinction of the two systems is more imaginary than real. Most of Jie early establishments of the Europeans in the West were made with the view

207 J()4 ON PRODUCTION. BOOK I of colonies, formed upon ancient system, 13 The production the commencement; mconsideraoie but at the increases with great for of adoption a spot colonists choose their country rapidity. The is fertile, the where or the position advan- the soil climate genial, commercial purposes. The land is generally quite frusn for tageous have been the scene of a whether it dense population long since or the range of roving tribes, too small in extinguished, merely strength of the soL exhaust the productive qualities and number to civilized entirely new country, a to an Families transplanted from practical knowledge, which is one carry with them theoretical and chief elements of productive industry: they carry likewise the of of industry, calculated to set habits in activity, as these elements well habit of subordination, so essential to the preservation of as the social order; they commonly take with them some little capital also, not but in tools and stock of different kinds: moreover, in money, no to share the produce of a virgin soil, far they have landlord in extent what they are able to bring into cultivation for exceeding to these causes To years of rapid prosperity, should, perhaps, come. the of all, the natural desire of mankind be superadded chief cause and to render as comfortable as possible the to better their condition, of mode life they have adopted. of products in The rapid increase colonies, founded upon this plan, would have been still more striking, if the colonists had carried with them a larger capital; but, as we have already observed, it is not the families favoured by who have the fortune that emigrate; those of a sufficient capital procure a comfortable existence command to scene their halcyon days of infancy, the of in their native country, tempted to renounce habits, friends, and will rarely to be relations, in what must always be attended-with hazard, and encounter embark the inseparable hardships of a primitive establishment. This accounts the scarcity for capital in newly-settled colonies; and is one reason of why bears so high a rate of interest there. it of in is of much more rapid accumulation In point fact, capital in would seem It new colonies than as if countries long civilized. the coionists, abandoning their native country, leave behind them in part of their vicious propensities; they certainly carfy with them little of that fondness for show, that costs so dear in Europe, and brings so a return. No qualities, but those of utility, are in poor in the 13 are going to; and consumption estimation country they to is of rational desire, which limited sooner satisfied than objects The artificial wants. are few and small; the life of agricul- towns turists, which they must necessarily adopt, is of all others the most at of absolute migration. at St. Domingo, the English French Barbadoes, The the Spaniards almost universally, settled without the intention of returning" home. Tne introduction of negro labour was an after-thought. Slavery was an esta- blished practice ancient world, and colonies either made prize of the in all the indigenes, or imported slaves from abroad, as soon as they were rich er >igti to ouy them. T

208 CHAP. XIX. ON PRODUCTION. 205 is proportionately more produc- economical; finally, their industry requires and to work upon. a tive, smaller capital of the colonial government usually accords witl The character active in the execution individuals; its duties, sparing that of it is of of expense, avoid quarrels; thus there are few taxes, and careful to since the government takes little or at all; and, sometimes none revenues nothing from subject, his ability to multiply his the of the and to enlarge his productive capital, is very savings, consequently begin upon, annual produce of to great. With very little capital the f consumption. Hence, the astonish- its he colony very soon exceeds ingly rapid progress wealth and population ; for human labour in its in proportion to the accumulation of becomes dear and it is capital, a well-known maxim, that population always increases according to the demand.* With these is no difficulty in explaining the causes of data, there such colonies. Among ancients we find of the the rapid advance Miletus in Asia Minor, Tarentum that Ephesus Crotona in and and and Agrigentum in Sicily, very soon surpassed the Italy, Syracuse in wealth and parent cities The English colonies in consequence. North America, which bear closest resemblance of any in our the to of ancient Greece, present a picture of prosperity less times those but quite as deserving striking perhaps, notice, and still in the of attitude of advance. It is the invariable practice of colonies founded upon this plan, and without any thoughts of returning home, to provide themselves an independent government; and the mother-country even where the right legislation, that right will sooner or later be reserves of operation natural causes, and matters be brought by the dissolved of its real interest should to that footing, on which justice and regard to her to put have prompted them originally. But, to proceed to the colonies formed upon the colonial system the moderns; of founders of them were for the most part ad- the venturers, whose object was, settle in an adopted country, not to a to enjoy it in their former but rapidly to amass fortune, and return homes.f of The early adventurers of this stamp found ample gratification their extravagant rapacity, first in the cluster of the Antilles, in Mexico and Peru, and subsequently in Brazil and in the Eastern Indies. After exhausting the by resources previously accumulated to the aborigines, they were compelled direct their industry towards discovering the mines of these new countries, and to turn to account no less valuable produce of their agriculture. Successive swarms the in of new colonists poured to time, animated for the most from time Vide infra, under the head of Population, Book II. c. 11. * f There have been many exceptions in North America and elsewhere. The colonies Spain and Portugal in the New World were of an ambiguous charac of ter. Some of the colonists contemplated a return: others went to establish them- has selves their posterity; but the whole plan of them and been subverted, since the commencement of the struggle for emancipation.

209 206 ON PRODUCTION. BOOK L of return, with desire, not of living in part with some hope the land they cultivated, affluence upon a and the leaving behind them but of and a contented posterity making inordinate spotless name, gain to led afterwards enjoyed elsewhere: this motive to be them of adopt of which negro slavery a system compulsory cultivation, principal instrument. the v/as But let me ask, in what manner does slavery operate upon pro- Is the labour of the slave less costly than that duction free ? of the ? is an important inquiry, originating in the influence labourer This modern system colonization upon the multiplication of the of of wealth. Smith, all agree Stewart, Turgot, thinking, that the labour and in the slave is dearer and less productive than that of the freeman. of to this: a man, that neither works nor con- Their arguments amount on his own sumes as little and consumes as much as account, works can: he has no interest exertion of that degree of care and he in the insure success: by life is shortened can intelligence, which alone his master must replace great expense and his excessive labour, it at free workman looks after the support; but that of besides, his own be attended to by the master; and, as it is impossible, the slave must the for to do it so economically as the free workman, the master of the him dearer.* labour slave must cost This position has been controverted by the following calculation: of a negro in the West Indies, upon the planta- The annual expense not tions most humanely administered, does 60 dollars: add exceed of his the interest say at ten per cent., for it is a life in- prime cost, terest ; the average price of a negro is about 400 dollars, so that, allowing 40 for the annual interest, the whole expense of a dollars to his owner is 100 dollars per annum, (a) a sum, doubtless, negro but charge in free labour to the that part of the world. much inferior of earn there from a dollar to a dollar An ordinary free labourer may a half per day, or even more. Taking the medium of a and dollar and quarter, and reckoning about 300 working days in the year, a to 375 of 100 dollars/)" the annual wages will amount instead Inquiry into the Prin. of Pol. Econ. book ii. c. 607. * Stewart (Sir Jas.) Reflections Formation Turgot. et la Distribution des Richesses, § 23. sur la Smith. of Nations, book i. c. 8; book iii. c. 2. Wealth f It should be observed here, that the free labourers, who are so much better paid, are in occupations which, though less laborious, re- commonly engaged a greater degree intelligence and personal skill. Tailors and watch- quire of generally free men. And the mere existence of slavery itself enhan- makers are the price of ces by driving all competition out of the market. free field labour (a) In this calculation no account has been taken of the housing of the negro, the tools and implements supplied to him, or the clothing furnished by the master; neither does our author seem to any allowance for the probable make increase agricultural production, which free negro labour might afford. Free of European labour would doubtless be far more expensive, were it practicnble. The interest of money is also estimated far too low, and tho infant and the aged must bt provided for by the master. T.

210 CHAP. XIX. ON PRODUCTION. 201 the consumption siave must Common sense will tell us, that of a free workman. be less than that not if his The of a master cares a of trowsers and a live; pair slave enjoy life, provided he do but of the negro: his lodging a jacket hut, are the whole wardrobe bare food the manioc root, to which kind masters now and then his and little dried fish. A population of add one a free workmen, taken and to support: the ties with another, has women, children, invalids gratitude, of consanguinity, friendship, love, to all and contribute is often relieved the multiply consumption; whereas, slave-owner effects of by the maintenance of the veteran: the the fatigue from and sex enjoy little exemption from labour; and even the tender age of sexual attraction is soft impulse to the avaricious calcula- subject tions master. of the is the motive which operates every man's breast to What in impulse towards gratification of his wants and the the counteract Doubtless, the providential care of the future. Human appetites ? appetites have wants tendency to extend—frugality to reduce and a easy to conceive, that these opposite motives, consumption; and it is in the mind of the same individual, help to working counteract each other. But, where there master and slave, the balance must needs are to the side frugality; the wants and appetites operate upon incline of and the of frugality upon the stronger. the weaker party, motive is a well-known fact, that the net Jt of an estate in St. Do- produce mingo cleared whole purchase-money in six years; whereas off the in Europe produce seldom exceeds the one twenty-fifth or the net one thirtieth of the purchase-money, and sometimes falls far short even of himself, elsewhere tells us, that the. planters of that. Smith, the rum and molasses will defray the English islands admit that the sugar plantation, leaving total produce of of a the whole expenses proceeds: which, as he justly observes, is much ^ugar as net the as if our farmers were to pay their rent and expenses with the same and to make a clear profit of all the straw only, Now I ask, grain. how many products there that exceed the expenses of produc- are in the (a) tion same degree? Indeed, this very exorbitance of profit shows, that the industry of is paid out of all the master of the slave. To proportion with that the consumer it makes no difference. One of the productive classes benefits by the depression of the rest; and that would be all, were it not that the of production, resulting from this de- vicious system the introduction better plan of industry. rangement, opposes of a both degraded beings, incapable of ap- The slave and the master are to the perfection of inckistry, proximating their contagion, and, by degrading industry of the free man, who has no slaves the at his (a) What reference can this inequality have to the relative position of the proprietor and the different productive agents one to another ? j.t is a mere question difference of interest of capital. Capital in the West Indies brings of a return very different, in its ratio, to rent or the profit of land, from what it of thf yields Europe. Land, the source of production, sells cheap, because in greater unhealthiness of climate, insecurity of tenure, abundance, &c. &c. T

211 208 ON PRODUCTION. BOOK I. For labour never be honourable, or even respectable, command. can executed by an The forced and unnatural where it is inferior caste. the in the is exhibited master over affecta- superiority of the slave, lordly indolence inactivity: and the faculties of mind of tion and equal degree; the place of intelligence is usurped are debased in an brutality. and by violence travellers by and observation, that of I have been told veracity arts Brazil and other settlements in the they consider all progress in utterly hopeless, while slavery shall continue of America as to be of tolerated. Those states the North American Union, which have making the largest strides towards national are proscribed slavery, of the slave states of Georgia and Caro- prosperity. The inhabitants the best cotton in the world, but cannot work it up. Dur- lina raise the ing war with England, they were obliged to send it over last to New-York spun into yarn. The same cotton is sent land to be vast expense place consumed at the at a of its original back to be in a (a) This is a just retribution for the growth manufactured state, of a practice, by which one part of mankind is made to toleration and labour, to the severest privation, for the benefit of an- subjected is in in accordance with humanity, (b) other. Policy this point yet to be explained, what are the consequences of the It remains commei cial intercourse between the colony and the mother country, in regard production; always taking it for granted, that the colony to moment in a continues dependence, for the state it shakes off the of yoke, it has nothing colonial but its origin, and stands in relation to the mother-country, on as any other nation exactly the same footing the globe. on view a to the products of its own to secure The parent state, with of colonial consumption, generally pro- industry the market soil and hibits the colonists from purchasing European commodities from any own merchants one else, which enables sell their goods in the her to for are currently worth. This is colony somewhat more than they on the of the parent state at the expense a benefit conferred subjects the of who are likewise its subjects. Considering the colonists, mother-country colony to be integral parts of one and the and the the and loss balance each other; and this restric- same state, profit is nugatory, except inasmuch as it entails the charge of an tion So it is (fl) is free and most abundant. now from Hindostan, where labour has become too powerful for the Cotton will flow towards machinery, which competition of human labour, even where it is the cheapest. That is, therefore, not the of the toleration of slavery in those states. T. effect Therefore author has come to this correct conclusion, his reasoning (b) our nor satisfactory ; indeed, the whole of this important subject is neither logical a to its is dismissed with importance. There are two precipitation little suited enjoyment., of motives hope of human industry, and the fear of suffering. the The slave is actuated principally by the latter, the free agent by the forme. N«?itner of to in the these motives should have been thus cursorily adverted of actual production, analysis have been fairly set forth in the outset, imme- but diately after the detail of the sources of production; being both of them the ano stimuli to those sources. After all that our author which give activity others have dene, much yet remains for the organization of the science. T.

212 CHAP. XIX. ON PRODUCTION. 209 of custom excise officers; and thus increases the establishment or national expenditure. on the one colonists are obliged to buy of the hand, While, the to other, compelled mother-country, they sell their are, on the who thus obtain an colonial produce exclusively to its merchants, of value, at the expense, like- creation extra advantage without any colonists, by the enjoyment of an wise, of the exclusive privilege, of the profit and loss and exemption from competition. Here, too, individually ; what merchant not a destroy each other nationally, but Bordeaux gains in this way is substantial profit; but it of Havre or pockets of one or more subjects of the same state, the is taken from had equal right to have their interest attended to. It is who true, indeed, that the colonists indemnified in another way; viz. either are of the slave population, as we have already explained; by the miseries privations of the of the mother-country, as I inhabitants by the or show. to am about whole system built upon compulsions, re- So completely is the monopoly, that these very domestic consumers and striction, are buy what colonial articles of to compelled consumption they require exclusively from the national colonies; every other colony, and all of the world, being denied the the rest of importing colo- liberty nial* produce, subjected to the payment of a heavy fine, in the or of an shape import duty. It would seem that the home-consumer should at any rate derive in the price of an obvious benefit, his exclu- colonial produce, from sive right of purchasing of the colonists. But even this unjust pre- ference is denied him ; for, as soon as the produce arrives in Europe, the home-merchant is to re-export and sell it where he allowed and particularly those nations that have no colonies of chooses, to that, after competi planter is deprived of the so their own; all, the to buyers, although home-consumer is made of suffer its tion the full effect. the class of home-consumers, All these losses fall chiefly upon a class of all the most important in point of number, and others of of the on account of the wide diffusion deserving attention of any well it, as evils as the functions vicious system affecting it performs every part of the social machine, and the taxes it in contributes to the public purse, wherein consists the power of the government. They may be two parts; whereof divided into one is absorbed superfluous charges of raising the colonial the in the be got ;f this is a dead loss produce, which might cheaper elsewhere the term is applied * Or equinoctial; the ordinary products of equinoctial to latitudes. Poivre, a writer of f and probity, assures us, that whit<* great information sugar of the best quality is sold in Cochin-China, at the rate of about 3 dollars per quintal of is little more than two cents per pound, and the country, which of pounds that more than 80 millions thence exported annually to China at are that rate. Adding 300 per cent.for the charges and profits of trade, which is n most liberal allowance, the sugar of Cochin-China might, under a free trade, Us sold in France at from 8 to 9 cents a pound.

213 210 ON PRODUCTION. BOOK I. the consumer, without gain body. The other part, which to to any consumer, goes is also paid the fortunes of West- to by the make The is the merchants. Indian planters and wealth thus acquired tax upon the people, although, being centred in produce of a real dazzle the and be mistaken for wealth few hands, eyes, it is apt to And it is for the protection commercial acquisition. of colonial and wars of the of this imaginary advantage, that almost all the eigh- and the European states teenth century have been undertaken, that keep up, at a have thought themselves obliged to vast expense, civil as well and military, establishments, at the as and judicial, marine globe.* opposite extremities of the appointed governor was Isle of France, the When Poivre of the been planted more than 50 years; yet he calcu- colony had not it to have then cost France no lated 12 millions of dollars* less than to source of regular and large out-going; and to bring her no be a of any kind whatsoever.! true, that the money spent return It is defence that settlement had the further object of uphold- the of on other possessions in the ing but, when we find that our East Indies; to the government and these latter were still more expensive both the proprietors of the two companies, old and new, it is to impossi- ble deny, that all we gained by keeping the Mauritius at this to the of a further waste in Ben- enormous expense was, opportunity and on the coast of Coromandel. gal to such of our possessions in The same observations will apply other parts the world, as were of no importance, but in a military of point of view. Should it be pretended, that these stations are kept up at a the object of gain, but to extend and great sacrifice, not with the power the mother-country, it might yet be asked, why affirm of such loss, since this power has no other object at maintain them a the colonies, which turn out to be themselves but the preservation of J a losing concern ? That England has benefited immensely by the loss of her North a considerable quantity both of sugar The English already derive from Asia and indigo, at a of the West Indies. And, doubtless, if cheaper rate than those to and industrious colonies along the the Europeans were plant independent northern coast of Africa, the culture of equinoctial products there would rapidly and supply Europe in greater abundance at a still cheaper rate. gain ground, * Arthur Young, in the annual charge entailed on France, by 1789, estimated of St. the possession at 9 millions of dollars. He has gone into Domingo, detail to prove, that, if the sums spent on her colonies for 25 years only had been devoted to any one of her own provinces, she would have the improvement of an of 24 millions of dollars, net revenue, consisting of acquired annual addition to any body. Vide his Journey in France. actual products, without loss (Euvres de Poivre, p. 209. In this estimate he takes no account of the charge f herself, the of marine establishment of France military of which a part and should be set down to the colony. of | works of Benjamin Franklin, vol. ii. p. 50, for the opinion the that Vide celebrated man, who had so much experience in these matters. I find it stated ?n the Travels of Lord Valentia that the Cape of Good Hope, in 1802, cost Eng- 1,200,000 land excess of from 1,000,000 to an dollars per annum above its own •emme

214 C IP. XIX. ON PRODUCTION. 211 American colonies, is a fact no one has attempted to deny.* Yet she spent the incredible sum of 335,000,000 dollars in attempting to retain possession: a monstrous error in policy indeed; for she might hav& enjoyed the same benefits, that is to say, have emancipated her colo- without expending a sixpence; besides saving a profusion of nies, gallant blood, and gaining credit for generosity, in the eyes of Europe and pbsterity.f The blunders committed by the ministers of George III., during the whole course of the first American war, in which, indeed, they were unhappily abetted, by the corruption of the parliament and the pride of the nation, were imitated by Napoleon, in his attempt to reduce the revolted negroes of St. Domingo. Nothing but its dis- tance and maritime position prevented that scheme from proving equally disastrous with the war of Spain. Yet, comparatively, the independence of that fine island might have been made equally pro- ductive of commercial benefit to France, as that of America had been to England. It is high time to drop our absurd lamentations for the loss of our colonies, considered as a source of national prosperity. For, in the first place, France now enjoys a greater degree of pros- perity, than while she retained her colonies; witness the increase of ner population. Before the revolution, her revenues could maintain but twenty-five millions of people: they now support thirty-two (1831) (1). In the second place, the first princi- millions and a half, Bristol was one of the chief " of North American commerce. Her * entrepots most energetic representation in a to principal merchants and inhabitants joined infallibly ruined by the acknowledgment parliament, that their city would be of 1 , that their port would be so deserted, as not to be American independence; adding the charge of worth keeping up. Notwithstanding their representations, peace became matter of necessity, and the dreaded separation was consented to. a the same worthy persons Ten years had scarcely elapsed after this event, when and parliament leave to petitioned for deepen the port, which, the enlarge of being deserted, as they had instead of receiving apprehended, was incapable the influx additional shipping, that the commerce of independent America of had given birth to." Levis, Lettres Chinoises. De f These remarks are not altogether applicable to the British dependencies in the East; because there the nation is rather a conqueror than a colonist, having the domination over thirty^two millions of and the absolute disposal inhabitants, But the clear national profits derived from of the revenue levied upon them. thn no means generally supposed; considerable, as may be is by for so acquisition administration and protection must be deducted. Colquhoun, in of the charges Treatise on the his Resources of the British Empire, which Wealth, Power, and gives exaggerated picture of them, states the total revenue of the an sovereign company, at 18,051,478Z. sterling; and its expenditure at 16,984,271?.; leaving a surplus of 1,067,207*. In all probability were India in a state of national independence, the commerce between her so much, as to produce to the lat- and Great Britain would increase the ter an additional revenue, larger than to say nothing amount of that surplus, of the increase of individual profits. (1) The population of France, notwithstanding the interruption to industry, and drains occasioned by the long wars, has inoreased since the commence- the ment of the Revolution. According to calculations made by the National Assem- bly in 1791 France contained 26,363,074 inhabitants, and in 1831 it contained

215 212 ON PRODUCTION. BOOK I, of political economy will teach us, that the loss colonies by no pies of loss means implies of a the trade with them. Wherewith did France to ? oef'ore buy the colonial products with her own domestic products them Has she not same to buy be sure. since continued in the or even an way, though sometimes ? of a neutral, enemy ignorance and vices of her rulers for the time the I admit, that those products much dearer than being have made her pay for she but now she buys them at the natural price, need have done; that course, import duties,) and pays for them as of of the (exclusive, domestic products, in before with way is she a loser ? her what a new direction to commerce ; the Political convulsions have given of sugar and coffee is no longer confined to import and Bor- Nantes deaux those cities have suffered in consequence. But, as ; and at least much of those articles as she ever France now consumes as has not Bordeaux, must by the way of Nantes or all, that did', come some other channel. France can not needs have found its way in other way, than as of in any the products of have bought old, with her own land, capital, and industry; for, excepting robbery and piracy, of buying of another. Indeed, France one nation has no other means by the might have benefited largely has supplanted her trade which had not old and erroneous own colonial commerce, prejudices notions constantly opposed the natural current of human affairs. it may be argued, that the colonies furnish commodities Perhaps are which to be had. The nation, therefore, that nowhere else no share should have territories so highly favoured by nature, of would lie at the mercy of the nation that should first get possession * for the of purchasing the colonial produce would enable monopoly to exact price from her less fortunate neighbour. Now her her own proved beyond doubt, that what we erroneously call colonial is all it tropics, where the soil is produce, grows everywhere within the cultivation. The spices of the Moluccas are found to to its adapted at Cayenne, and probably by answer in many other places; this time and monopoly was ever more complete, than the trade of the no in had sole possession of the only Dutch that commodity. They and allowed nobody else to approach them. spice islands, Has Eu- rope been in any want of spices, or has. she bought them for theii weight in gold ? Have we any reason to regret the not having de voted two hundred years of a score of naval battles, and war, fought of and the lives of half a million sacrificed some hundreds millions, our fellow-creatures, for the paltry object of of our pepper getting and cloves cheaper some two or three by a pound? And this sous example, it is worth while to observe, is the most favourable one for the be selected. One can colonial system, that could possibly the hardly imagine of monopolizing sugar, a staple pro- possibility duct of most parts of Asia, Africa, and America, so completely as 32,560,000 within the same limits. The annual increase is about 200,000 indi- viduals. (Vide Annuaire pour V An 1834.) AMERICAN EDITOR.

216 CHAP. XX. ON PRODUCTION. 213 the spice trade; this very trade been snatched the Dutch did yet has avaricious grasp from of the the monopolist nation, almost without firing a shot. their system colonization, made themselves by of The ancients, the known world; the friends to make all over moderns have sought therefore have made enemies. Governors, deputed by and subjects, slightest interest in the diffusion of the mother-country, feel not the real wealth amongst happiness people, with whom they do not and a spend their lives, sink into privacy and retirement, or to propose to to conciliate popularity. They know their consideration in the the fortune they return with, mother-country will depend upon not office. in this the large discretionary upon their behaviour Add to be power, that must unavoidably in the deputed rulers of vested distant possessions, there will be every ingredient towards the and of a truly detestable government. composition feared, that power, like the rest of mankind, It men in is to be are to moderation, too slow in their intellectual too little disposed as it is at every step by the unceasing progress, embarrassed manoeuvres of and innumerable retainers, civil, military, financial, all by interested motives, to present things commercial; impelled, and involve the simplest questions in false colours, obscurity, to in allow any reasonable hope of accelerating the downfall of a cystem, which for the last three or four hundred years must have wonder- fully abridged the at large, in all inestimable benefits, that mankind of the globe,* have, ought to have derived the five great divisions or rapid progress and the discovery, the prodigious impulse from of to the commencement of the sixteenth given human industry since The silent advances of century. and the irresistible intelligence, tide human affairs, will alone effect its subversion. of XX. CHAPTER AND PERMANENT EMIGRATION, CONSIDERED IN REFERENCE OP TEMPORARY TO NATIONAL WEALTH. WHEN traveller arrives in France, and there spends 2000 dol- a lars, it must not be supposed that the whole sum is clear profit to France. The it in exchange for the values he traveller expends the as if he had the same, consumes: remained abroad effect is just to and sent for what he wanted, instead of coming and con- France suming it here; and is precisely similar to that of international com- *The vast continent of its surrounding islands, is nov New Holland, with as a distinct portion of the globe, under the generally considered by geographers denomination of Australia or Australasia, which has been given to it on account of its Dosition exclusively within the southern hemisphere.

217 214 ON PRODUCTION. BOOK L in which profit made is not the whole or principal value merce, the r but a smaller per centage upon that principal larger eceived, or circumstances. according to the The matter hitherto been viewed in this light. In the has not was the only item tirm conviction of this maxim, that metal money foreigner came amongst if a of real wealth, people imagined, that, them with 2000 dollars in his pocket, it was so much clear profit to tailor that clothes him, the jeweller that fur- the nation; as if the with trinkets, the victualler that feeds him, gave him no nishes him exchange specie, but made a profit equal to the total in values for his that the nation gains is the profit of their respective charges. All its dealings with him, upon what he purchases: and this upon and means contemptible, for every extension of commerce is a is by no pi ;* but it is well to know its real amount, oportionate advantage that betrayed into the folly of purchasing it too we may not be An eminent writer upon commercial topics, tells that dearly. us, grand, splendid, or too be too too theatrical exhibitions cannot that they are a kind of numerous; re- for traffic wherein France all and pays nothing; a proposition which is the very reverse ceives ; for France pays, that is to say, loses, the whole expense of of truth is productive of nothing but barren amuse- the exhibition, which and no value whatever to replace what has been con- ment, leaves on it. Fetes of this description sumed very pleasant things may be as affording amusement, but must make ridiculous figure as a specu- a lation profit and loss. What would people think of a tradesman, of that was to give a ball in his shop, hire performers, and hand re- freshments about, with a to benefit in his business? Besides, view may be reasonably doubted, whether fete or exhibition of the it a reality occasion considerable influx in any most splendid kind, does of foreigners. Such an influx would* be much more powerfully commerce, or by rich fragments of attracted or by by antiquity, of art nowhere else to be seen, or by superiority of master-pieces or by the properties of medicinal waters, or, most of •;limate, by all, the desire visiting the scenes of memorable events, and of learn- of a of extensive acceptation. I am strongly inclined to ing language the enjoyment of a few empty pleasures of vanity believe, that has never attracted much company from great distance. People any go a few leagues may ball or entertainment, but will seldom to a make a journey for the purpose. It is extremely improbable, that the vast number of and Italians, who visit the Germans, English, of the desire in time of peace, are actuated solely by capital France has the *A strange country traveller, and its deal- some advantages over ing's with considered as lucrative; for his ignorance of the lan- him may be guage and of prices, and often a spice of vanity, make him pay for most of the objects of his the current rate. Besides, the public consumption above and sights he there pays for seeing, are expenses already exhibitions, which incurred by the nation, which he nowise aggravates by his presence. But in J and positive, are very limited advantages, though real amount, and not DP over-rated.

218 CHAP. XX. ON PRODUCTION. 215 of seeing the French opera at Paris. That city has tortvnately many worthier objects of general curiosity. In Spain, the him- fights are considered very curious and attractive; yet I cannot think many Frenchmen have gone all the way to Madrid to witness that diversion. Foreigners, that have already come into the country or other accounts, are, indeed, frequent spectators of such exhibitions; but it was not solely with this object that they first set out upop their (a) journey, The vaunted fetes of Louis XIV. had a still more mischievous tendency. The sums spent upon them were not supplied by foreign ers, but by French provincial visiters, who often spent in a week, as much as would have maintained their families at home for a year. So that France was two ways a loser; first, of the sums expended by the monarch, which had been levied on the subjects at large; secondly, of all that was spent by individuals. The sum total of the consumption was thrown away, that a few tradesmen of the metropolis might make their profits upon it; which they would equally have done, had their industry and capital taken a more beneficial direction. A stranger, that comes into a country to settle there, and brings his fortune along with him, is a substantial acquisition to the nation. There is in this case an accession of two sources of wealth, industry and capital: an accession of full as much value, as the acquirement become a matter of some interest to (a) This has England, whose unpro- and the society of ductive capitalists proprietors have absolutely overwhelmed great part Italy, where they consume an immense revenue, and a of France export of her manufactures without derived from Britain return. by the any pro tanto, a producer without being a consumer— Thus their native country is, the scene exertion but not of enjoyment. This circumstance, although of nowise prejudicial productive powers, is extremely so to the comfort and to her and content population; for there are few enjoyments so per- enjoyment of her or and diffused in some degree as not to be other at the moment sonal selfish, of consumption. Besides, the and place of the proprietor is always a presence benefit, especially in Great Britain, where so many public duties gratuitously are in a attracted her gentry are performed. Ireland suffers by worse degree; as well as the continent; and the consequences have long been matter England of regret and complaint. Though it might be impolitic to check the efflux by authoritative measures, it at least not be directly encouraged and stimu- should as it really financial system, which the English ministry so lated, is, by the in. the whole of the taxation is thrown immedi- obstinately persevere Almost the permanent sources of production and the ately upon consumption; whilst clear rent they yield to the idle proprietor are left untouched. The proprietor has, therefore, obvious interest in effecting- his consumption where it is least bur- an is to say, anywhere but in England. His property thened with taxation; that «3 and the charge of its protection defrayed by the pro- protected gratuitously, ductive classes, who thus are compelled to pay for the security of other people's property as as their own, and are themselves unable to imitate their unpro- well by running away from domestic taxation. A more unjust ductive countrymen, not and discouraging system could Its evils are daily have been devised. increasing, and threaten the most serious diminution of the national resources. But ministers neither see the mischief themselves, nor will listen to ths the warnings of others. Many of them, indeed, have an interest in perpetuating ao exemption, by which they benefit personally. T.

219 21 o ON PRODUCTICW. BOOK I a proportionate extension territory; to say nothing of what is of of morai estimate, gained him private if the in a emigrant bring with to the of his adoption. " When Fre- attachment place virtue and the derick William came into of the regency," says royal historian Brandenburgh, "there was in the country no manufac- of the house hats, of stockings, of ture or woollen stuff of any kind. of serge, The All these commodities were derived from French industry. making broadcloths, French emigrants introduced amongst us the of lighter woollens, of caps, of stockings wove in the frame, baizes and in of as well as dyeing beaver and felt, al! its branches. Some of hats, of that nation established themselves in trade, and refugees retailed the products their industrious countrymen. Berlin soon could of of its goldsmiths, jewellers, watch-makers, carvers; those boast and emigrants, that settled country, introduced the the of in the low tobacco, and of garden fruits and vegetables, and by cultivation of sandy tract the the environs into capital their exertions converted in kitchen-garden grounds." of This emigration and local attachment, is no industry, capital, a dead and total loss to the country thus abandoned, than it is a less clear gain to the an asylum. It was justly ob- country affording by of Sweden, upon the revocation of the served Christina, queen of Nantes, that Louis XIV. had used his right hand to cut off edict his left. Nor calamity be prevented by any measures of can the legal coercion. A fellow-citizen cannot be forcibly retained, unless he be absolutely incarcerated; still less can he be prevented from ex- porting his if he be so inclined. For, putting movable property, of the question channel of contraband, which can never be out the convert effects into goods, whose ex- he may his closed altogether, tolerated or even encouraged, and port or cause them to is consign, to some correspondent abroad. This export is a real be consigned, of value; but how is it outgoing for government to ascer- possible tain, that intended to be followed by no return ?* it is of and attracting mankind is, to treat The best mode retaining and benevolence; to them with justice one in the en- protect every joyment of the rights he regards with the highest reverence; to allow the free disposition of person and property, the liberty of con- tinuing or his residence, of speaking, reading, and writing changing in perfect security. Having thus investigated means of production, and pointed the the circumstances, that render their agency more or less prolific, out of *In 179C, when of France indemnified the holders authorities the new suppressed offices in paper-money, tbesp discarded functionaries for the most pirt converted their assignats into specie, or other commodities of equal value, which they took or out of the country. The consequent national loss to sent France was nearly great, as if they had received their indemnities in cash; as for its paper representative had not then suffered any material depreciation Even when individual remains himself in the country, he can not be pre- the vented from transferring so doinjj fortune thence, if he be determined on his

220 CHAP. XXI. ON PRODUCTION. 217 be endless, well as foreign to my subject, to attempt a it would as various products that compose wealth of all the general review the of mankind: such a task would furnish materials for many distinct there is one amongst these products, the uses and treatises. But which of very imperfectly known, although the know nature are them would throw much light upon of matter now under ledge the discussion: for which reason I have determined, before the conclu- of this part of my work, to give a separate consideration to the sion money, product so prominent a part in the business of which acts in the character the principal agent of exchange and production, of transfer. CHAPTER XXI. THE NATURE AND USES OF MONEY. OF I. SECTION General Remarks. Lv society ever so little advanced in civilization, no sicgje in- a all that is necessary to satisfy his own wants; and dividual produces it rarely that an individual, by his single exertion, creates even is any single product; but even if he does, his wants are not limited to that single article; they are and various, and he must, numerous all other objects his personal consumption, by therefore, procure of the single product he himself creates be- of exchanging the overplus such other products as he stands in need of. for yond his own wants, the way, it is observable, that, since individual producers, And, by for their own use but a in every line, keep of their very small part own products; the gardener, vegetables he raises, the bakes of the he he the of the bread of the shoes bakes, makes, and so shoemaker, of all others: the great bulk, nay, almost the whole of the products of every community, arrive at consumption by the medium of ex- change. This reason, why it has been erroneously concluded, that is the of of exchange and transfer are the basis and origin the production and of commerce in wealth, are only particular; whereas they secondary and accessory circumstances; inasmuch as, were each family to raise the whole of the objects of its own consumption, as we practised in some instances in the back settlements of the see United States, society might continue to exist,.without a single act view of exchange transfer. I make this remark, merely with a or to correctness of first principles, without any design to detract from

221 '2U ON PRODUCTION. BOOK I of exchange transfer to the progressive advance- the importance and production; indeed, ment the position, that they I set out of with of advanced stage are indispensable in an civilization. of interchange, let us pause a mo- Admitting, then, the necessity and consider, what infinite confusion ment, and difficulty must arise different component members society, who are for the all the to of single article, or two or three most part producers of but a at the but of the poorest is a consumer of a vast num- utmost, whom even different products; what difficulty must ensue, were of I say, Der obliged to exchange his own products specifically for every one want; and were the whole of this process carried on he may those a barter in kind. The hungry cutler must offer the baker by his knives bread; perhaps, the baker has knives enough, but wants for he is willing purchase one of the tailor with his bread, but a coat; to bread, but butcher's meat; infinity. not the tailor wants and so on to getting over this difficulty, the cutler, finding he can- By way of does the take an article he to not want, will use not persuade baker to have a commodity to his best endeavours the baker offer, which will able readily to exchange again for whatever he may happen be If in the society any specific commodity that to need. there exist in general request, not merely on is of its inherent utility, account but likewise on account of the readiness with which it is received in exchange for the necessary articles of consumption, and the facility of proportionate subdivision, that commodity is the precisely what try to barter knives for; because he has learnt from cutler will his possession will procure without any diffi- its experience, that him second act of exchange, bread or any other article he may culty, by a for. wish precisely that commodity. Now, money is qualities, that give two general preference of value, in the The a of the current money of the country, to the same amount shape oi value other shape, are:— in any The in the character of an intermedial object of ex- 1. aptitude, to help all who have any exchange or any purchase to make, change, that is to say, of the community, towards the specific every member of is a com- The general confidence, that money object desire. modity acceptable every body, inspires the assurance of being to able, by one act of exchange only, to procure the immediate object of desire, whatever it may be; the possessor of any othei whereas, T ill sure that it w can be be acceptable to the pos- commodity never of that particular object sessor desire. of 2. capability of subdivision and precise apportionment The to the amount of the intended purchase; which capability is a recom- mendation to all who have purchases to make; in other words, to every member of one is, therefore, anxious the community. Every for superfluity, the product whereof he holds a to barter and money is commonly that he himself produces; because, in addition which i<* the other quality above stated, he feels sure of being able to buy small •wim value in that shape is its or as large a portion of cor-

222 CHAP. XXI. ON PRODUCTION. 219 as he may require; because he maj ouy, responding value, and wherever whenever, as he may desire he and pleases, such objects of in sold originally. to have the product lieu he has of very advanced stage a In civilization, when individual wants have become various and numerous, and productive operations very of much subdivided, exchanges become a matter more urgent neces- well much more frequent and more complicated; and sity, as as in kind becomes less practicable. barter personal consumption and makes not the For instance, but the handle of if a man whole knife, as in is the case in towns where cutlery is conducted on it only, fact does produce any thing that he can turn to ac- he not a large scale, for what could he do with the count 1 He ; handle without the blade not himself consume the smallest part of his own product, but can must unavoidably exchange whole of it for the necessaries or the conveniences life, for bread, meat, linen, &c. But neither baker, of nor weaver, ever stand in need of an article, that is fit butcher, can finishing cutler, himself give either but the for nobody who can not meat in exchange; because he produces neither; and who bread or commodity, that, one custom of must, therefore, give some by the in for most the country, may be expected to pass currently exchange others. money is the more requisite, the Thus, a nation is, more civilized and further it has carried the division of labour, (a) Yet history the of the use of any in which contains precedents considerable states, as told was utterly unknown; as we are specific article, it money, was among Mexicans at the time of the discovery. We are in- the formed, that, just about the period of their conquest by the Spanish adventurers, they were beginning to grains of cacao as employ in the smaller transactions commerce.* money, of custom, authority of govern- to and not to the I have referred choice of the particular article that is to act as ment, in the money to every other: for though a government may coin what preference to call crowns, it does not oblige the subject to give his it pleases goods in for these crowns, at least not where property is exchange all Nor is it the mere impression, that makes people at respected. to take this coin in exchange for other products. Money consent and liberty at passes current like any other commodity; people may or for one for another barter kind, article gold in bars, or silver in bullion. The sole reason why a man elects to receive the coin in preference to is, because he has learnt from ex- every other article, Raynal) phil. et pol. lib. vi. * Hist. of money is intense, in the compound ratio (a) The utility division of of the jibour and variety of individual consumption. the sugar colony in the West A r< ndies, though highly productive in proportion to its population, requires little money to the transfer of the produce; because the bulk of the population, facilitate of consumption : they are fed, clothed, &c. the negroes, have very little variety in the wholesale, and in the plainest and most uniform manner. Yet, possibly, plantation the division both agricultural and manufacturing labour on each of may be carried to considerable length. T.

223 220 ON PRODUCTION. BOOK I it is preferred those whose products he has occa- pericnce, that by purchase. Crown pieces derive their circulation sion as to money and if other authority than this spontaneous preference: from no for supposing, that any other commodity, there were the least ground in as wheat, for for instance, would pass more currently exchange give not what they calculate upon wanting themselves, people would their goods for crown pieces, but would demand wheat, which would invested with all the properties of money. And then has be this in the authorized or govern- occurred occasionally practice, where consisted public paper destitute of credit or has ment money of confidence. and not the of authority, designates mandate Custom, therefore, as the specific product that shall pass exclusively money, whether crown pieces or any other commodity whatever.* of the exchange of every individual The more frequent recurrence for the product for any other product, has commodity, money, than to this transaction; thus, receive money attached particular names to called, and to give it, buying. is selling, in exchange money. These positions In this way originated the use of are by for on them must all arguments, and no means purely speculative; and regulations, on the subject of money, be grounded. A laws, any other foundation can possess neither beauty system built upon and to fulfil the object of its construction. nor solidity, must fail the view of throwing the utmost possible light upon With the essential properties money, and the principal contingencies it is of subject shall treat of these particulars in separate sections, and to, I endeavour to enable such as may give me their attention, to follow with ease the chain of ; connexion, notwithstanding that classification to arrange comprehensive view the whole and themselves in one mechanism, causes of that derangement, which of the play and the misfortune may occasionally effect. human folly or II. SECTION Money. Of the Material of would appear reasoning in the preceding section, If, as it by the be employed money mere intermedial object of exchange be- as a * When intercourse between the Europeans and the negroes of the river the the request with them in Gambia first commenced, was iron, commodity most the for of war and of tillage. Iron, therefore, became the standard of purposes comparison of value. In a little time, it became a mere nominal standard in their mercantile dealings; and a of tobacco consisting of 20 or 30 leaves of bar for a or of rum consisting of four that herb, was given five pints, according bar In the to scarcity of the article. abundance such a state of society, each or product successively performs the functions of money in reference to all other products; which leaves the to all the inconveniences of bar- community subject ter kind, the chief of which is, the inability to offer any one article in general in request and acceptation, and capable of ready apportionment in amount to ether commodities at large. Vide Travels of Mungo Park, vol. i. c. 2.

224 CHAP. XXI. ON PRODUCTION. 221 an object possession and the object of desire, tne choice of tween in great importance. Money its material as an is not is of no desired of or of personal covering, but for the food, household use, object of as it were, and purpose for some objec* of of re-sale, re-exchange exchange for one in utility, after having been originally received therefore, not an object of consumption; such already. Money is, hands without sensible diminution it passes through injury; the or office equally well, whether its material be gold its and may perform or paper. or silver, leather enable it to execute its functions, it must Yet, necessity be to of of inherent and positive value; for no man will be content possessed to resign object possessed of value, in exchange for another of an less value, none at all. or of are some other less essential requisites, which There add to its material, wherein these combined, is unfit for A are not efficiency. the purpose, to engross its functions either generally and cannot hope or permanently. are told by Homer, that the armour of Diomede had cost We A warrior, that wished to arm himself at half the price, nine oxen. to pay and a half. Wherefore, must have been puzzled four oxen as money must be capable of being readily the article employed to the different objects of desire, and without injury apportioned in such manner, and subdivided admit of exchanges of the as to exact amount required. Again, we read, that in Abyssinia, they make use of salt for money. If the in France, a man must take same custom prevailed of salt market to pay for his weekly provisions. a mountain to commodity employed money must not be so the as Wherefore, make it necessary abundant, transfer a large quantity, on as to to act of exchange. each recurring it is said, that dried cod performs the office of At Newfoundland, and of a money, village in Scotland, where Smith makes mention are use of for that purpose.* Besides many other incon- nails made of this nature are subject to, there is this veniences, that substances the quantity may be enlarged almost at plea- grand objection, that and sure, very short space of time, and thereby a vast fluctuation in a effected in their relative value. But who would readily accept in exchange an in a few moments, lose the article, that might, perhaps, or of its value ? Wherefore, the commodity em- half three-fourths as money must be of ployed as to ensure such difficult acquisition, those who take it, from the danger of sudden depreciation. In the Maldive islands, and in some parts of India and Africa, shells, called are employed as money, although they have cowries, for ornament to some rude no intrinsic value, except that they serve tribes. This kind of money would never do for nations that carry on trade with many parts globe; a medium of exchange ol of the such very limited circulation would offer insuperable objections. Il * Wealth of Nations, book i. c. 4.

225 M ON PRODUCTION. I BOOK for people receive most willingly in exchange that arti- is natural to is the cle, like manner by othei most universally received which in in people their turn. commerciai We need not, then, surprised, that almost be all the the world should have selected metal to perform the office nations of and of money; when once com- the more industrious commercial declared their choice, all the rest had an evident in- had munities follow their example. ducement to metals At times, when most abundantly produced were the now make them for the purpose. to yet rare, people were content use of Lacedaemon was of iron; that of the early The legal currency of of copper. proportion as those metals were extracted Romans, In the in greater quantity, they became liable to the objec- from earth in respect to all products tion above stated too little comparative* of value; long since the precious metals, that is to say, gold and it is To this use they and silver, have been almost universally adopted. are particularly applicable: As and capable being divisible into extremely minute portions, 1. sensible loss of weight or value; so of re-union, without any that may be easily apportioned to the value of the article of the quantity purchase. The precious metals have a sameness of quality all over 2. the world. One grain pure gold is exactly similar to another, whe- of it or the mines of Europe or America, ther from the came from alter of and damp, have no power to sands Africa. Time, weather, the quality: the relative weight of any specific portion, therefore, determines at once its relative quality and value to every other portion: two grains of as much as one. gold are worth exactly twice Gold and the mixture of alloy, that they 3. silver, especially with hard enough resist very considerable friction, and of, are to admit rapid circulation, though, indeed, in this are therefore fitted for re- are inferior to many kinds of precious stones. spect, they Their rarity and consequent dearness are not so great that the 4. of gold or of silver, equivalent to the generality of goods, quantity too for ordinary perception; nor, on the other hand, are is minute so abundant and cheap, as to they a large value amount to a make great weight. It is possible, that in progress of time, they may be- come liable to objection on this score; especially if new and rich veins of ore be discovered: and then mankind must have should for the pur- to some other yet unknown metal, or recourse platina, of currency. pose of receiving a stamp or Lastly, gold and silver are capable impres- sion, certifying the weight the piece, and the degree of its purity. of of Lacedsemon is a proof of the position, that public authority money is incompetent of itself to give currency to its money. The laws of Lycurgus iron, purposely directed to be made of money to prevent its being easily the hoarded, or transferred in large quantities; but they were inoperative, because they went to defeat these, the principal purposes of money. Yet no legislato was ever more rigidly obeyed than Lycurgus.

226 CHAP. XXI. ON PRODUCTION. 228 the precious metals used money have generally Although for baser metal, generally of by way of alloy, some mixture of copper, is for no- baser metal, thus incorporated, the value of the reckoned the alloy is itself destitute of value; but because thing. Not that disuniting it the purer metal would cost more the operation of from be would it was extracted. For this reason a it than worth, after coined gold or silver, mixed with alloy, is estimated by the piece of of precious metal only contained quantity in it.* of France contains one part copper nine parts The present silver coin * to as thereabouts. to 60, or relative value of copper to silver being fine silver; the 1 in the whole silver coinage, amounts to about the So that copper contained of the ^ of the silver coin, or 1 cent in 6 fr. Supposing it were total value F disengage the copper, it to not pay the expenses of the process attempted would to say of separation; of the value of the impression that must be nothing destroyed. Wherefore, reckoned for nothing in the valuation of the coin. it is of 5 fr. the idea of the 22^ grammes of fine silver contained A piece presents though actually weighing 25 inclusive of the alloy. (1) it, gr. in values of the gold, silver, and copper coins of the United States, (1) The Congress were first regulated April, 1792, establish- by the act of of the 2d of that By eagle contained 247.5 grains of pure gold and ing the mint. act, the of alloy, making together 270 grains of 22.5 grains and the standard gold; half eagle quarter eagle, their respective fractional proportions of the and the By the act of Congress 30th of June, 1834, this standard same metals. of the and the of the gold coins reduced: the eagle now has been debased, weight of pure gold and 26 grains contains 232 grains alloy, making together 258 of grains standard gold; and the half eagle and the quarter eagle are of reduced in like proportions. By the act of 1792, the standard of gold was eleven- twelfths of pure gold to one-twelfth of alloy, or 22 carats fine. By the act of Jie present year, the or number of carats has been reduced to relative fineness to a debasement about 1.9 per cent.; and the actual about 21.58, equivalent of pure metal coin has been diminished more than 6.25 per of in the quantity alloy of standard gold is composed of cent—(6.262626+). and The silver not copper, exceeding one half silver. silver coins of the the has been made, since the In United States, no change of 1792, which regulated their value. The dollar, by that act, is made the act of the unit, as the Spanish milled dollar then current. The dollar same value the United States contains 371.25 grains pure silver and 416 grains of of of half dollar 185.625 grains pure silver and 208 grains the of standard silver; of quarter dollar 92.8125 grains of pure silver and 104 grains standard silver; the the dime 37.125 grains of standard silver; pure silver and 41.6 grains of of standard silver; half dime 18.5625 grains of pure silver and 20 8 grains and the 1485 parts The of of standard silver. is standard of fine to 179 parts silver alloy; accordingly, 1485 parts in 1664 parts of the entire weight of the silver coins are of and the remaining 179 parts of alloy. The alloy of pure silver, is of copper. standard silver wholly composed of the United States are the cent and the half cent; the The copper coins of the act of weight 1792, has been twice reduced. By the act of which, since 1792, cent contained 264 grains, and the half cent 132 grains, of copper, the and the cent was fixed at the value of the hundredth part of the dollar, or unit. By an act of the of January, 1793, the cent was reduced to 208 grains, 14th and by an act of the 3d of the and 104 grains, of copper; half cent March, to f 1795, the President was authorized by proclamation, and accordingly, on ho 26th of January, 1796, reduced the cent to 168 grains, and the half cent to 84 graina of copper, their present weight. proportional mint value of gold to silver, The by the act of 1792, was of of pure gold to 15 of pure silver; and by the 3,cc as 1

227 224 ON PRODUCTION. BOOK T. III. SECTION Value a Commodity receives by being Vested with Of the Accession of Money. the Character of it is indebted the will appear, that money From foregoing sections not to the authority of the government, for its currency, but to its commodity bearing a peculiar and intrinsic value. But its a being object of exchange, to all other commodities of preference, as an owing equivalent value, characteristic properties as money; is to its peculiar advantage derives from its employment in that to the it and advantage of being in character; namely, use and re- the universal The whole population, from the lowest degree of poverty to quest. of wealth, must effect exchanges, must buy the objects the highest of want; must be of money; or, in other words, must consumers of the commodity, that acts medium of ex- obtain possession as the commodity generally admitted best suited, and the to be change, that purpose. A man that has any most frequently employed for instance, to offer in exchange for the for other commodity, jewels, or luxuries he may have occasion for, cannot get those necessaries or necessaries by the process of exchange, until he has luxuries a sure, that for his jewels; nor can he even then be found consumer a be such able to give him, in return, the very identi- consumer will he may want: whereas, a man, with money in his pocket, cal article is quite certain, that it will be acceptable to the person, of whom he would buy any in turn, be himself thing; because that person will, to become purchaser in like manner.* With the com- obliged a obtain by a wants he can single act of ex- modity, money, all he purchase; whereas, with all others two acts change only, called a are necessary; a sale and a purchase. This is the sum total at least its of in the character of money : but it must be obvious advantages the it as money, is a to every body, that preference, thus shown of its actual use as such. consequence I must here observe, that the of any specific commodity adoption to serve money, considerably augments its intrinsic value, or as value as an article of commerce. A new use being discovered for the commodity, it in request; the em- unavoidably becomes more of a the half or perhaps three-fourths of the ployment great part, of it on hand, in whole stock way cannot fail to render the tills new whole more scarce and dear, (a) *Tho other property of money, the capability of subdivision, and apportion- ment of the not be lost sight of: by it the jeweller is value parted with, must to enabled a minute portion of his precious commodity for the smallest exchange item of his household expenditure. (a) This point has been well observed upon by Turgot. Refl. sur la Form, et Distrib. des Rich. 1 gold to silver is as *he present year the proportional mint value of of pure gold .o 16.00211*^4- of pure silver. AMERICAN EDITOR.

228 CHAP. XXI. ON PRODUCTION. 225 the actually existing stock silver and gold applied to Were of fabrication of or ornament, the quantity no other use than the plate and it is at present; that is to abundant would be much cheaper than say whenever they were exchanged for other commodities, more or received in proportion to the value ob- be of them would given exchange. But a large portion of these metals being tained in money, and exclusively occupied in that way, destined to act as less remaining manufactured into jewellery and plate, is there to be scarcity of course adds to the value. On the other hand, if and the plate in jewellery, there would be more of they were never used or purpose of money, and money would grow them applicable to the is to say, more of it would be cheaper, that to purchase necessary an equal quantity goods. The employment of the precious of in manufacture makes them scarcer dearer as money; metals and their employment money makes them scarcer as as in like manner and dearer in manufacture.* naturally follows, that these metals being, by reason Hence it of as money, raised to such a price, as precludes their employment so general use in the form of plate and jewellery, it is in con- their to use them in that form. Tho sequence found less convenient it is worth. Thus, massive gold plate luxury costs more than has fashion, particularly in those countries, where of gone completely out the activity of and the rapid progress of wealth, make commerce, in great demand for gold of money. The richest in- the purposes dividuals content themselves with gilt plate, that say, plate is to a very thin coat covered with gold ; solid gold is used only in of smaller articles of manufacture, and those in which the value of the workmanship exceeds that of In England, plate is made the metal. and people affluence often content themselves with very light, of ostentation displaying a large service The silver-plated goods. of of that metal costs the interest of a considerable capital. value of metals is, generally speaking, at- The increase of the as it places many arti- tended with some disadvantages; inasmuch comfort convenience, silver dishes, spoons, &c, beyond cles and of most private families; the reach there is no disadvantage in of but of the metal such increased value character of money; on the in its *Ricardo some other writers maintain, that the charges of obtaining the and its or relative value in exchange for all other com- metal wholly determine price to their notions, therefore, the modities. According or demand nowise want influences that price; a position in direct contradiction to daily and indisputable experience, which leads us invariably to the conclusion, that value is increased by increase of by the discovery of new mines, silvei demand. Supposing that, would to common as copper, it as be subject to all the disqualifica were become of copper for the tions of money, and gold would be more generally purposes employed. The consequent increase of the demand for gold would increase the intensity of its value; and mines would be worked, that are now abandoned, be- cause they defray the expense. It is true that the ore would thei be ob- do not tained at a heavier rate; but will any one deny, that the increased value of the metal would owing to the increased demand for if? It is the increased in be tensity of that demand, that determines the miner to incur the increased charge of production.

229 226 ON PRODUCTION. BOOK I. is a greater convenience transfer of a less contrary, there in the every change bulky commodity, and every act of of on residence, exchange. any commodity, money in but one part of to act as The selection its value everywhere else. There is no of the world, increases to be current as money in Asia, silver should cease if doubt, that, that metal in Europe would be affected, and the value of it of more be in exchange for all other commodities; for one use would given Europe possibility of exporting it to Asia. in is, the of silver precious metals as money The employment means of the by no to local as well renders their value stationary; they remain subject as temporary fluctuations of value, like every other object of com- In China, half an ounce of silver will purchase as many merce. objects of use or as an ounce in France; and an ounce of pleasure in France will generally much farther in the purchase ol silver go will America. Silver is more valuable in it in commodities, than France, and in France than China than America. in in or specie, as some people call it, is a commodity, Thus money, is determined by the same general laws, as that of all whose value is to and other commodities; that falls in proportion to the say, rises and supply. intense is that demand, as to And so "dative demand make paper, employed as money, to have sometimes been sufficient in value to gold equal same denomination; of which the mo- of the ney Great Britain is a present example. of It must imagined, that the paper money of that country not be derives its value from the promise of payment in specie, which it purports to has been held out ever since the convey. That promise of cash payments bank in 1797, without any suspension by the performance, which many people consider impossible.* at attempt Bank of England can pay off its notes in * Before the government, the cash, its debts in specie; which it can not do unless its principal debtor, must discharge the specie, either with its savings, or with the proceeds of further it purchase In doing so, it would, in effect, substitute a new and very costly en- taxation. of be purchased by the state, for the present one, gine circulation, which must out of order, and altogether destitute of intrinsic value, which, although much is yet to do the business well enough. (1) made (1) The Bank of England, notwithstanding the opinion expressed by the author and continued the payment of its notes on in this note, has long since resumed demand in specie; and, it must be added, without any intention having be«n expressed, or by the British government, to " discharge its debts attempt made, Say seemed here think must be previously effected. in specie." which M. to parliament, passed an act of July 1819, generally known as Mr. Peel's By in the Bank of England was required, from the 1st of Act, to pay its May, 1823, notes on demand, legal coins of the realm. The final resumption of cash in the by the Bank of England took place, however, at a still earlier period; payments for. finding itself in possession of sufficient gold to 'make payments in cash sooner than this iaw prescribed, bank obtained the passage of another act, which the made it imperative upon the institution to pay all demands in the legal coin of the realm May, 1822, since which time it has never ceased to on the 1st of ** m*cha *ge its debts in specie " when required AMERICAN EDITOR.

230 CHAP. XXI. ON PRODUCTION. 227 is only procurable piecemeal, payment of an agio or Gold and by other words, per centage ; a larger amount in paper for by in giving Yet the is gold. a smaller amount in paper, though depreciated, of its flimsy material. invested with value far exceeding that the urgent want, in a Whence, then, is that value derived? From and of society of some agent 01 of very advanced stage industry, exchange. England, in its actual state, requires, for the medium of sales effectuation purchases, an agent or medium equal in of its and 1,284,000 of gold; or, what is the same say to lbs. weight value, 1,200,000,000 lbs. weight of sugar; or, thing, is still the to what to 60,000,000/. sterling of paper, taking the Bank of same thing, at 30 millions, and the England paper of the country banks paper at much more, (a) This is the reason, why the 60 millions of as of intrinsic value, mere want of paper, though destitute are, by the exchange, made equal value to 1,284,000 lbs. weight of in a medium 1,200,000,000 lbs. weight of of gold, or sugar. a proof that this paper has a peculiar and inherent value, As its credit was the same as at present, and its volume or nominal when its proportion in amount was enlarged, to the enlargement, value fell of And, as all other commodi- just like that any other commodity. in price, in proportion to the depreciation of the paper, its ties rose of lbs. weight total value never exceeded the same amount 1,284,000 or, of sugar. Why? Because the of gold, 1,200,000,000 lbs. weight of business all the values of England required no largei circulating value. No government has the power of increasing the total national money otherwise than nominally. The of the increased quantity the value every part; and vice versa.* whole reduces of national money, whatever Since a be its the material, must have inherent value, originating employment in that and peculiar in its forms an item of character, in the same manner it national wealth, and all the nation as sugar, indigo, wheat, the other commodities that to It fluctuates in value like other commodi- may happen possess.f of * For the consequence of an excessive issue vide infra, Chap. paper-money, XXII. sect. where the subject of paper-money is discussed. 4. of paper-money, consequent depreciation, effects f The multiplication and its of it makes necessary a no augmentation the wealth of the community, although use of figure* in the estimation; just more liberal same way as its valua- in the tion wheat instead of silver would do. in total of national wealth might be The 20,000,000,000 kilogr. of wheat, and but 25,000,000 kilogr. of silver, and yet the value precisely the same. If the be less intense, it will re- value of the money of it to the same degree of value. quire more express It must not be supposed, that our author is ignorant of the wide difference (a) paper- between Bank and country bank paper, viz: that the onp is England of money, the principal; the other, its convertible representative. This position is perfectly correct. The credit, embodied, as it were, in the provincial paper, is equally agent of circulation with the inconvertible principal, the paper- an money; which, but for its presence and rivalry, would be requhed in double the quantity, maintain the same scale of money-prices. Great confusion ha»» to litherto prevailed on this subject for want of a clear conception of the concurrent operation of com and its rival, credit. T.

231 228 ON PRODUCTION. BOOK L and like thorn, too, consumed, though less rapidly than most ties; is would of them. Wheiefore, to subscribe to the opinion be it wrong lays " down as a maxim, that, who so long as sil- of Garnier, (a) it of money, it is not an item of actual wealth in the ver remains shape strict sense of the word; for it does not in and imme- the directly a or procure an enjoyment." There are abun- diately satisfy want values incapable procuring satisfying a want, or of an dance of their present existing shape. A merchant may have enjoyment, in indigo, which is of no use in its actual state, his warehouse full of as food or as clothing; cither nevertheless an item of yet it is wealth, that can be converted, at will, into another value fit and one in the shape crown pieces, is, there- for immediate use. Silver, of an of wealth with indigo in chests. Besides, is equally article fore, utility not money an object of desire in civilized society 1 the of the same writer elsewhere admits that, " specie in the Indeed, of an coffers is real wealth, an integral part of his sub- individual he may to his personal enjoy- stance, which immediately devote ; although, in the eye of political economy, this same coin is a ment of exchange, essentially differing from the wealth mere instrument to circulate."* it helps hope what I have said is quite sufficient I to show the complete analogy of specie to all other items of wealth Whatever is to an individual, is wealth to the nation, which wealth but an aggregate many individuals; and is wealth also in the is of political economy, which must notion misled by the of eye not be regard or value any thing, but what all the of imaginary value, as of the community, individually, as well as jointly, treat as members not nominal, but actual. And this is one proof more, thai value, are not two of truth in this, more than in any otheT there kinds is tr'je in relation science. What individual, is true in rela- to an tion to the government, and to the community. Truth is uniform; in the applio^ion on'y can there be any variety. SECTION IV. of Coinage, of the Charge of its Execution. and Of tltt Utility hitherto been made of the value that money has Nu mention the impression derives from coinage. I have merely pointed and out various utility of gold and the as articles of commerce, silver wherein originates their value; and considered their fitness to act as money, as of that utility. part and Wherever gold act as money, they must of course be silver constantly passing from hand to hand. Most people buy or sell the ad * cTEconomie Publique, Ire partie, c. 4, and Abrege des Principes •rertnement prefixed. (a) Garnier de Saintes, translator of the Wealth of Nations,

232 CHAP. XXI. ON PRODUCTION. 220 a day; judge, then, what inconvenience must ensue, several times necessary it to weigh the to be were always provided with scales and and disputes received; money paid or what infinite blunders Nor is this must arise from awkwardness or defective implements. and silver compounded with other metals without all; gold can be degree purity can not be exactly The any wsible alteration. of delicate and complex chemical process. ascertained, without a The of are wonderfully facilitated, when the weight transactions excharge each piece and standard are denoted by an impression, money of of mistake. can that nobody reduced to an Metals and divided into are established standard, of an by the art of coining. pieces established weight, each state usually reserves to itself the exclu- The government of of this branch of manufacture; whether with a sive exercise view of gaining somewhat more monopoly, than it could, if every by the at liberty practise it, or to hold out to the subjects a body were to private manufacturer could offer, which any more solid security, than motive. In fact, though governments have the is more frequently this particular, their guarantee is still pre- too often broken faith in by the people to that of individuals, both for the sake of ferred in the and uniformity because there would probably be more coin, in the frauds of private issuers. difficulty detecting a value to the metal coined ; that The coinage unquestionably adds to say, a of is silver, wrought into a dollar, is better than an lump of bullion of like standard; and for a very simple rea- equal weight son. The fashion given to the metal saves the person, that takes it in course of all the charges of weighing and assaying, exchange, the loss time and labour must be reckoned ; just in among which of coat readv made is worth more than the the same manner as a made it is to be Even if the business of coining were materials of. to all the world, and government confined itself to fixing the open the standard, and the impression, that each piece should weight, the holders bullion would find it answer to pay a of possess, still coiner, for coining their bullion into money; other- to the premium they would have some difficulty wise, effecting an exchange, and in would, perhaps, lose more on the exchange, than it would cost to have the bullion converted into coin. But the additional value, thus communicated to the precious metals by the not be confounded with that, which coinage, must as an of trade, receives from the circumstance of its bullion, article as money. The latter value attaches to the whole stork employment of gold and in existence; a silver tankard is of greater value, snver is employed as money, whereas, the additional because that metal value accruing from the coinage is peculiar to the specific portion wholly coined, exactly is peculiar to the goblet; and is fashion fis its independent of the value, that the commodity, silver, derives ire in its various utility. In England, the whole expense of coinage is defrayed by the government; the same weight of guineas is delivered at the mint in

233 ON PRODUCTION. BOOK I for a like weight bullion of the legal standard. The return of quality nation, of money, is gratuitously presented of in consumer of are levied by taxation upon them charges coining, which with the of taxes. Yet in their other character in the shape of payers gold, evident advantage over bullion; not that of being has an of guineas, people are often at the pains of re-weighing, ready weighed, for but of it has happened some- that being ready assayed. Consequently, has to the mint, not to be converted that bullion times, been carried merely to have the standard ascertained, and certified into coin, but foreign the domestic purchaser, (a) For guineas are a better or to export than bullion, inasmuch as bullion, bearing the cer- of article of assay, is tificate to bullion without any such certificate. preferable On contrary, for the purposes of importation into England, gold the of guineas ready coined, bullion answers every purpose and is of same value, weight just for the mint and the standard being alike; charge converting the bullion into coin. Foreigners no makes for fact, have, object in keeping back the guineas, which have in an the certificate of assay, and remitting bullion to already received to obtain a like gratuitous certificate. This system, there- England fore, makes object to export the coined metal, but holds out no it an to its encouragement reimportation.* The mischief is somewhat palliated by an accidental circumstance, which never entered into the calculation of the legislature. There no other mint in England, but that of the is is so metropolis, which completely overloaded with business, that re-deliver the it can not It is hardly necessary * repeat, that the specie exported is not so much to value lost to the community; for nobody will feel inclined to make a present of it to the Its value is transmitted, for the purpose of obtaining a cor- foreigner. in return; but the nation loses value of the coinage in this responding value the exported from England, receives in exchange are she operation. When guineas metal only, and nothing for the impression it bears, the value of the (b) That say, to receive the certificate of is to for use, not in the cha- (a) coinage, of money, but as an article of commerce. The assay racter charged for at the is English mint, upon bullion re-delivered without coinage^ before the And, of the risk was probably equal to the value of the cer- export coin was made free, by coinage. These remarks apply to the coinage of gold only, tificate conferred no longer to a of 4s. in 665. But silver is silver being now subject seignorage Ihe material of the metallic money, except for minute and fractional exchanges. (b) This is hardly true to the full extent. The Spanish dollars pass current in many countries at a on bullion of equal weight and fine- considerable advance and constitute the legal currency of communities, that have not under- ness, some business of the as in Hayti, and elsewhere. The taken coinage themselves; is the difference of the coinage, which is paid for sometimes very local value liberally. But to whom is it paid] to the Spanish individual or to the Spanish government. If to the former, it is an undue advantage to'the individual at the expense of the if to the latter, it is the recompense of productive community; the gold coinage of England subject to a seignorage like the ngencv Were cilver, it would never be exported habitually, but to such nations as were con- rent extra value of the coinage. Indeed, our author presently says in to pay the express terms, that importation. value of the coinage is not always lost on the

234 CHAP. XXI. ON PRODUCTION. 231 and often months, after brought metal coined till many weeks, it is consequence for coinage.* the owner, who leaves his is, The that the of its value during the whole coined, loses interest bullion to be in the mint. This operates as a small time coin- it remains tax on raises the value of the coin somewhat above that of bullion and age, manifest, that the For be exactly the same, if it is value would and for bullion guineas were taken without distinction, weight weight. for the of the English regulations on this head. So much effect other governments of Europe, if I mistake not, derive from All the revenue more than equal a the charges of the process.f the coinage to issuing money which they have most The exclusive privilege of properly engrossed, together with the severe penalties denounced to raise the against private coiners, would enable them of the profit business very high limitation of their issues; for the value of by the of every thing else, always in the direct ratio to money, like that is inverse ratio supply. and in the to the the demand, shape of coin is so rare and In fact when silver in the dear, that in coin will purchase the weight of 20 dollars of equal 18 dollars the shape of bullion, it is an indication that the fineness in public attaches same value to 15 oz. 12 dwt. of coined, as to 17 oz. 6 the 16 of uncoined metal. Wherefore, the government can, dwt. grs. its coinage, in such case, give to 9 by the value of 10 dollars, dollars, and make a profit of 10 per cent. But, if the coin become more abundant, and more of it be necessary in exchange for bullion, it may perhaps be to give 95 dollars in coin for the weight necessary in bullion: which latter case, the government.can of 100 dollars in profit and more than 5 per cent, upon the purchase a make of no bullion into coin. of conversion the government, with a If, in the to increase the latter case, view of its profit, instead of purchasing bullion itself, were simply ratio a 10 of to charge per cent, upon the bullion brought seignorage, say brought the coinage, none at all would be for for that pur- to mint by individuals, who would have to pay 10 per pose for an cent, operation, which added cent, only to the value of the metal. 5 per the mint would have nothing to coin either on public or private Thus account; and the government would find a high ratio of profit incom- patible with an of coinage. extended amount Wealth of book i. c. 5. * Nations, German translators, of my learned Professor Morstadt, of HeideJ f One the the Russian government berg, has observed upon this passage, that since 1810, has made no for the coinage. It might with equal reason execute gra- charge the tuitously of letter-carriage, instead of charging for it to the indi business viduals. I am perhaps incorrect in saying, that most governments make a profit over and above the The French government charges a seigno- expense of execution. expense equal rage, to defray the at of the mere process. But the interest most and wear and tear of the capital vested in buildings, machinery, &c. and the government; charge administration, &.c. are so much dead loss to the of aiuJ probably many other governments are in the same predicament.

235 ON PRODUCTION. BOOK L it may be concluded, that duty or seignorage upon Whence the been coinage, which is an absolute so has frequently discussed, can not fix own ratio of profit that governments their nullity; for but that it uponthe execution the of the coinage, must depend upon bullion market, which again is regulated by the relative of the state coined and uncoined metal, and the supplies for them at of demand the time being. observed, that, to the public at large, in its capacity of It is to be coined bullion, of matter of perfect indifference, consumer it is a long coin the or cheap; for, so be as its value is not whether dear to sudden fluctuations, it will pass current for as much subject as it has been taken for. the coinage money is not executed gratuitously, and When of paid monopoly-price, it is a matter of it is for at a especially when state, whether or not its coin be perfect indifference to the melted or exported, for it can neither be melted down or exported, down the coinage in full, which is all that is lost without having first paid or by melting On the contrary, the export of such exportation.* as as that of any other manufactured com- coin is quite advantageous It is a branch of the bullion trade; and unques- modity whatever. a coin, so well executed as to be difficult to counterfeit, tionably, in the weight and assay, and charged with a moderate duty accurate on the coinage, may acquire a currency in different parts of the world, and the government, that issues it, a profit of no con- yield temptible amount. Witness of Holland, which are in request through- the gold ducats the north Europe, at a higher rate than their intrinsic value all of out dollars of Spain, which are all as bullion; at Lima and the coined and have been executed with so much regularity and and Mexico, as to pass current as money not only all integrity, over Spanish America, likewise in the United States and in several parts of but and Europe, Africa, Asia.f The Spanish dollar is a remarkable instance of the value attached the metal by the process of to the Americans of the coinage. When Union determined on a national coinage of dollars, they contented themselves with simply re-stamping those of the Spanish mint, with- out varying their weight or standard. But the piece thus re- stamped would not pass current with the Chinese, and other Asiatics, the of the United States would not pur- at same rate; 100 dollars so much of other commodities as 100 dollars of chase The Spain. American Executive, nevertheless, continued deteriorate the coin to n a handsome impression, apparently wishing to avail by giving * Trv? value of the coinage, or fashion of the metal, is not always lost in the export. The is, to a certain degree, a recommendation beyond the impression of the authority which executes it, and raises the value somewhat higher limits than that of bullion in bars. weight f The Jr. pieces of France, have, by their invariable uniformity of 5 and standard since their first issue, acquired a similar currency in manv oarts t i tiie world.

236 CHAP. XXI. ON PRODUCTION. 233 of this method checking the export of specie to Asia. For itself of was directed, that all of specie should bo this purpose it exports of its make in this way to dollars the jnade in own coinage, hoping to the domestic products of its own ter- a exporters give preference ritory. Thus, after wantonly depreciating the Spanish dollar, with- true, to the specie remaining current within tho out prejudice, it is Union, went of the on further to enjoin its use in the territory it commercial intercourse with those in the least profitable way, viz. set the least value on it. The natural course would nations that suffer the value exported to go out of the country in have been, to of the largest returns. the form that might offer the prospect Self- this particular. (1) on in interest might have been safely relied But what are we to of the wisdom of the Spanish govern- think by the ment, which was enabled in its good faith in the confidence execution its coinage, to export dollars with a proiit, and sell them of at an advance upon their intrinsic value; thought fit abroad and yet advantageous traffic, which would have furnished a so to prohibit a product of the national soil, worked up by domestic indus- vent to a for an ample recompense try 1 government be a of money, and is Though the exclusive coiner no means bound to coin gratuitously, it can not with justice by of deduct the expense its payments, in discharge of its coinage from If it to pay a million, say for supplies own contracts. has engaged advanced, it can not honestly say to the contractor: " We bargained a million, but, we pay you to pay specie just coined; and there- in fore shall deduct 20,000 dollars, more or less, for the charges of coinage." In fact, all pecuniary engagements, contracted by govern- ment or individuals, virtually imply a promise to pay a given sum, not in but in coin. The act of exchange, wherein the bar- bullion is effected with implied condition, on behalf of gain originated, the the contracting parties, to give commodity somewhat more of one a crown pieces, or coin valuable than silver bullion; namely, silver in other. The virtual contract of a govern- of some denomination or coined money; is to pay in consequence of that im- ment and, in it obtains a greater quantity plied condition, goods, than it will, of if bargain be to pay in bullion. In this instance, it offers the the of the time the bargain at charge of concluding the coinage into contract, and if it is in the habit thereby obtains better terms, than of paying bullion. in The charges of coinage should be deducted from the metal brought (1) This paragraph contains three errors in relation to the coinage of dollars by the United States, and the exportation of specie, it is of importance to which are and never have been, simply restamped at point out: 1st. Spanish dollars not, without varying their weight or standard: 2d. A pound, troy, of Spanish jur mint, a dollars, dwts. of fine silver: 10 oz. 15 pound, troy, of American dot contains 'ars contains 10 oz. 14 dwts. 5 grains of fine silver: 3d. No law has ever been specie enacted directing the exportation of Congress, to be made in dollar* by of our own coinage; nor has the executive the power to regulate, or in any specie •nanner with the exportation of interfere from the United States. AMERICAN EDITOR.

237 •l'3<* ON PRODUCTION. I BOOK the mint coined, at the lime of its re-delivery in a coined to to be state us to the necessary conclusions,—that These considerations lead the of the the manufacture value bullion into coin increases of metal, the additional convenience resulting to the com- in the ratio of circumstance of coinage, and not an item further, munity, from the duties state may attempt or to saddle it with ;* whatever charges the government, of monopolising the business a coining, may I hat by a to the whole extent of this accession of value; that it make profit not possibly advance this profit any further, in its discharge can of engagements, fairly freely entered into; and that it can not dc and to prior engagements, without committing so with regard an act of partial bankruptcy. it is in all dealings between individuals, Moreover, evident that, still less power, by means of the impression the public authority has as die, make the commodity, acting to money, pass for more of its value, plus the value added by the fashion than its intrinsic receives. it Vain will any enactment, that the'stamp impressed shall give to be* of a specific or determinate value; it will never buy an ounce silver an ounce more goods than silver, bearing that impression, is worth of at the time being. SECTION V. Of Alterations of the Standard Money. The first thing to be observed under this head is, that the public authority has to fix arbitrarily the com. generally taken upon itself as money. This assumption, part, has modity, that shall serve on its itself; nation interests of the in and of little inconvenience for the exactly the same. Should a govern the ruling power happen to be to force an ill-adapted medium into circulation, it would ment attempt a sustain on every bargain, and the people would, by loss itself the of coined degrees, adopt some other medium. Thus, first issue the Romans was by their King Numa, money among coin- and his age was of copper, which at that time of day was the properest metal for the purpose; for, before the time of Numa, the Romans knew no other money but in bars. On the same principle, modern copper of and silver, which would governments have made choice gold by the general accord of individuals undoubtedly have been selected the interference of their rulers. without the But sovereign power, being firmly persuaded that its mandate * In Spanish America, a higher duty is charged, amounting, according to Hum- holdt, to 11 ^ per cent, on silver, and 3 per cent, on gold, over and above the actual charges coinage; for the government allows no bullion to be exported of in an uncoined state. So that, in fact, this is not a seignorage, but a duty on eyoortation, exacted a* the time of converting the bullion into coin.

238 CHAP. XXI. ON PRODUCTION. 235 and competent invest any commodity whatever was necessary to currency of in impressing its subjects with the money, succeeded and at the very same notion during the darker ages, with the that too to personal interest, were acting time that individuals, with a view whoever was dissatisfied upon principles diametrically opposite; for, with authorised money, either abstained from selling altogether, the goods some other way. of his or disposed in another of much more serious mischief, that has This error led to order whatever. all overset that itself, or depress it The public authority persuaded could raise at money and that on every exchange of goods of the value pleasure; value of the for money, to the imaginary the goods adjusted itself it to affix to it, and not to the value value, which pleased authority agent of exchange, money, by the conflict- naturally attached to the of demand and supply. ing influence when Philip Thus, France, adulterated the livre of Charle- I. of 12 oz. of fine silver,* mixed with it a third magne, containing and still continued call it a livre, though containing but but to part alloy, fine silver, he was nevertheless fully persuaded, that his 8 oz. of was worth quite as much as the livre of his prede- livre adulterated Yet it was really worth 1-3 less than the livre of Charle- cessors. A livre in coin would purchase but 2-3 of what it had done magne. the of the monarch, and of individuals, before. However, creditors but 2-3 of their just claims; land-owners received from their got paid but 2-3 of of the renewal tenants leases their former revenue, till on a injustice of placed matters more equitable footing. Abundance and was committed but after all it was impossible to authorised: make 8 oz. of fine silver equal to 12.f In the livre, as it was still called, contained no more year 1113, the 6 oz. fine silver. At the commencement of the reign of Louis than of been reduced oz. St. Louis gave the name of livre it had to 4 VII. quantity of silver weighing but 2 oz. or 6 gros. 6 to At a grains.J era of the the money bearing that name the French revolution, the 1-6 of an oz.; so it had been reduced to 1.72 weighed only that its' original standard of weight or quality in the days of Charle of magne. no notice, present, of the great fall experienced in the I take at of to commodities at large, which has been relative value fine silver * The measure weight called a livre contained 12 oz. in the time of Char- of lemagne. f According to the principles established supra, sect. 3 of this chapter, there is reason to believe, that the value of the adulterated livre of 8 oz. of fine silver might have been kept up to of the old livre of 12 oz., if the volume of the that had not But the rise of money prices, consequent upon coin been augmented. of the coin, is a ground ftf presumption, that the adulteration government, the with view to profit a this momentary operation, ordered a recoinage, and by made 12 pieces out of 8, by the addition of alloy, so as to increase the total quantity proportionately reduction of the standard of quality. to the I We find in the ProUgomenes of Le Blanc, 25, that the silver sol of St. Louii makes weighed gros. 7£ grains, which, multiplied by 20, 1 2 oz. 6 gros 6 grains, the livre.

239 236 ON PRODUCTION. BOOK 1. as 1-4 of its former amount; this is foreign to the reduced so low but present section, and I to speak of subject of the shall take occasion it hereafter. term, has at different times been applied the livre tournois, Thus The alteration has been to very different quantities of fine silver. the size and weight of the coin reducing by effected, sometimes deteriorating the standard bearing that denomination, sometimes by mixing up a larger portion of alloy, and a of quality, that is to say, pure metal; and, sometimes, smaller one by of raising the denomina- for specific coin; making, a 2fr. of a tion instance, what was before ass under the name piece account is ever i of one of 3/r. As no of any but the pure silver, which is the thing taken only valuable a similar effect; substance in silver coin, all these expedients have had all, in fact, reduced the for this reason; that they of silver quantity contained what was called a livre tournois. And this is what all in in compliment royal ordinances, have digni- French writers, to the term, raising standard ; on the ground, that the nomi- the the fied by the coin is nal value of raised by these operations; which might, with be said to lower the standard, since the metal, much more propriety, the money, is thereby reduced in quantity. which alone constitutes the in the of metal Though livre has been continually quantity the of Charlemagne till the present period; decreasing from days of our monarchs have, at different times, adopted a contrary many the weight and standard of quality, particu- course, and* advanced the larly since of St. Louis. The motives for deterioration reign are evident enough: it is extremely convenient to pay one's debts with less money than one But. kings are not only borrowed. are frequently creditors too. matter of taxa- debtors; they In the same relative position subject, the tion, they stand precisely in to the their tenants. Now, if every body be enabled by as landlords to their debts and discharge their contracts with a less law to pay of for, the subject, of course, can pay amount silver than bargained and the tenant his his taxes, a smaller quantity of that rent, with metal. And, although king received less silver, yet he continued the as as before; for the nominal price of commodities to spend much in proportion to the diminution rose, metal in the coin. When of what was before 3/r. was declared by law to be 4 fr. the govern- ment was obliged to pay 4 fr. where it before paid but 3 fr. ; so that it was to increase the old, or to impose new necessary, either in the government, to obtain the same quantity taxes; other words, was obliged to demand a greater number of of fine silver, hvres from subject. This course, however, was always odious, even the it when no difference in the real pressure of taxation, really made and was often auite impracticable. Recourse was, therefore, had to the restoration of coin to thfe higher standard. The livre being the made contain a greater weight of silver, the nation really paid to more silver in paying the same number of Hvres.* Thus we find. * The same expedient was resorted to that monster of prodigality, the Ro- by man emperor Heliogabalus. swon'c taxes of the empire were payable in The

240 CHAP. XXI. ON PRODUCTION. 23? the ameliorations the coin commence nearly about the same that of establishment period of as the permanent taxation. Before that had no for increasing the monarch personal motive innovation, the he issued. intrinsic value of the coin to suppose that the frequent varia- great mistake be a It would standard alluded to, were effected in the same clear and tions of have adopted intelligible manner which explain them. Some- I to alteration, instead being openly avowed, was kept secret the times of possible;* and this attempt at concealment gave occasion as long as in this branch manufacture. to the barbarous technical jargon used of denomination one coin was altered, while the rest At other times, of so that, at a given period, a livre, were left untouched; in one de- paid nomination, contained more silver than paid in another. Finally, if the matter still greater obscurity, the subject was com- to throw in reckon in accounts, sometimes to livres and monly forced up his in crowns, and to pay in coin representing neither sous, sometimes sol, nor crown, but either fractions or multiples of these seve- Hure, to such pettifogging ex- ral denominations. Princes, that resort can be viewed other light, than as counterfeiters in no pedients, armed with public authority. of such measures upon credit, commercial in- The injurious effect and all the sources of prosperity, tegrity, industry, easily may be conceived; indeed, serious, that, at several periods of oui it was so the monetary operations of the state suspended all com. history, merce whatever. Philip le Bel drove all foreigners out of the fairs of France, by to receive his discredited coin in compelling them and prohibiting making of bargains in a coin of better payment, the Valois to the same thing with respect de credit.f Philip did the with precisely A same result. and cotemporary gold coin, the that almost all foreign merchants discon- chronicler J informs us, the French traders them* tinued their dealings with France; that by the frequent alterations of the coin, and the con- selves, ruined of values, withdrew other countries; and that sequent uncertainty to of the and bourgeois, wero the rest king's subjects, both noble the merchants; for equally impoverished with the which reason, annalist adds simply enough, king was not at all beloved. the The examples have cited are taken from the monetary system I gold coin, called aurei, and not in gold by the tale: and the emperor, to enlarge his receipts, made a aurei, weighing as much as 24 oz. each. Tho new issue of a virtuous Alexander Severus, actuated by an oppoaite motive, made considerable i eduction of the weight. de Valois, in his official instructions to the officers * Philip mint, of the A. D. 1350, enjoins the utmost secrecy on the subject of the purposed adultera- tion, even with the sanction of an oath, for the express purpose of taking in the commercial classes; directing them " put a good face upon the matter of the to of exchange of the mark of gold, so that the intended adulteration migltt course not be discovered." Many similar instances are to be met with in the reign o' King John. Blanc, Traite Hist, des Monnaies, p. 251. Le t Le Blanc, Traite Hist, des Monnaies, p. 27. { Matthieu Villani.

241 238 ON PRODUCTION. BOOK I. but similar expedients have been practised almost of France; in or G\ery government modern. Popular forms nation, ancient of The despotic character. have been equally culpable with those of a the most glorious periods of the republic, effected a Romans, during the intrinsic national bankruptcy more than once, by deteriorating In the course of the first Punic war, the as, their coin. of value originally 12 oz. of which to 2 oz.; and, in was copper, was reduced war, was to 1 oz.* the second Punic again lowered year 1722, In of Pennsylvania, which acted, in this State the the independent government, even before the American as an particular, war, passed for 1/. 5s. ;f a law, enacting, that 1/. sterling should pass the United States, and France also, after declaring themselves and republics, have both gone still further. It would require " separate treatise," says Stewart, " to investi- a gate artifices which have been contrived to make mankind all the of the principles money, in order to palliate and make lose sight of sovereign the change in the value of the coin appear this power to He a volume would be reasonable."J might have added, that such of little practical service, and by no means prevent the speedy adop- of some new device tion the same kind. The only effectual pre- of ventive would be, exposure of the corrupt system, that engen- the and ders such abuses; were that system rendered simple intelligible, be detected and extinguished in the outset. every abuse would let no government imagine, that, to strip them of the power And is to deprive them of a valuable privi- of defrauding their subjects, lege. A system of swindling can never be long-lived, and must infallibly in the end The feel- produce much more loss than profit. of personal interest that which soonest awakens the inte- ing is mankind, sharpens the dullest apprehensions. of and lectual faculties matters affecting personal interest, a Wherefore, has in government of outwitting its subjects. Individuals are not the least chance by measures tending to procure supplies to the easily duped in state an under-hand manner: although they cannot guard against and or breach public faith, yet it can never long escape of direct outrage, concealed. The and their penetration, however artfully disguised a character government will acquire cunning as well as faithless- for ness, and will lose entirely the powerful engine of credit, which will operate with infinitely more efficacy, than the mere trifle that fraud can procure. Yet, even that trifle will often be wholly engrossed by the of government, who are sure to turn every act of in- agents the to their own private advantage. Thus, justice towards subject, the government loses its credit, its while get all trie profit; agents and the public authority is disgraced, for no other purpose, than to enrich its menials. The real interest of a is, to look not to fictitious, dis- government and destructive resources, but to such as are really pro.ifir graceful, * Montesquieu, Espiit des Lois, liv. xxii. c. 11. f Smith's of Nations, book ii. c. 2. Wealth p. 306. Inquiry into the Princ. Pol. Econ. 8vo. 1805, voL ii. t Stewart's

242 CHAP. XXI. ON PRODUCTION. 230 and one can render better service, than to and inexhaustible; it no render abortive those of the and point out expose and former kind, of those to it the latter. of the coin is, a The immediate consequence of a deterioration debts and in proportionate reduction of all obligations payable or redeemable rent-charges, whether upon of all money; perpetual upon individuals; of all salaries, pensions, and rack- the state or short, in values previously expressed in money; by rents; of all debtor gains what creditor loses. It is a the which reduction, the partial bankruptcy, or compromise, by every iegal authorization of a creditor, for a sum less than his fair claim, in money-debtor with his the diminution of precious metal in the same denomina- the ratio of of coin. tion whatever government Thus, recourse to this expedient, is not has an illegitimate advantage, urges all content with giving itself but likewise. other debtors to do so of France, however, have not always allowed their sub- The kings jects to reap the same advantage their private concerns, which the in himself by the operation of increasing or monarch proposed to dimin- the of metal contained in a particular denomination quantity ishing such occasions, to pay on all of coin. Their personal motive was, or receive more silver or less, in honesty they gold themselves, than ought; they sometimes compelled individuals, notwithstanding but to pay in the old coin, or, if in the new, at the alteration, and receive of exchange between the two.* This was a close the current rate of a ~opy in the second Roman precedent. When that republic, the as Punic war, reduced copper from two oz. to one, the repub- of ic paid its creditors 1 as instead of two, that is to say, 50 per cent. 3er proportion. the two methods differ. In either case, the creditor is equally a loser in all his purchases posterior to the his income be abridged by bankruptcy. Whether or whether he find himself obliged to pay for every ihing one-half, twice as dear as before, is to him precisely the same thing. * the several ordinances of Philip le Bel in 1303; of Philio de Valois iri Vide 1329 1421. in 1354; and of Charles VI. in and 1343; of John

243 240 ON PRODUCTION. BOOK 1 to all his own existing debts, undoubtedly get rid ol As he may same terms them as on the the public has discharged his own claim for the public creditors are there supposing, that hut wnat ground is in their private accounts with the rest always the com- in arrear of same relation to society as all other in the munity? They stand there is every reason to believe that the classes; and public creditors as fo them by one set of individuals as they owe have much owing another; short, that the accounts will square. to in themselves injustice they do to their private claimants is Thus, by the balanced and a bankruptcy, in the shape of a dete- the injury they receive; of rioration is to them full as bad, as in any other shape. the coin, But attended with other serious evils, destructive of nationa it is and prosperity. welfare violent dislocation a of commo- of the It occasions money-prices thousand different ways, according to the parti- operating dities, in a each respectively, and thereby disconcerting cular circumstances of and most useful speculations, and destroying all the best planned confidence between lender and borrower. Nobody will willingly he runs the risk lend when receiving a less sum than he has of advanced ; will any one be in a hurry to borrow, if he is in dan- nor ger of he gets. Capital is, consequently, diverted paying more than and the blow given to production by from productive investment, deterioration of the coin, is commonly followed up by the still more fatal ones of and the establishment of a taxation upon commodities, of price. maximum effect less serious respect to national morality. Peo« Nor in is the value are kept in a pie's ideas of confusion for a length of of state during which knavery has an advantage over honest simplicity time, the conduct of pecuniary matters. Moreover, robbery and spo- in liation are sanctioned by public practice and example; personal inter- est opposition to integrity; and the voice of the law to the is set in of impulse conscience. SECTION VI. reason why Money is neither a Of the a Measure, Sign nor Money would be a mere sign or representative, had it no intrin- sic value of its own; but, on the contrary, whenever it is employed in sale or its intrinsic value alone is considered. When purchase, is or the for a dollar piece, it is not the impression an article sold exchange, is or taken in name that but the quantity of silver given that is known to be contained in it. As a proof of the truth of this position, if the to issue crown pieces made of tin government were not be or pewter, they would so much as those of silver. worth Though declared by law to be of equal value, a great many more of mem would required in purchase of the same commodities; be mere sign. not happen if they were nothing but a which would

244 CHAP. XXI. ON PRODUCTION. 241 or extraordinary political circu nstances have Violence, ingenuity, current value up the a reduction of a sometimes kept money, after of but not for any of its intrinsic value; time. Personal inter length paid than est very soon finds received, is whether more value out is and contrives some expedient loss of an unequal and to avoid the absolute necessity of finding some the unfair exchange. Even when circulation of value obliges a government medium in vest .with of to an of intrinsic value or substantial guar- value agent destitute either value attached sign by this demand for a medium, the to the antee, utility, and makes it a Is actual value, originating in substantive of A Bank of traffic. the suspension of object England note, during was of no value whatever cash payments, representative; for it as a then really represented nothing, mere promise without and was a by the bank, which advanced it to the govern security, given had security this note, by its mere utility, wag any ; yet ment without positive value in England, as a piece possessed gold or silver. of of a bank-note, payable on demand, is the representative, the But of the silver sign,(l) specie, which may be had whenever it is or wanted, presenting the note. The money or specie, which the on for it is not the but the thing representea bank gives representative, a man sells any commodity, he exchanges it, not for a sign When or representative, but for another commodity called money, which to possess he supposes value equal to the value sold. When he a buys, he does so, not with a sign or representative, But with a com- modity of to the value received. real, substantial value, equivalent in this particular, has given rise another of very A radical error, to sign general prevalence. Money having been pronounced to be the in every country, it was boldly inferred, that, of all values whatever, of the money, bank and other notes, and credit paper, the total value total value is equal all other commodities. A position that to the of of plausibility, from the circumstance, that the derives some show of money declines when its quantity is increased, and relative value is diminished. advances when that quantity specie, ** sign," of silver or or " as applied to (1) The terra, representative," has no precise or definite meaning. A bank-note, with no sort bank-notes, of n said to be " the representative of money ; accuracy can be as such loose and metaphorical expressions have given occasion to most of the vague and mystical notions respecting paper-money which have been too long current, and only serve to the subject in obscurity and confusion, they cannot too soon be involve discarded. We have already seen, that coins neither more nor less than commodities, are which are bought and sold tor theiT value, like other commodities. Bank-notes any more than bills of exchange, or are not, for other transferable engagements the payment of money, the representatives or symbols of these commodities, bit are actual obligations for the payment, on demand, or at a stated time, of the quantity of on the face of them, and are themselves received the coins expressed n payment readily as specie itself, only when it is perfectly understood. as I hat the specie can be obtained for them, or when it is generally known, th.'i. * ill be as readily received m the market as the coins which they specify AMERICAN

245 242 ON PRODUCTION. L BOOK is obvious, however, that same fluctuation affects all other It the vintage be as productive one commodities whatever. If the twice of to half what it was another year, the price year as it is wine falls the year preceding. In like manner, one may readily concede, that, of circulating specie be doubled, the prices of the should aggregate doubled also; in other words, twice the quantity all goods would be purchase of the same articles. But this of specie would go to the means proves, that consequence of the circu- the by no total value always equal total of all the other items is lating medium to the sum more, than that of wealth, total of the produce of the any the sum is equal to the totality of other values. The casual fluctua- vintage in the value tion silver and of wine, in the cases supposed, is the of effect difference in quantity of these respective commodities at of a and has nothing do with the quantity of other two different times, to commodities. has of the money of It been already remarked, that the total value addition to the value any country, even with precious the of all the in the nation under any other shape, is but an metals contained the gross amount of other values. Wherefore, atom, compared with in the thing represented would exceed the representative; and value not the presence or possession of the the latter could command former.* of Montesquieu, that money-price depends upon Nor is the position of the total commodities to that of the total the relative quantity money nationf at all better founded. What do sellers and of the buyers know of the existence of any other commodities, but thost that are the of their dealing? And what difference could objects in the demand supply in respect to those such knowledge make and in the particular commodities? These opinions have originated ;gnorance of fact and of principle. ence at specie with more plausibility, or but in reality with Money has truth, been pronounced to be a measure of no better ground of may be estimated in the way of price; but it can not value. Value is to say, a be measured, that known and invariable compared with of intensity, such measure has yet been discovered. measure for no never succeed in fixing the Authority, however absolute, can of value. It may enact, that John, the owner general ratio a sac* of of wheat, shall give Richard for 4 dollars; and so it may that it to his sack of wheat for nothing. This enactment wiL John shall give probably rob John to benefit Richard; but it can no more make 4 * If be thrown into the scate, it will not help us over this diffi credit-paper The can of circulation, whether in form of specie or of paper, culty. agent in total utility vested the lever exceed in it. The expansion of the vo- amount paper, a rtmie of metal or of national money, whether is sure to be followed of by a proportionate dilution of its value, which disables the whole from being pqual purchase of a greater portion of commodities at large: and the to the value, devoted to the business of circulation, is always a trifle, compared with infra, the it is employed to circulate. Vide value under the head of Bank-notes, t Esprit des Lois, liv. xxii. c. 7.

246 CHAP. XXI. ON PRODUCTION. 243 of the value sack of wheat, than it can dollars the exact measure of a sack make by ordering it to be given for of a wheat worth nothing, nothing. foot real measure of length; it always presents or a is a A yard the idea of the self-same degree to length. No mattei the mind of world a man may be, he is quite sure, that a of the in what part feet high in one place is as man as a man 6 feet high in of 6 tall T told that another. When of Ghaize is 656 the am great pyramid I can jase, a space of 656 feet square at at the feet square measure Paris, and form an exact notion of the space the pyra- or elsewhere, but when I am told that a camel is at Cairo worth mid will cover; sequins, 50 is to say, about 90 ounces of silver, or 100 dollars that in coin, form no precise notion of the value of the camel; I can I may have every reason believe that 100 dol- because, although to worth less be Paris than at Cairo, I can not tell what may are lars at of value. the difference done is, The utmost, therefore, that to estimate or can be merely relative value of commodities; in other words, to declare, reckon the at a and that place, one commodity is worth more or less given time A positive impossible to determine. it is than another; their value to be worth 4000 dollars; but what idea does that house may be said to the mind? The idea sum present whatever I can purchase of with which is, in fact, as it: as to say, the idea of value equi- much valent to the house, and not of value of any fixed degree of inten- sity, or of comparison between one commodity and independent another. When of unequal value are both compared to differ- two objects specific product, still mere estimate of of one ent portions it is a house is said to be worth 4000 dollars, another relative value. One simply saying, the former is worth two of 2000 dollars; which is true, that, when both are compared to a product the latter. It is of separation into equal portions, as money is, capable more accu- a rate idea formed of the relative value of one to the other; for can be has no in conceiving the relation of 2 integers to the mind difficulty or 4000 to 2000. 1, attempt to form an abstract notion of But any the value of one of these integers must be abortive. If this be all that is meant by the term, measure of value, [ admit that money is a measure; but so, it should be observed, such not in the is eveiy other divisible commodity, though employed of money. The ratio of the one house to the other will character if one be said to be worth 1000, and the other be equally intelligible, of only 500, quarters wheat. Nor will this measure of relative value, if we may so call it, convey an accurate idea of the ratio of two commodities one to the other, at any of time or place. The 1000 considerable distance of wheat, or 4000 dollars, will not be of any use in the quarters comparison of a house in former, with a house in the present times, for value of silver coin and of wheat have both varied in the the of A house at Paris, worth 10,000 crowns in he .lays interim.

247 244 ON PRODUCTION. L BOOK Henry IV'., would now be worth a great deal more, than anothei of that value now-a-days. So, likewise, one in Lower Britany, worth 4000 dollars, is of much more value than one of that price at Paris; for the same reason that an income of 2000 dollars is a much larger one in Britany than at Paris. Wherefore it is impossible to succeed in comparing the wealth of different eras or different nations. This, in political economy, like squaring the circle in mathematics, is impracticable, for want of a common mean or measure to go by. Silver, and coin too, whatever be its material, is a commodity* whose value is arbitrary and variable, like that of commodities in general, and is regulated in every bargain by the mutual accord of the buyer and seller. Silver is more valuable when it will purchase a large quantity of commodities, than when it will purchase a smaller quantity. It can not, therefore, serve as a measure, the first requi- site of which is invariability. Thus, in the assertion of Montes- quieu, when speaking of money, that " what is the common mea- sure of all things, sh'duld of things be the least subject to change,"* all there are no less than three errors in two lines. For, in the first place, it has never been pretended, that money is the measure of all things, but merely that it is the measure of values; secondly, it is hot even the measure of values; and lastly, its value can not be made invariable. If it was the object of Montesquieu to deter governments from altering the standard of their coin, he should have laboured to enforce those sound arguments, which the question would fairly have supplied him with, instead of dealing in brilliant expressions, which serve to mislead and give currency to error. It would, however, often be a matter of curiosity, and sometimes even of utility, to be able to compare two values at an interval of time or place; as, for instance, when there is occasion to stipulate for a payment at a distant place, or a rent for a long prospective term. Smith recommends the value of labour as a less variable, and, consequently, more appropriate, measure of absent or distant value; he reasons thus upon the matter: " Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer. In his ordinary state of health, strength, and spirits, in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price, which he pays, must always be the same, whatever may be the quantity of goods which he receives in return for it. Of them, indeed, it may sometimes purchase a greater and sometimes a smaller quantity; but it is their value which varies, not that of the labour which purchases them. At all times and places, that is dear, which it is difficult to come at, or which it costs much labour to acquire; and that cheap, which is to be had easily, or with very little labour. Labour alone, .herefore, never varying in its own value, is alone the ultimate and * Esprit des Lois, liv. xxii. c. 3.

248 CHAP. XXI. ON PRODUCTION. by which value of all commodities can at all times real standard, the estimated and places and be compared."* a to so means follows, With great deference writer, able it by no is to the labourer same degree in the that, because labour always it must always bear the same himself of the same value, therefore of value may as an object exchange. Labour, like commodities, and supply ; and its value, like value in general in the vary demand the mutual accord of the is determined of buyer by adverse interests and and seller, fluctuates accordingly. labour The value by its quality. The is of affected materially and intelligent person is worth much more than of a labour strong weak and ignorant that Again, labour is more valuable of a one. a is a lively demand for it, than in thriving community, where there country overloaded with population. In the United States, the in a of an artificer amount in silver to three times daily wages much as as France.f Are we to infer, that silver has then but 5 of its in in France The artificer is there better fed, better clothed, value ? convincing that he is really is a and better lodged; which proof, probably one of the most fluctuating of better paid. Labour is offered times at in great request, and at others is it valuer, because is in cities with that distressing importunity occasionally witnessed where industry is on the decline. has, therefore, no better title to act as a measure of Its value two valu.es great distances of time or place, than that of any other at is, in fact, such thing as a measure of value, no commodity. There nothing possessed of the indispensable requisite, is because there of value. invariability the absence of an exact measure, we must be content to ap- In to accuracy; and, to this end, many commodities "of well proximate known value will serve to give a notion, more or less correct, of the value of specific product. At the same point of time 'and place, any is little difficulty approximation: the value of any given there in the be by almost all others. To ascertain may readily measured article of Nations, book i. c. 5. On * " labour Wealth this point, Smith observes, that the the original purchase-money, that was first price, for all thing's. It was paid not by gold or silver, but by labour, that was wealth of the world was all the originally purchased." think I have succeeded in proving that he is mistaken. I and an the production of values ; of her agency is Nature executes essential part for, and forms a portion of the in most cases paid of the product. The value profit land, which is called rent, is of to the proprietor, who does nothing paid himself, and stands in place of the original occupant; and it affects the value of the product, raised by the of nature and industry; the portion of joint agency by is not the product of human labour. Capital also, value contributed nature is, for the most part, the accumulated product of labour, concurs, like which of in the of nature, and receives in recompense a portion business production, Ihe product; but the gains, accruing to the capitalist, are quite distinct from the \ccumulated labour vested in the capital itself, which can be expended or con- other sumed by one set of persons; while its share in the product, in tolo, in words, the interest paid for its use, may be consumed by another. f Humholdt reckons it at from 3 Jr. 50 cents to 4 Jr. of our money Essat Pol. nir la Nouvelle Espagnc, torn. iii. p. 105. oct. edl

249 SM6 ON PRODUCTION 1 BOOK pretty r.ear'y the value of an article amongst the ancients, we must iind out some article which there is reason to think has subsequently undergone little change of value, and then compare the quantity of that article given by the ancients and moderns respectively, in ex- change for the article in question. Wherefore, silk would be u bad object of comparison ; because 4 was, in the time of Caesar, procura- ble from China only, at a most extravagant expense, and, being then nowhere produced in Europe, must of course have been much dearer than at present. Is there any commodity that has varied less in the intervening period? and, if there be any such, how much of it was 1 These are the two points we must then given for an ounce of silk inquire into. If any one article can be discovered, that was pro- duced with equal ease and perfection at the two periods, and the consumption of which had a natural tendency to keep pace with its abundance, this article would probably have varied little in value and may be taken as a tolerable measure of other values. Ever since the earliest times recorded in history, wheat has been the staple food of the great mass of the population, in all the princi- pal nations of Europe ; consequently, their relative population must have been influenced by the abundance or scarcity of this article of food, more than of any other: the ratio of the demand to the supply must have been, therefore, at all times nearly the same. There is, besides, no product which I know of, that has undergone less altera- tion in the course of production. The agricultural skill of the an- cients was in most respects equal, and in some, perhaps, superior to our own. Capital, indeed, was dearer amongst them ; but that dif- ference was little felt; for, in ancient times, the proprietor was com- monly both farmer and capitalist; and the capital embarked in agri- culture yielded iess return than other investments; because, as more honour was attached to this, than to the other branches of industry, commerce and manufacture, the influx of capital, as well as of labour, into that channel, was greater than into the other two. And, during the middle ages, in spite of the general declension of all the arts, the tillage of arable land was prosecuted with a skill little inferior to that of the present day. Whence I infer, that the same quantity of wheat must have borne nearly the same value among the ancients, during the middle ages and at the present time. But, as there has all along been a vast dif- ference in the produce of the harvest in one year and another, grain being sometimes so abundant, as to sell extremely low, and at other times so scarce, as to occasion famine, the value of grain must be taken on an average of years, whenever it is made the basis of any calculation. So much for the estimation of values at distant periods of time. There is equal difficulty in the estimation at great distances of place. The staple articles of national food, which, as such, maintain the greatest uniformity in the ratio of the demand and supply, are '-ery different in different climates. In Europe, wheat is *he staple ; m Asia, it is rice: the relative value of neither the one nor the other

250 CHAP. XXI. ON PRODUCTION. and Europe tolerably steady; nor has the value of rice 'n in Asia is relation to the of wheat in Europe. Rice is beyond Asia any value is in of the India, than wheat question less valuable in this part the besides that is less expensive, it yield,, for, world; cultivation year. This is one reason, why labour is so cheap two crops in the China. and m India food most general use is, therefore, but a bad The article in of value at great distances of place. Nor are the precious measure of correct one: their value metals by any means indubitably not so a is North America in West Indies, as in Europe, and great and the in every part of Asia, much greater constant efflux of specie as the thither sufficiently proves. frequency of communication Yet the of the world, facility of trans- between these different parts and the reason suppose them the least liable to fluctuation of us to port, give their passage from one climate value another. on to is no necessity, for the happily of commerce, to There purposes the relative value compare goods and of metals in two distant of parts world ; it is quite enough to know their relation to of the in a merchant remits to other commodities each country. When an ounce of silver, it is of China half to him, whe- little importance ther it has more relative value in China than in Europe. All he wants to know is, whether he can buy with it at Canton a pound of tea of a he can re-sell in Europe, say for two certain quality, which of silver. With these and in expectation of receiving, ounces data, close half the speculation, a gross profit of an ounce and a the at of calculates whether that profit will leave him a sufficient of silver, he charges the risk out and home; and net profit, after covering and is all he cares about. If, instead of this he remit goods, it bullion, is enough know ; 1. The relation between the value of for him to T and in Europe; that is to say, how much they these goods silver 2. The that and will cost; of Chinese relation between their value products Canton; that is to say, what he can get in exchange for at them ; and, lastly, the relation between these latter and silver in Europe; that is to be worth when imported. It say, what they will of this operation brings into question is evident that every repetition relative value of two or more articles nothing more than the at the same time, and at the same place. the common purposes of life, or, in For no- other words, when thing more requisite, than to compare the value of two objects, is at no great distance of time or place, most commodities possessed of any value at all may serve as a measure; and if, in describing the value of an is no question of either buying object, even where there or selling, estimation is more generally made in the precious the metals, or in money, than in any other commodity; it is simply, be- cause value is more generally known, than that of other com- its modities.* But, in all bargains for a long prospective period, as ioi * The difference of value in different objects has, throughout this work, been noted in money-price or what they will fetch in money; extreme correctness not

251 248 ON PRODUCTION. Boo* L the reservation of a perpetual rent, it is more advisable to reckon m wneat: for the discovery of a single mine might perhaps greatly re- duce the present value of silver; whereas the tillage of all North America could not sensibly alter the value of wheat in Europe: for the number of mouths to be fed in America, would increase almost in the ratio of the improved cultivation. But long prospective stipulations regarding value must unavoidably, under any circum- stances, be very precarious, and can never give any certain notion of the value that is likely to be received. Perhaps the most im- provident course of all is, to stipulate for a particular denomination of money; for the same denomination may be fixed to any variation of weight or quality whatever; and the contracting party may find he has bargained for a name, rather than a value, and that he runs the risk of paying, or being paid, in mere words. I have dwelt thus long upon the refutation of incorrect expres- sions, because they appear to have acquired too general a circula- tion,* and because they often confirm people in false notions and ideas which ideas sometimes serve as the basis of erroneous systems, that in their turn give birth to conduct equally erroneous. SECTION VII. Of a Peculiarity that should be attended to, in estimating the Sums mentioned in History. In reducing the money of former ages into money of the present day, the best informed historians have contented "themselves with converting the actual quantity of gold and silver, designated by the term made use of by the authority cited, into the current money of their own times. Bjt this is not enough: the actual sum, the real amount of the metal, can give no correct notion of its then value, which is the very point we want to arrive at. It is, therefore, ne- cessary to reckon, besides, the fluctuations of value that the metal itself has undergone. A few examples will best explain my meaning: Voltaire tells us, in his Essay on Universal History,f that Charles V. enacted, that the sons of France should have an annual revenue settled on them of 12,000 livres: and, as he reckons this sum to be equal to 100,000 of the present day, he naturally enough ob- livres serves, that this was no great provision for the sons of the monarch. But let us examine the grounds for this calculation of Voltaire. being necessary for illustration. Even in the exact science of geometry, the figures are given merely to make the demonstrations more intelligible; svrict accuracy is necessary in the reasoning and conclusions only. v Sismondi publ'shed his After the appearance of three editions of this work, Nouveaux Principes d'Econ. Pol.; wherein amongst many excellent t hapters, 1 there is one entitled, " money, the sign, token, and measure of value. * Li/, v. c. J. t Edit, de Kehl, oct. torn. xvii. p. 394.

252 CHAP. XXI. ON PRODUCTION. 248 ho reckons that mark of fine silver was, in the time of First, the worth about Charles at this rate, 12,000 livres will 6 V., livres; at at the date silver, which, their relative value make 2000 marks of to 100,000 livres, of Voltaire's writing, would in fact amount or 2000 marks of fine silver were worth in the reign But thereabouts. much more than in the reign of of Charles XV. Of this V. Louis by a of the relative average at the we shall be convinced, comparison pure silver to wheat, which will take as of we two different periods, one of the least variable. St. Maur, whose book* is an Dupre of learned of ample repository the value of commodities, gives it as his opinion, information upon the that, from of Philip Augustus, who died A. D. 1223, until reign about the year 1520, seller of wheat (Paris measure) was worth, the the average, much as 1-9 of a mark of fine silver; i. e. about on as weight. grains 512 year 1536, when the mark of silver was of the value of About the or rather passed under the denomination of 13 livres tournois, 13 tournois, the ordinary price of a setier livres wheat was about 3 of livres tournois, 3-13 of a mark of fine silver, amounting to 1063 i. e. weight that metal. grains of the reign of Henry IV., the mark of In 1602, under fine silver being at that time equal to 22 livres, the average price of the setier of wheat was 9liv. 16s. 9d.; i. e. 2060 grains of fine silver.f Since that period, the of wheat has, one year with another, setter the same weight silver. In 1789, been constantly worth about of mark the equivalent to 54 liv. 19 s. the average price of was when according to Lavoisier, 24 liv. the setier, i. e. 2012 was, wheat of fine silver. I have not reckoned the fractions grains grains, of for these matters it is enough to approximate to accuracy; in- in the average of the setier, taken at the deed of Paris and the price is itself but loosely calculated. environs, of The result is, that the setier of this comparative statement wheat, whose relative value to other commodities has varied little froru 1520 down to the has undergone great fluctua present time, being worth, tions, gr. of pure silver. D. 1520 - - 512 A. 1063 do. do. - - 1536 - - 2060 do. do. 1602 - - 2012 do. do. 1789 the of pure silver must have varied consi- which shows that value the derably since of these dates; inasmuch as on every act of first exchange, four times as much of it must now be given for the same quantity of as was given three centuries ago. We commodities, of *hall see by-and-by, J why the discovery and the American mines, * Rapport entre VArgent et les Denrees, p. 35. f For these calculations I am indebted to the Essai sur les Monnaies, ard tho Variations dans les Prix, both by Dupre de Saint Maur. t Book II. Chap. 4.

253 25( ON PRODUCTION. BOOR I. the market about ten times as much silver as the influx into of operated before, its value only in the ratio of 4 to 1. to has reduce of to the royal stipend in application this information Now to the was worth in the time of question: V. four if pure silver Charles the age of Voltaire, the settlement of 2000 marks as in times as much sons of France was equivalent upon 8000 marks at the pre- the to is to say, of our present currency, sent, that more than 400,000/r. observations or about 75,000 dollars; which makes of the Voltaire of the provision much less applicable. inadequacy the upon he wrote avowedly upon commercial matters, has Raynul, though similar error, committed estimating the public revenue in the a in of Louis XII. at 36 millions of our present money (francs) on reign it amounted to the ground, that liv. of 11 liv. to the mark 7,650,000 of silver. sum, indeed, was equal to 695,454 marks of silver: The it would enough merely to reduce the mark into livres of but not be the same quantity silver was then worth lour day; for the present of much as it is now; so that, before reducing them into times as multiplied by four, which will swell modern money, they should be the public revenue under Louis XII. to a sum of 144 millions of of present currency, or nearly 27 millions of dollars. francs Again, we in Suetonius, that Caesar made Servilius a present read which a millions of sestertii, 6 his translators, La of pearl worth and Levesque, estimate to be equal to Harpe fr. present 1,200,000 money. little lower down, we find, that Caesar, on his return But a of the gold bullion, accruing from the plunder of to Italy, disposed Gaul, for coin, at the rate of 3000 sestertii to the pound of gold *, which shows the of Servilius to have been much under-rated. pearl to Le Blanc, weighed 'i of our The Roman pound, according 10 10^ oz. gold in Caesar's time, were worth as much and of ounces; ounces of that metal at the present day, for it as 32 may reasonably the of gold has fallen value ratio of 3 to 1.* be reckoned, that in the 32 oz. of gold are worth nearly 3036 fr. Now may therefore which be looked upon about the real value of 3000 sestertii; at which as the in question must have been worth 6,072,000 fr rate pearl and the Roman sestertius, somewhat more than (1,129,392 dollars,) franc money; which A is greatly beyond the ordinary esti- of our mate.f 12 oz. of silver were given for 1 oz. of gold, in Caesar's time. Where- * fore, silver having- fallen in the ratio of 4 to 1, 1 oz. of gold was worth as much in his as 48 oz. of pure silver at the present period. But 48 oz. of silver days, 3 or thereabouts: so that gold must have fallen in the are now'worth oz. of gold of about 3 to 1. ratio The of \ calculation has led these translators involuntarily to same error underrate prodigality of the worst of the emperors. Thus we are told, that the Caligula, in less than a year* squandered the whole of the treasure accumulated by Tiberius, amounting to 2700 millions of which La Marpe translates sestertii, no more than 540 millions into livres: whereas, supposing the value of gold of to have varied little between the days of Csesar and of Cnligula, which is pro- to ,»able enough, will be found it. amount to very nearly 3000 millions of livies.

254 CHAP. XXI. ON PRODUCTION. 251 the public treasures Rome, in When Caesar laid hands upon of opposition spite he is stated to have of the of the tribune Metellus, lbs. of gold, and 80,000 of of silver consist 4130 lbs. found them to to 2,911,100 which Vertot estimates town. to have amounted Hv. loss to imagine. To form a tole I am at a but upon what grounds the treasure seized by Caesar upon his rably correct notion of usurp- the of gold should be reduced into oz. of the French ation, 4130 lbs. rate Roman lb.* which makes at the standard, of 10j oz. to the same weight of gold was then worth three 44,052 oz. But, as the as much present, the value will appear to have been as at times 12,530,346 fr. (2,330,644 dollars,) supposing the oz. or 132,156 of quality in the gold to have been the same standard present as at The 80,000 lbs. weight silver also were then worth a& much as of at the present period, e. 20,915,735 fr., (3,890,327 320,000 lbs. t. Roman lb. 10§ oz. and taking the stand- the at dollars,) reckoning quality to have been the same. Wherefore, the sum appro- ard of usurper amounted priated 33,446,081 fr. (6,232,971 dol by the to money; which is greatly above Vertot's estimate of lars,) of our 3 millions only. about From this specimen we may how little reliance can be judge, the calculations other historians, of less information and of placed on have been quoting. Rollin, in his Ancient,, I accuracy than those in his Ecclesiastical History, have reckoned the talen- and Fleury, mina and sestertius, according to the scale made out by some tum, the administration of Colbert. This scale is learned persons, under to many objections: 1. It establishes upon very questionable liable data, the respective quantities of the precious metals contained in the coins of is a primary source of error: 2. The the ancients, which of the precious metals considerably varied, between the value has antiquity period and the ministry of Colbert, which in of question 3. The scale of reduction, drawn up under of is another source error: that minister, was calculated the direction rate of 26 Hv. 10 of at the to the mark of silver, being the then mint price of silver bul- sous, ; but this rate lion altered before the days of Rollin, which is a was third source error. Lastly, since the date of his publication, that of has and a livres tournais, conveys to rate been still further altered, the idea of a smaller quantity of silver, than us time; it did in his Indeed, seems hardly possible, that a less sum it for the would have sufficed monstrous extravagancies recorded of him. Horace, Epist. 2. lib. ii. speaks of an estate, that, from the context, must have been a as being" of the value of 300,000 sestertii, which, considerable one, to my to 303,600 fr. (about 56,470 dollars) of our according view, amounted Dacier, perverts the meaning of the passage, present money. His commentator, the in by estimating question, at 22,500 fr. only, or 4185 dollars. estate Le Blanc. Traite Monnaies, p. 3. estimates the Roman lb. of 12 oz. at the * actual weight of only 10| oz. of our standard, taking as a guide, the weight of some of the of the emperors which are in a state of high preservation coins The valuation have here given of the oz. of gold, takes it at the mint standard, I viz. with a proportion of gold, thua V alloy; for I take it for granted, that the T alloy by Caesar, was not pure gold, laid hands upon coin with a mixture of but

255 25$ ON PRODUCTION. BOOK L a fourth source error. Thus, whoever now takes up and thii ii> of calculations therein contained, will enter- that work, relying on the of the most erroneous idea expenditure of the tain income a and well as of their commerce, their resources, antiquity, ol states as and every part organization. of their system and would understood to say, that a be of history I Not that writer to give his readers, can ever have sufficient cases, a cor- data, in all of in general; but, for the sake of a closer ap- rect notion values accuracy, than has hitherto been effected, reducing to proximation in ancient times, and even of the middle ages, into modern the sums of would recommend, what indeed I generally done, first, to money, is antiquity, the actual weight of precious inquire from those learned in in the coin in question: secondly, as far back metal contained as the Emperor Charles that is to say, about the year 1520, that V., if gold, must multiplied by 3 only, and if silver, by 4:* quantity, be discovery American mines has occasioned a fall the of the because lastly, to reduce that quantity in nearly that proportion: gold and of the current money of the period, at which he may or silver into to be writing. happen the value the From of silver progressively year 1520 downwards, the latter reign of Henry IV., that is to declined until end of the beginning of the seventeenth century. We may say, towards the of the depression of its value judge increasing price of any by the given commodity, manner explained in the preceding section. in the a To acquire of the value of the mark of silver during correct notion this period, it will be necessary to allow for a diminution in the ratio of the is, metal, and not nominal or coin, price increased real, that in general, one, as wheat, for instance, in of commodities or of any particular. the of the seventeenth century, there will be no beginning From further allowance, after having reduced the money occasion for any of silver; for there does not appear to of the time being into marks any in the have been value of silver, since further sensible decline for the most commodities have been procurable same metal-price. Jt will be sufficient, therefore, to reduce them into the money current the time being, according to the then current value of the mark for of fine silver.f * Until period specified, the ratio of the to silver in Europe was 1 to 12. gold At present, it is in most nations of Europe 1 to 14, or 1 to 15; so that taking the average ratio in at 1 to 11 [ and in modern times at 1 to 15, ancient times in to silver in the proportion of 4 to 3. gold will have increased relative value if gold be multiplied by 3, and silver Wherefote, result will be equal. by 4, the f disposed to believe, that the I am of both gold and silver began again value to decline about the commencement of the present century ; for more gold and vary silver for most of the commodities least liable to now given in the are costs of production. (1) (1) In the very able and laborious *' Historical Inquiry into the Production •nd Consumption the Precious Metals, by William Jacobs, Esq. F. R. S. I of don, f we are furnished with a chapter (xxv.) on the production 1831,"

256 CHAP. XXI. ON PRODUCTION. 253 way of illustration, take the statement we find in th^ By let us Sully, Memoirs in the vaults viz. de that this minister accumulated, a sum of 36 the of livres iournois, to funhor Bastile, of the millions the house of Austria. If we wish to of his designs master against actual value of that hoard, we must, know first place, the in the of it amounted to. The mark of examine what weight fine silver then represented livres tournois; consequently was by 22 fine silver livres make 1,636,363 marks, 5 oz. of 36 millions of silver. There no sensible variation in the value of that metal since the has been period question; for the same quantity of metal would then buy in the same quantity wheat as at present. Now, at the present time, of marks 5 oz., or, in 5 grammes 1,636,363 other terms, 399,588,018, end author the year 1809 to the end of 1829. The the re- and silver from of that it was at the first named period, 1809, when a great change took marks, " in the production of the place of gold and silver, in every part of the mines western continent, after space of more than three centuries, during the whole a ; had a of which there of the quantities obtained been each constant increase succeeding decennial period yielding a larger portion than the similar number of years that preceded it; and though they have in some measure been restored, it has been by and they are yet very far from having approached slow degrees, the copious produce which they yielded before their general abruption from European government." productiveness of the mines of Mexico, Colombia, After then examining the Brazil, and gold and including New Grenada, Peru, Buenos Ayres, Chili, in also after taking notice of and gold found in North and South Caro- silver, the and Georgia, from 1824 to 1830, he sums lina whole of the amount of up the the gold silver supplied by the late Spanish dominions in America, during and the end 1829, thus:— the year 1809 to the end of the twenty years, from of in in Divisions. Amount twenty years. dollars Mexico, 220,043,200 Guatimala, 2,893,710 Colombia, 33,564,267 Peru, 64,688,429 Buenos Ayres, 30,000,000 Chili, 16,618,880 367,808,486 Or in sterling, at 4s. 2d. the dollar, 1. 76,626,768 To this may be the produce of added Brazil, 4,110,000 Whole produce America, - - - J.80,736,768 of In Europe," he states, likewise, " the produce of gold " silver has de and clined, when average of the the is compared with that of the last twenty years one hundred and ten years which preceded it. The value of the gold produced in Europe, he and of the silver 530,000Z., being to- estimates about 720,000*. gether 1,250,000/. annually, period of twenty years from 1810 to 1829, or in the 23 millions; to this the supply from America, 80,736,768*., will make together, 103,736,768 pounds sterling." Mr. Jacobs estimates the diminution in the of metallic money, during the twenty years mentioned, at 13 per cent. AMERICAN EDITOR

257 254 ON PRODUCTION. BOOK I. fr of fine silver, coined into money, will make exactly 88,797,315 sum, indeed, that would go no great way or 16.516,300 dollars. A must be in modern warfare ; but it considered, that war is now con- very different principle, and has become infinitely more ducted on a wasteful, reality as/well as in name. in VIII. SECTION of Value between one Metal and another* of any fixed ratio Of the Absence public functionaries to believe, that The same error, which led fix the relative value metal to commodities, has they could of any determine relative value of to by act of law the also induced them money, one to the other. Thus, the metals employed has been as it a given quantity of silver shall be worth 24 arbitrarily enacted, that and that a given quantity liv., gold shall likewise be worth 24 liv. of In this manner, ratio of the nominal value of gold to that of sil- the to be legally established. ver came authority was both cases equally vain and The pretension in of consequence ? impotent; and what has been the The relative value to other commodities has, in fact, been constantly of the two metals as the relative value of the metals themselves, fluctuating, as well when exchanged one for the re-coinage of gold, the other. Before of the louis d'or of 13th October, 1785, the in pursuance was arret for commonly sold liv. and some sous of the silver coin. Con- 25 sequently, people took good care not to pay in gold coin the sums bargained for in 25 silver; otherwise they would really have paid and 8 or sous, for every 24 liv. of the sums stipulated. liv. 10 1785, when of quantity in gold in the Since the re-coinage the oVor by one-sixth, its value has nearly kept pace huts was reduced of 24 Hv. in with that so that gold and silver have been paid silver; indifferently. However, still continued most customary to it has in and partly because the gold pay silver, partly from long habit, to be clipped or counterfeited, was received coin, being more liable with more caution and liable to more frequent cavils about the weight and quality. In England a different arrangement has produced an effect directly contrary. In the year 1728, the natural course of exchange fixed the relative value of gold to silver as 15-Hk to 1; say 15 to 1, foi V r the sake simplicity; 1 oz. of gold was sold for 15.V oz. of silver of and vice versa. was established by law Accordingly that ratio of 1 oz. the nominal sum of 3/. 17.9. lOhd. gold being coined into and 15 government V OZ. of silver into the same sum. Thus, the T to fix a ratio, that is, in the nature of attempted permanently things, perpetually varying. The demand for silver gradually increased; its use for plate and other domestic purposes became more general the India trade received an additional sivmulus

258 CHAP. XXI. ON PRODUCTION. 255 off silver preference to gold, for this reason, that tb

259 ON PRODUCTION. Boo* I SECTION IX Of Money as it ought to be. rom all that has been said in the preceding sections may be inferred my opinion of what money ought to be. The precious metals are so well adapted for the purposes of money, as to have gained a preference almost universal; and, as no other material has so many recommendations, no change in this particular is desirable. So also of their division into equal and portable particles. They may very properly be coined into pieces of equal weight and quality as has heretofore been the practice among most civilized nations. Nor can there be any better contrivance, than the giving them such an impression, as shall certify the weight and quality; or than the exclusive reservation to government of the right of impressing such certificate, and, consequently, of coining money; for the certifi- cate of a number of coiners, all working together and in competition one with the other, could never give an equal security. Thus far, then, and no further, should the public authority inter- meddle with the business of money. The value of a piece of silver is arbitrary, and is established by a kind of mutual accord on every act of dealing between one indi- vidual and another, or between the government and an individual. Why, therefore, attempt to fix its value beforehand ? since, after all, the fixation must be imaginary, and can never answer any practical purpose, in the money transactions of mankind. Why give a deno- mination to this fixed, imaginary value, which money can never possess? For what is a dollar, a ducat, a florin, a pound sterling, or a franc; what, but a certain weight of gold or silver of a certain established standard of quality? And, if this be all, why give these respective portions of bullion any other name, than the natural one of their weight and quality I Five grammes of silver, says the law, shall be equivalent to a which is just as much as to say, of silver is franc: 5 grammes grammes of silver. For the only idea presented to equivalent to 5 franc, is that of the 5 grammes of silver it the mind by the word contains. Do wheat, chocolate or wax, change their name by the mere act of apportioning their weight A pound weight of bread, ? chocolate, or of wax candles, is still called a pound weight of bread, chocolate, or wax candles. Why, then, should not a piece of silver, weighing 5 grammes, go by its natural appellation? Why not call it simply 5 grammes of silver? This slight alteration, verbal, critical, and nugatory as it may seem, is of immense practical consequence. Were it once admitted, ir would be no longer pc^irj.e to stipulate in nominal value; every rwrgain would be a barter of one substantial commodity for another

260 UIIAP. XXI. ON PRODUCTION. 257 a given quantity of silver for a given quantity of grain, or butcher's <_f meat, of cloth, &c. &c. Whenever a contract for a long prospective period was entered into, its violation could not escape detection: a person taking an obligation to pay a given quantity of fine silver, dt a day certain, would know precisely how much silver he would *iave to receive at the period assigned, provided his debtor continued solvent. The whole monetary system would thenceforth fall to the ground; d svstem replete with fraud, injustice, and robbery, and moreover so complicated, as rarely to be thoroughly understood, even by those who make it their profession. It would ever after be impossible to effect an adulteration of the coin, except by issuing counterteit money; or to compound with creditors, without an open, avowed bankruptcy. The coinage of money would -become a matter of perfect simplicity, a mere branch of metallurgy. The denominations of weight, in common use before the introduc- tion into France of the metrical system, that is to say, the gros, once, had the advantage of conveying the notion of portions of grain, weight, that had remained stationary for many ages, and were appli- cable to all commodities whatever, without distinction: so that the could not be altered for the precious metals, without altering it once at the same time for sugar, honey, and all commodities sold by the weight: but, in this particular, the new metrical system is infinitely preferable. It is founded upon a basis provided by nature, which must remain invariable as long as our world shall last. The gramme is the weight of a cubic centimetre of water: the centimetre is the hundredth part of a metre, and the metre is m.m/o.ooo part of the arc formed by the circumference of the earth, from the pole to the gramme equator. The term may be changed, but no human power can change that portion of weight actually designated by the term gramme; and whoever shall contract to pay at a future date a grammes quantity of silver, equal to 100 weight, can never pay a less quantity of silver, without a manifest breach of faith, whatever arbitrary measures of power may intervene. The power of a government to facilitate the transactions of ex change and contract, wherein the commodity, money, is employed consists in dividing the metal into different pieces of one or more grammes or centigrammes, in such a manner, as to admit of instant calculation of the number a given payment will require. of grammes It has been ascertained by the experiments of the Academy of Sciences, that gold and silver resist friction better with a slight mix- ture of alloy, than in a pure state. People versed in these matters say, besides, that this complete purity cannot be obtained, without a very expensive chemical process, that would add greatly to the expense of coinage. There is no sort of objection to mixing alloy, ; provided the proportion be signified by the impression, wh ch should be nothing more than a mere certificate of the weight and quality of the metal. I make no mention of the terms franc, decime, centime, because

261 258 ON PRODUCTION. BOOK I. to the coin, being, fact, those names should never have been given in nothing whatever. names indicative of France, instead The of laws be the shall of enacting that pieces called coined, having francs, grammes of silver, should have simply ordered a coinage weight of 5 credit In a letter of which case, or bill grammes. of pieces of 5 being drawn for, say 400 fr., would be for of exchange, instead of of 2000 of the standard of TO silver to grammes V alloy; or silver T for grammes of gold of if preferred, of purity; the same degree 130 the most simple imaginable; for the pieces and the payment would be silver, would and fractions or multiples of the .>f coin, gold be all of metal of that standard. gramme it However, be necessary to enact, that no sum stipu- would still grammes of or gold should be payable otherwise than lated in silver special proviso; else, debtor might dis- a in coin, unless under the claims in bullion of somewhat less value than coin. This charge all of practical arrangement; principle requiring is obviously matter the that but obligation, after mentioning the metal and nothing, the of it, whether payable in standard, should specify on the face national coin bullion. The only object of such a law would be, to save or of the continual necessity enumerating many particulars that would thenceforward be implied. the bullion of private persons, A government should never coin operation. the as well as the cost, of the without charging profit, The monopoly of coinage will enable it to make this profit some- what high: but it should be varied according to the state of metal- lurgic science, and the for circulation. Whenever the state demand to coin account, it had better lower its charges, has little on its own machinery workmen remain idle; and, on the other let its and than charges, when the influx of bullion is hand, raise and super- its rapid And in this, it would but imitate other manufacturers. abundant. to the bullion bought and coined As government on its own by account, coin issued would reimburse the charges; and yield a the by its in exchange; as I have endeavoured to profit superior value in Section IV. prove above, of To of weight and quality, should marks indicative course the be superadded every device to prevent counterfeits. I have not occupied my reader's time with any observations on the relative proportion of to silver; nor was there any occasion gold do so. Having avoided specification of their value under to any shall pay no more attention to the any particular denomination, I of that value, than to the fluctuations alternating variations of the relative value both to all other commodities. This must be left of to regulate, for any attempt to fix it would be vain. With itself; •egard to obligations, they would be dischargeable in the terms of contract: an to pay 100 grammes of silver would be undertaking by the transfer of 100 grammes^ silver; unless, at the discharged time of payment, by mutual consent of the contracting parties, any on, other metal, goods at a rate agreed or should be substituted in preference.

262 CHAP. XXI. ON PRODUCTION. 259 be difficult calculate the advantage, that would aer rue It would to branches, from to industry an arrangement; but so in all its simple by the mischiefs that may be obtained, considering some notion of it Not only has the have resulted from a contrary system. relative individuals been repeatedly overset, and the of pecuniary position best planned and most beneficial productive enterprises altogether rendered abortive; but the interests of the public, as thwarted and private persons, well almost everywhere, subject to daily as of are, and hourly aggression. of or gold, bearing a A medium, composed antirely either silver none but its real intrinsic value, and, conse- certificate, pretending to caprice of legislation, would hold out such quently exempt from the to of commerce, and to every class advantages every department it could not fail to obtain currency even in foreign of society, that the countries. Thus, it, would become u nation, that should issue of money foreign consumption, and might general manufacturer for manufacture no nerive from that branch of inconsiderable revenue. a Blanc,* that by St. Louis, in Le We read particular coin issued J d and called from the figure of a lamb impressed upon or, agnels great request even among foreigners, and a favourite was in them, in commercial dealings, for the sole reason that it money invariably contained same quantity of gold, from the reign of St. Louis to the of VI. that Charles be so fortunate as to make this experiment, I hope Should France of honour do me the none to read this work, will feel any those who regret drain of its money, to use the expression of certain at the persons, who neither know nor choose to learn any thing of the matter. It is nor gold coin will go quite clear, that neither silver of the kingdom, without leaving behind value fully equivalent out a metal fashion it bears. The trade and manufacture of the and the to export are considered lucrative to jewellery yet they for the nation; an outgoing of the precious metals. The beauty of the occasion and pattern adds, to be sure, greatly to the price of the form metal thus exported; accuracy of assay and weight, and, above all but the the of the coin at an invariable standard of things, maintenance and quality, would be an equal recommendation, and weight would undoubtedly be just well paid for. as it be Should the same system was adopted by objected, that Charlemagne, when he called a pound of silver a livre, and that notwithstanding the has been since repeatedly deteriorated, coin in at called a livre, contained, was fact, but 96 gr., until, last, what I answer: That, neither in the time of Charlemagne, nor at any subse- 1. quent period, there ever been a coin containing a pound of has silver; that the livre has always been a money of account, an ideal measure. silver coin of Charlemagne and his successors, con The sisted of soh of silver, the sol being a fractional part of the poun(« weight. * Traite Hist, des Monnaie* de la France, Prolegom. p. 4.

263 260 ON PRODUCTION. BOOK I None of has ever borne on the face oi it the indication 2. the coin weight of it contained. There are extant in the col- of the metal in the of medals many pieces coined Charlemagne. lections of reign nothing more than name of the monarch, was The impression the occasional addition of the name of the town where the coin with the very rude Characters; which, indeed, in was struck, executed is not wondered at, considering that the monarch, though an avowed to be literature, himself unable to write. of was patron coin was yet further from bearing any 3. The thing indicative the standard quality of the metal, and this was the thing first of for the sol in the reign of Philip encroached upon; still contained I. the same fractional weight the lime as originally; but it was made of of 8 parts silver to 4 copper, instead of containing, as under up of monarchs, was the oz. of fine silver, which of the second race 12 livre. of the then weight actual money of England, The very singular state of the and the in respect to it extraordinary circumstances, that have occurred the first editions of this work appeared, have given a since decisive proof, the mere want of an agent of circulation, or, of the com- that is to support a paper-money absolutely modity, money, sufficient of security for its convertibility at a destitute of value, or high rate even at a par with metal, provided it be limited in amount to the actual demand of circulation.* Whence some English writers of great intelligence in of science have been led to con- this branch the purposes money call into action none of the clude, that, since of metallic properties material, some substance less and of its physical costly than the precious metals, paper, for instance, may be employed due attention be paid to keep the amount in them with good effect, if celebrated paper within demands of circulation. The the the of an ingenious plan, making Ricardo, has, with this object, proposed or corporate body, invested with the privilege of the Bank issuing the paper-money, liable bullion for its notes on demand. to pay in on so much gold or silver A note, actually convertible demand into in value below the value of the bullion it purports bullion, cannot fall on the other hand, so long as the issues of the to represent; and, paper exceed the wants of circulation, the holder will have do not no inducement to present it for conversion, because the bullion, when obtained, would not the purposes of circulation. If a casual answer of in the paper should bring it for conversion interruption confidence too large quantity, the paper remaining in circulation must rise in in the absence of any other circulating medium, and there in value, be an would to bring bullion to the bank to be converted inducement into paper.f * Vide our author's pamphlet, entitled, de V Angleterre, et des Anglais, 1815. 3d edition, p. 50, et seq. Proposals for an t and secure Currency, by D. Ricardo, 1816. It economical seems, the British legislature has since adopted the expedient of that writer, in its ,819 experiment is yet in progress; and whatever be The ultimate resu'l t must needs advance the interests of the science.

264 CHAP. XXL ON PRODUCTION. 261 X. SECTION and Base Metal* Coinage. Of a Copper that The copper coin are not, strictly speaking, of and base metal, be in this coin, except such debts cannot legally tendered money; for to be paid in fractional sums, or silver. Gold as are too minute gold the only metal-money of almost all commercial nations. are and silver kind of transferable security, a sign Copper coin representa- is a or of a of silver too diminutive to be worth the coinage. tive quantity such, the government, that issues should always exchange as it, and, demand for silver, when tendered to an it to the on amount equal of silver coin. Otherwise, there is no security againsi smallest piece of an excess beyond the the issue of circulation. demand Whenever there such an excess, the holders, finding the base is the gold silver it represents but metal less advantageous than and equal way: value, would strive to get rid of it in every not does in selling by loss, or by employing it in preference to pay whether to a in nominal for low-priced articles, which would consequently rise or by it to price; their creditors in larger quantity, than proffering to up the fractional part of sums in account. The enough make an interest in government, having its being at a discount, preventing because that would reduce the profit upon all future issues, generally authorizes the latter expedient. Before 1808, for instance, it was a legal tender at Paris to the extent of of every sum due; which had exactly the same effect* TV a partial debasement the national currency. Every body knew, as of bargain was concluded, that was liable to be paid in pro- a he when copper or brass metal, portion U silver, and made his cal- of A to if no such culation accordingly, on terms proportionably higher, than had existed. It is with this particular, precisely as wuh regulation and the weight of the silver coin; sellers do not stop to standard and but the dealers in gold weigh assay every piece they receive, and those connected with the trade, and silver, perpetually on are the watch to compare the intrinsic, with the current, value of the coin; and, whenever their values differ, they have an opportunity of gain; their operations to a constant tendency to obtain which, have the of the coin on a level with its real value. put current value to receive copper in any considerable proportion, The obligation in like manner, an influence upon the exchange with foreigners. has, is no There a letter of exchange on Paris payable in question, that francs is sold cheaper at Amsterdam, in consequence of the liability to receive part payment in or base metal; just as it would copper * a compound of copper and silver, containing" \ or \ only of the latter Billon, and the residue of the for Tier. It is used in the fractional coinage of France, to •upv,rsede the employment of copper in large quantities.

265 ON PRODUCTION. BOOK I. if the were made to contain less of silver and more of r>c, franc alloy. it is to be whole, the value of money observed, that, Yet, on the by this circumstance, as by the mixture of is much affected not so for the reasons alloy has positively no value whatever, alloy; for the whereas, the copper money, payable in the above stated of ;* ratio had a to the sum in silver, A, small intrinsic value, though inferior made equal value, there would have pass for: had it been of was it to no for an express law to give it currency. been occasion as a government gives silver on demand As long copper for the and base metal regularly presented, with little inconvenience it can the demand circulation give them very trifling intrinsic value; for very large quantity, they will maintain a and will always absorb their value as fully, as if really worth the fractional silver represented; on exactly the same principle, as a bank-note passes current, and that for years together, without any intrinsic value, just as well as if too the sum it purports on the face of it really worth contain. In this to manner, such coinage can be made more profitable to the govern- a by and the to receive it in part payment; ment than any compulsion of no value depreciation. The only danger the legal coin will suffer of counterfeits, which there is the strongest stimulus for ava- is that rice to fabricate, in proportion as the difference between the intrinsic, and the current value, grows wider. of Sardinia's predecessor, attempting to with- The last King in base currency, issued father in a a by his draw from circulation calamity, had more than thrice the poriod of quantity originally by the government thrown upon his hands. The same thing issued to the king happened Prussia, when, under the assumed name of of the Ephraim, he withdrew the base coin he had compelled the Jew to receive, during his distresses in the seven years' war;f Saxons and exactly the same reason. Counterfeits of the coin are usually for executed beyond the national frontier. In England it was attempted to remedy this evil in the by a coinage of half-pence year 1799, a and and executed with an attention with very fine impression, can rarely bestow. perfection, that counterfeiters XI. SECTION Of Form of Coined Money. the preferable The wear of the coin by friction is proportionate to the extent of quality, that its surface. of coin of equal weight and pieces Of two will suffer least from continual use, which offers the least surface to Jie friction. The spherical or globular form is, consequently, preferable in this * p. 166. Supra, f Mongez, 31. $ur les Monnaies, p. Consider.

266 CHAP. XXI. ON PRODUCTION. 26.% as least liable wear; but it has been rejected on account respect, to inconvenience. of its the cylinder, of equal depth and breadth, is Next this form, to but is smallest surface; fully as incon that, which exposes the this other; form of a very flat cylinder has, conse- as the venient the quently, been very generally adopted. However, from what has will appear, that the less it is flattened the bet- been already said, it and the coin should rather be made thick than broad. ; that ter impression, the chief requisites are, 1. That it With regard to the That weight quality of the piece; 2. and it be very dis- the specify and tinct, to the meanest capacity; 3. That the die oppose intelligible all possible difficulties defacing or reducing of the coin; that to the to say, that contrived, that neither the ordinary wear nor is it be so able reduce the weight without be to fraudulent practices should impression. The last coined English half-pence have destroying the projecting, but indented in the thickness of the circum- not a cord, and occupying the central part ference, circumference only, of the so make it liable neither to clipping nor wear. This mode as to be and in the silver and gold coinage with certainty might adopted and it is of prevent their dete- to success; much more consequence rioration. When the is in basso relievo, it should project but impression little, for the convenience of piling the pieces one upon another, as well as to the friction. On the same account a projecting reduce not be too sharp surface, or it would wear impression should on the rapidly. With to view too prevent this, experiments have away a of in alto relievo; but it was found that been made dies executed was thereby too much weakened, and liable to be bent or the coin broken. This plan, however, might possibly be practised with advan- if the pieces were secured greater thickness. tage, by giving of coin the least possible surface, The same motive to the the government should induce issue as large pieces as convenience to will admit; for the more pieces there are, the greater is the surface exposed to friction. No more small pieces of coin should be issued, than just enough to of small amount, and to pay transact exchanges All be paid in large pieces fractional sums. large sums should of coin. SECTION XII. the Party, on whom the Loss Of the Coin by Wear should properly fall of It has been a question, who ought to defray the loss, consequent upon the friction or wear of the coin ? In strict justice, the person who made use of it, in like manner as the wearer of any other had commodity. A man, that re-sells a coat after having worn it, sells it for less than he gave for it when new. So a man, that sells a

267 204 ON PRODUCTION. BOOK I. for some other commodity, should sell less than crown-piece it for should receive he gave; that of goods a is to say, smaller quantity it he than with. obtained specific coin, consumed But passage through of a portion the in its one the hands is less than almost any assigna- of any honest person, circulate for many years together, without any It may ble value. weight; and, when sensible diminution diminution is dis- of its the it may be to tell, by which of the innumerable covered, impossible effected. aware, that each of them has imper- it was I am holders depreciation of its exchangeable value, occasion- ceptibly shared the wear; that the quantity of goods it would purchase has by the ed bv an insensible gradation; that, although the declined depreciation has been imperceptibly progressive, becomes at last very manifest; it not be taken with new coin. Con- and that worn money will at par think, that, entire class of coin were gradually so I if an sequently, make a re-coinage necessary, its holders could not in reduced as to exchanged reason expect that their reduced coin should be for new pioce for par, be received, even by at piece. Their money should at no more than the government, real value: the silver it contains its is less quantity than at the first issue; and it has been received by in at a of value; they have given for it less goods the holders lower rate in the outset. than they would have done is the course that rigid justice w Jd prescribe; but In fact this there reasons, why it should not be strictly enforced. are two 1. Each individual piece of coin is not, if I may be allowed the expression, a of commerce. Its exchangeable substantive article is calculated, according to the weight and quality of the value not question, according to the average weight and in but identical piece coin in large quantities, as quality by common of the ascertained A crown piece of an earlier date, and more worn, is experience. in exchange for one more yet freely received perfect; the new and difference sunk in the average. The mint issues new pieces every is r of the eight and standard, which prevents the coin from year full w in value, in consequence declining sensibly friction, even for of the many years after issue. its is This circumstance by the fact, of the French pieces illustrated of 12 and 24 sous passing current at par with the crown-pieces of 6 liures without difficulty; although the same nominal sum, in the any of the worn pieces 24s., contained in reality alout shape of 12 and crown-piece. J less silver than the The subsequent law, which prohibited their being taken by the or private persons at public receivers 10 and 20 sous, more than rated them their full intrinsic value, but below the at at which rate, the then holders had taken them. For their value had been previously kept up to 12 and 24 sous in spite of the wear, by reason »>f theii passing current with the crown-piece. Thus, the last holder at par was saddled with the entire loss of a friction, to which the hmumer- nble hands they passed through had all contributed. had 2. at the impression is equally effectual in giving currency The

268 . XXII. ON PRODUCTION. 265 last as at the first, although it becomes in course of time scarcely if at all visible; witness the shillings of England. The coin derives, as above explained, a certain degree of value from the mere impres- sion, which value has been admitted and recognised throughout, until it reaches the ultimate holder, who has in consequence received it at a higher rate, than he would a piece of blank bullion of equal weight. To saddle him with the difference, would be to make him lose the whole value of the impression, although it has been equally serviceable to perhaps a million of others. On these grounds, I am inclined to think, the loss by wear, and that of the impression, should be borne by the community at large; that is to say, by the public purse: for the whole society derives the benefit of the money; and it is impossible to tax each individual, in the precise proportion of the use he has made of it. To conclude: every individual, that carries bullion to the mint to be coined may be fairly charged the expenses of the process, and, if thought advisable, the full monopoly-profit. Thus far there is no harm done: his bullion is increased in value to the full amount of what he has been charged by the mint; otherwise, he would never have carried it thither. At the same time, I am of opinion, that the mint should always give a new piece in exchange for an old one on demand: which need nowise interfere with the utmost possible pre- cautions against the clipping and debasing of the coin. The mint should refuse "such pieces as have lost certain parts of the impression, which jare not liable to fair and unavoidable wear; and the loss in that case should fall on the individual, careless enough to take a piece thus palpably deficient. The promptitude, with which the public would take care to carry injured or suspicious pieces to the mint, would greatly facilitate the detection of fraudulent practices. With diligence on the part of the executive, the loss arising from this source might be reduced to a mere trifle, and the system of na- tional money would be materially improved, as well as the foreign exchange. CHAPTEB XXII. OF SIGNS OR REPRESEN f ATIVES OP MONEY. SECTION I. Of Bills of Exchange and Letters of Credit. A BILL of exchange, a promissory note or check, and a letter oi credit, are written obligations to pay, or cause to be paid, a sum of money, either at a future time, or at a different place.

269 2

270 CHAP. XXII. ON PRODUCTION. 267 place for a sum actually due at that place; and no sum can be there actually due, unless an equal value, in some shape or other, has been remitted thither: the imports of a nation can only be paid by the Bills of exchange are a mere national export; and vice versa. representative of sums due; in other words, the merchants ot one country can draw bills on those of another for no more, than the full amount of the goods of every description, silver and gold in- cluded, which they may have sent thither directly or indirectly. If one country, say France, have remitted to another country, Ger- many perhaps, merchandise to the value of 2 millions of dollars, and the latter have remitted to the former to the amount of 3 millions of dollars, France can pay as much as 2 millions by the means of bills of exchange, representing the value of her export; but the remaining 1 million cannot be so discharged directly, although pos- sibly they may by bills of exchange upon a third country, Italy, for instance, whither she may have exported goods to that extent. There is, indeed, a species of bills, called by commercial men, accommodation-paper, which actually represents no value whatever. A merchant at Paris, in league with another of Hamburgh, draws bills upon his correspondent, which the latter pays or provides for, by re-drawing and negotiating or selling bills at Hamburgh upon his correspondent at Paris. So long as these bills are in possession of any third person, that third person has advanced their value. The negotiation of such accommodation-paper is an expedient for borrowing, and a very expensive one; for it entails the loss of the banker's commission, brokerage and other incidental charges, over and above the discount for the time the bills have to run. Paper of this description can never wipe out the debt, that one nation owes another; for the bills drawn on one side balance and extinguish those on the other. The Hamburgh bills will naturally counterpoise those of Paris, being in fact drawn to meet them; the second set destroys the first, and the result is absolute nullity. Thus it is evident, that one nation cannot otherwise discharge its debts to another, than by remittance of actual value in goods or commodities, in which term I comprise the precious metals, amongst others, to the full amount of what it has received or owes. If the actual values directly remitted thither are insufficient to balance the receipts or imports thence, it may remit to a third nation, and thence transport produce enough to make up the deficit. How does France pay Russia for the hemp and timber for ship-building imported thence? By remittance of wines, brandies, silks, not merely to Russia* but, likewise to Hamburgh and Amsterdam, whence again a remittance of colonial and other commercial produce is forwarded tc Russia. Governments have commonly made it their object to contrive that the precious metals shall form the largest possible portion of the national import from, and the least possible portion of the na- tional export to, foreign countries. I have already taken occasion to remark, with regard to what is improperly called the balance of

271 268 ON PRODUCTION. BOOK I if the national merchant finds the precious metals more trade, tfi;*t, a likewise profitable foreign remittance than another commodity, it is to remit in that form; for the state can only of the the interest state in the persons of its individual subjects; and, in the lose and gain foreign commerce, whatever is best for the individuals in matter of best is state also.* Thus, when impediments the aggregate, for the export precious metals by in- in the way of the of the are thrown effect is to compel an export in dividuals, the some other shape, less to the individual and the public too. advantageous SECTION II. Of Banks of Deposit. a small state and its neighbours The constant intercourse between occasions a of foreign coin. For, although the small perpetual influx a national coinage its own, yet, the frequent neces- state may have of taking foreign instead of the national coin in payment, of the sity fixation requires the ratio of their relative value, in the current the of of business. transactions are many mischiefs attending the use of foreign coin, aris- There ing chiefly from the of weight and quality. It is great variation old, and defaced; not having participated in often extremely worn, of the nation that issued it, the general re-coinage where, perhaps, it longer current; all which circumstances, though considered is no its current relative value to the local coin, yet, do not quite in settling reduce it to the natural level of depreciation. Bills drawn from abroad upon such a in the state, being payable are, in consequence, negotiated abroad coin thus rendered current, those drawn upon foreign countries, and and, at some loss; conse- of a coin and intelligible value, are in quently, payable more steady smaller state at a premium, because the holder of negotiated in a in a depreciated currency. In them must have purchased them the foreign coin is always exchanged short, local currency for the to loss. a by of this inferior class is the subject The remedy devised states of the present section. They established banks,f where private any amount of merchants could lodge of bullion, local national coin, or of foreign coin, reckoned by the bank as bullion; and the amount, * This position applies to foreign commerce only; the monopoly-profits of individuals in the are not entirely national gains. In internal deal- home-market the community. of the utility obtained is all that is acquired by the ings, sum of Venice, Genoa, Amsterdam, Hamburgh had each an establishment + and this nature. All rive been swept away by the torrent of the revolutionary war-, but there may be some use in examining the nature of institutions that may some day other oe re-established. Besides, the investigation will throw light or upon the history of the communities that established them, and of commerce in all the general. any rate, it was necessary to enumerate At various expedient* that have been resorted to as substitutes for money.

272 CHAP. XXIL ON PRODUCTION. 2GU so lodged, was entered as so much money of the legal na standard of weight and quality. At the same time, the bank opened an account with each merchant making such deposit, giving him credit for the amount of the deposit. Whenever a merchant wanted to make a payment, there was no occasion to touch the deposit at all; it was sufficient to transfer the sum required, from the credit of the party paying, to that of the party receiving. Thus values could be transferred continually by a mere transfer in the books of the bank. The whole operation was conducted without any actual transfer of specie; the original deposit, which was entered at the real intrinsic value at the time of making it, remained as security for the credit transferred from one person to another; and the specie, so lodged with the bank, was exempt from any reduction of value by wear, fraud, or even legislative enactment. The money still remaining in circulation, wherever it was ex- changed for the bank deposits, that is to say, for entries in the bank books, necessarily lost in proportion to the reduction of its intrin- sic value. And this loss occasioned the difference of value, or agio at Amsterdam, between bank money and circulating money, Xhe average from 3 to 4 per cent, in favour of the which was on former. It will easily be imagined, that the bills of exchange, payable in a currency so little liable to injury or fluctuation, must be negotiable on better than ordinary terms. In fact, it was observable, that on the whole, the course of exchange was rather in favour of the coun- tries that paid in bank, and unfavourable to those that paid in circu- lating money only. The bank retained the deposities in perpetuity; for the re-issue would have been attended with serious loss; inasmuch as it would have been the same thing, as producing good money of the full original value, to be taken at par with the deteriorated circulating coin, which passes current for—not its intrinsic, but its average weight. The coin withdrawn from the bank would have been mixed up with the mass of circulation, and passed current at par with the rest. So that the withdrawing such deposits would have been a gratuitous sacrifice of the excess of value of bank above cir- culating money. "This is the nature of banks of deposit; most of which combined other operations with the primary object of their institution; but of them I shall speak elsewhere. They derived their profits, partly r rom a duty levied upon every transfer, and partly from operations incident to, and compatible with, their institution ; as, for example, advances made upon a deposit of bullion. It is evident, that the inviolability of- the deposit, confided to them, is essential to the success of such establishments. At Amster- dam, the four burgomasters, or municipal magistrates, were trus tees for the creditors. Annually, on leaving office, they handed over the trust to their successors, who, after inspecting the account, and verifying it bv the registers of the bank, bound themselves bv

273 270 ON PRODUCTION. Boon I. oath, to surrender their charge inviolate to their successors in office. This trust was scrupulously executed from the first establishment of the bank in 1609 until 1672, when the forces of Louis XIV. pene- trated as far as Utrecht. The deposits were then faithfully restored to the individuals. It would seem to have been afterwards less scrupulously managed; for, when the French took possession of that capital, in 1794, and called for a statement of the concern, it was found to be in advance of no less a sum than 10,624,793 to florins the India company, and to the provinces of Holland and West- Friezeland, which were wholly unable to repay it. In a country governed by a power without control or responsibility, it may be expected,, that such a deposit would have been still more exposed to (a) violation, SECTION III. Of Banks of Circulation or Discount, and of Bank-notes, or Convertible Paper. There is another kind of bank, founded on totally different prin- ciples ; consisting of associated capitalists, subscribing a capital in transferable shares, to be employed in various profitable ways, but chiefly in the discount of promissory notes and bills of exchange, that is to say, the advance of the value of commercial paper not yet with the deduction of interest for the time it has to run, which due, is called, the discount These companies, with a view to enlarge their capital and extend their business, commonly issue notes, purporting to bear a promise to pay to the bearer on demand, the gold or silver specified on the face of them. Their security for the due discharge of these engage- ments is, the commercial paper held by the bank, and subscribed by individuals in solvent circumstances; for the company gives its notes in discount, or, what is the same thing, in purchase of this paper. The private commercial paper, indeed, having a term to run before it falls due, can not be available in discharge of notes payable on demand; for which reason, every well-conducted bank of circu- lation confines its advances of cash, or notes payable in cash on («) Public banks of deposit are now quite obsolete, and will probably never be revived. In fact they are clumsy expedients, suited only to the early stages of commercial prosperity, and are liable to many inconveniences. They hold ou* a strong temptation to internal fraud and violence, as well as to external rapaci ty; they withdraw from active utility a large portion of the precious metals, which might perhaps be turned to better account elsewhere ; and they yield a •ie£-ee of facility of circulation nowise superior to what may be afforded by the ftommon process of banking, except perhaps in security, and infinitely more ex- pensive to the public and to individuals. They have accordingly been every- where supplanted by banks of circulation, or by the expedient of an inconvertible paper-money. T.

274 CHAP. XXII. ON PRODUCTION. 271 demand, to the discount of bills at very short dates, and is careful to have always in hand a considerable amount of specie, probably a third, or as much as the half of the total amount of their circulating notes; and, even with all possible caution, it is at times greatly embarrassed, whenever a want of confidence in its solvency, or any untoward event, causes a sudden run upon the bank for cash. The bank of England has been obliged, on an occasion of this kind, to scrape together as many sixpences as it possibly could find, to gain time by the delay inseparable from payments in such a diminutive coin, until a part of the paper in its possession had fallen due. The discount bank of Paris, in the year 1788, being then under control of government, had recourse to similar paltry expedients. The profits of banks of circulation are very considerable; that portion of the notes, which is issued on the credit of private com- mercial paper, continues running at interest; for the advances have been made with the deduction of the discount. But the portion of the paper, issued on the credit of the specie in reserve, brings no profit; the interest lying dormant in the specie thus withdrawn from circulation. The banks of England and France make no advances to private persons, except on bills of exchange, and give no credit beyond the funds in hand. They indemnify themselves for the trouble 01 receiving and paying on account of individuals by turning to account the floating balance left in their hands. These two estab- lishments have, besides, undertaken the business of paying the inter- est upon the respective national debts, receiving an allowance foi their trouble: furthermore, they occasionally make advances to the governments. From these various operations, they derive a great increase of their profits. The one last mentioned, however, is completely at variance with the purposes of their establishment, as we shall pre- sently find. The advances made to the old government of France by the then bank of discount, and those of the bank of England to the English government, compelled those bodies to apply to the respective legislatures to give their notes a compulsory circulation; thus destroying their fundamental requisites of convertibility. The consequence has been, that the former of these banks went all to pieces. The establishment of several banks, for the issue of convertible is more beneficial than the investment of any single body notes, with the exclusive privilege; for the competition obliges each of them to court the public favour, by a rivalship of accommodation and solidity. Banks of circulation issue their notes either in the discount, ot promissory notes or bills of exchange, that is to say, in giving their notes payable on demand, and circulating like cash, in exchange foT private paper payable at a future date, upon which interest is deduct* ed ; which is the course pursued by the present bank of France, anu oy all the English banks, public and private; or else in lending at

275 272 ON PRODUCTION. BOOK L to solvent individuals, like those Scotland. Merchants of interest of latter way, supplied with good credit the are, in the sums necessary them is thereby tor their current expenses and payments, and each of enabled embark his whole capital in his commercial enterprises, to the calls upon him without being obliged to reserve any part to meet Paris of The merchant of business. or London must course in the have always on hand either in his private contrive matters, so as to bank, coffers sufficient to face the demands upon or in the a sum merchant Edinburgh is relieved from this the of him; whereas, liberty to invest the whole of necessity, in the con- and at his funds, the bank will advance him the money he may happen fidence that to require, (a) A bank circulation affords the advantage of economizing capi- of tal, reducing the amount of the sum, kept in reserve for the cur- by and contingent expenses the individuals it accommodates. rent of notes, payable cash demand, and circulating as or Bank bills on so a part in the progress of national wealth, an- play important in the brain of many writers nave engendered such important errors on other topics, that it will be worth while of repute and information and in a very particular to examine their nature consequences manner. the residue of this section applies ex- I should premise, that to bank-notes, depending solely upon the credit of the clusively for bank and convertible at pleasure into cash or their currency, specie. It is a matter of no less curiosity than of importance, to inquire whether bank-notes, or of intrinsic value< be any paper destitute to the stock national wealth, and what, if any, is the pos- addition of that addition; were there of no limits to it, there sible extent for, the wealth, that a state might acquire in a short could be no end to by the mere fabrication of some reams of paper. The time solution of this grand problem down as one of Smith's happiest may be set yet it is not every body that comprehends reasoning; I efforts; his render it more generally intelligible. will try to of a nation require The wants certain supply of such particular a commodity, and the extent of that supply is determined by the rela- tive prosperity of the nation for the time being. A surplus of each of those commodities beyond this demand is not produced at either nr, if a decline of relative local value: all, produced, must occasion its way out of the country, and goes in it, therefore, naturally finds of a market, where it may be in higher estimation. quest in other commodities; all Money is, it is a con- this respect, like two methods resolve themselves practically into one; for merchants (a) The ot good credit can always procure discountable paper; and the sole essential is difference in one case, the credit that, individual and unevidenced, in the is, other, evidenced, and, in most cases, joint also. The bank of England requires the names more than one firm on the paper it discounts. Country bankers of often content themselves with the security, or note of hand, of the borrower s'one. T

276 CIIAP. XXII. ON PRODUCTION. 27 a venient agent, and, therefore, employed as such in all operations of exchange; but the intensity of the demand for it is determined in each community, by the relative extent and activity of the exchanges negotiated within it. As soon as there is a supply of money suffi- cient to circulate all the commodities there are to be circulated, no more money is imported ; or, if a surplus flow in, it emigrates again in quest of a market, where its value is greater, or where its utility is more desired. It is seldom or never that any body keeps in his purse or his coffers more specie than enough to meet the current demands of his business of consumption.* Every excess beyond these demands is rejected, as bearing neither utility nor interest; and the community at large is fully supplied with specie, as soon as each individual is possessed of the portion suitable to his condition and relative station in society. It may be safely left to private interest, to make the best use of the excess of specie beyond the demand for circulation. The notion that every item of specie, that crosses the frontier, is so much dead loss to the community, is just as absurd as the supposition, that a manufacturer is so much the poorer, every time he parts with his money in the purchase of the ingredient or raw material of his manu- facture or that individuals, the aggregate of whom makes up the ; nation, present foreigners gratuitously with all the money they part with. Taking it for granted, then, that the specie, remaining in circula- tion within the community, is limited by the national demand for circulating medium; if any expedient can be devised, for substi- tuting bank-notes in place of half the specie or the commodity, money, there will evidently be a superabundance of metal-money, and that superabundance must be followed by a diminution of its relative value. But, as such diminution in one place by no means implies a contemporaneous diminution in other places, where tha expedient of bank-notes is not resorted to, and where, consequently, no such superabundance of the commodity, money, exists, money naturally resorts thither, and is attracted to the spot where it bears the highest relative value, or is exchangeable for the largest quantity of other goods: in other words, it flows to the markets where com modities are the cheapest, and is replaced by goods, of value equal to the money exported. The money that can emigrate in this manner, is that part only of the circulating medium, which has a value elsewheie than within the limits of the nation; that is to say, the specie or metal-money. Since, however, specie does not emigrate without an equivalent return; and, since its value, which before existed in the shape of specie, and was exclusively engaged in facilitating circulation, thenceforth assumes the form of a variety of commodities, all items of the repro- ductive national capital, there follows this remarkable consequence. that the national capital is enlarged to the full amount of all the spe- * No account is here taken of the money hoarded, which, for the national :n* lerest, might just as well have remained in the mine.

277 274 ON PRODUCTION. BOOK L the introduction substitute Nor is the cie exported upon of the cramped internal national circulation of money by for at all want of the functions this export; for the specie, that has been withdrawn, by the paper substituted in its stead. are just as well performed acquisition the may thus However valuable an national capital I have supposed, it receive, must not be rated above its real amount. sake for simplicity, that half the specie might be replaced by the of but is a monstrous proportion; particularly if circulating notes: this considered, that paper cannot retain any value as money be it its readily it is instantly convertible into specie; longer than while and I say, readily and instantly, because otherwise people would prefer is at all times, and without specie, which least hesitation, taken the for money. insure this requisite convertibility, it is necessary, To at all times fund in reserve, in private bills or that, besides having a specie, sufficient all the meet or in notes that may be securities, to the be at all times within the reach of presented, bank itself should of its notes. Therefore, if the territory be of any extent, the holders the notes so generally circulated, as to form half of the circu- and the of the bank must be greatly lating medium, subordinate offices to place them within reach of all the note-holders. multiplied admit- the of such an arrangement, and But, granting possibility ting, that paper might supplant as much as half the requisite national currency of specie, let us see what would be the amount of the ac- quisition to the national capital. of repute ventured to estimate the requisite circu- No writer has nation, higher than annual national of any lating specie £ of the -fa. Taking product; some, indeed, have reckoned it as low as annual product, which, for my the highest estimate, viz. } of the consider greatly above the reality in any case; I nation, own part, a whose annual product should amount to 20 millions, would need but of specie. Therefore, in case the half, or 2 millions, 4 millions were supplanted by and employed in augmenting circulating paper, be for all once the national productive capital, that capital would by a value equal to g$ or annual product V of the augmented, of r the nation. the annual product of a nation would, probably, be much Again, at \ of the gross national productive capital; but let it overrated T be set down at that rate, allowing 5 per cent, interest on productive capital, and 5 per and profits of the industry it sets in cent, wages On the paper substitute to add motion. this calculation, supposing the national capital, in the ratio of annual product, this to of its V T not at the highest estimate exceed addition will of the previous £ T ? capital. Although the practicable issue of bank-notes procures to a nation of moderate wealth accession of capital, much less considerable an than people may fondly imagine, this accession is, notwithstanding, o\ very great value; for, unless the productive energy of the nation be extremely great, Great Britain, or the national spirit of as in annual an.d persevering, as in HollarJ, the frugality very general

278 CHAP. XXII. ON PRODUCTION. 27£ savings withdrawn from unproductive consumption, to be added to productive capital, form, even in thriving states, a very inconsidera- ble portion of the gross annual revenue. Nations, whose production is stationary, as every body knows, make no addition to their pro- ductive capitals; and the consumption of those on the decline an- nually encroaches on their capitals. Should the paper-issues of a bank at any time exceed the demands of circulation, and the credit enjoyed by the establishment, there follows a perpetual reflux of its notes, and it is put to the expense of collecting specie, which is absorbed as fast as collected. The Scotch banks, though productive of great benefit, have been obliged, upon such trying occasions, to keep agents in London constantly employ- ed, in scraping specie together at a charge of two per cent., which specie was instantly absorbed. The bank of England, in similar circumstances, was under the necessity of buying gold bullion, and getting it coined; and this coin was melted again as fast as it was paid by the bank, in consequence of the high price of the metal, which was itself the effect of the constant purchases made by the bank, to meet the calls upon it for specie. In this manner, it sus- tained the annual loss of from 2^ to 3 per cent., upon a sum of about 850,000/.,* more than 20 millions of our money. I say nothing of the situation of this bank of late years, since its notes have acquired a forced circulation, and, consequently, altered their nature entirely. The notes issued by a bank of circulation, even if it have no funds of its own, are never issued gratuitously; and, therefore, of course, imply the existence, in the coffers of the bank, of a value of like amount, either in the shape of specie, or of securities, bearing in- ; terest upon which latter only the whole real advance of the bank is made; and this advance can never be made upon securities that have a long time to run; for the securities are the fund, that is to provide for the discharge of another class of securities, in the hands of the public at large, payable at the shortest of all possible notice, namely, on demand. Strictly speaking, a bank can not be at all times in a condition to face the calls upon it, and deserve the entire confidence of the public, unless the private paper it has discounted, be all, like its own notes, payable on demand; but, as it is no easy matter to find substantial assets, that shall bear interest, and at the same time be redeemable at sight, the next best course is to confine its issues to bills of very short dates; and, indeed, well-conducted banks have always rigidly adhered to this principle. From tne preceding considerations may be deduced a conclusion, fatal to abundance of systems and projects, viz. that credit-paper can supplant, and that but partially, nothing more than that portion of the national capital performing the functions of money, which cir- culates from hand to hand, as an agent for the facility of transfer; consequently, that no bank of circulation, or credit-paper of any de nomination whatever, can supply to agricultural, manufacturing, or * Wealth of Nations, book ii. c. 2.

279 276 ON PRODUCTION. BOOK I. any funds construction of ships or commercial enterprise, for the digging machinery, or canals, for the bringing of of for the mines of commencement waste land into cultivation, long-winded or the in short, to be employed as vested capital. speculations; any funds, is, its of The indispensable requisite credit-paper instant converti- total paper issued does not the sum bility into specie; when of the coffers of the bank, under the shape of specie, the deficit exist in the least should supplied by securities of very short dates; where- at be establishment, that should lend its to be vested in enter- funds as, an pleasure, could never at whence they could not be withdrawn prises, example will illustrate this be prepared with such securities. An a bank circulation to lend 6,000 dollars of position. Suppose of as to a landholder on mortgage of his its notes, circulating cash, the amplest security. This loan land, presenting destined by the is landholder construction of necessary buildings, for the culti« to the of the estate; which purpose he contracts with a builder vation for 6,000 dollars notes advanced by the bank, him the of and pays the builder, after a short lapse of time, be desirous Now, turn- if of the the bank can notes into specie, him by a transfer of ing not pay The only property the bank has to the mortgage. the 6,000 meet dollars notes is a security, ample beyond doubt, but not available of the moment. at hands of a bank, The securities hold to be a solid basis in the I the whole of its for of notes, provided those securities be of issues solvent persons, and have not too long the securities will to run; for or with be redeemed either with specie, notes of the bank itself. the In the first case, the bank is supplied with the means of paying its notes; in the it is saved the trouble of providing for them. second, circumstance, the be deprived of their power of If, by any notes specie, the task of replacing as metal for the paper- the circulating devolve upon the bank; nor was it at the first sad- not money does the business of turning to account the metal-money its dled with notes rendered superfluous. For, as we the have already observed, can the whole of its paper with the private securi- bank extinguish it holds. The inconvenience falls upon the public, which i-s ties by under of finding a new agent of circulation, either necessity the a re-import of the metal-money, or by the substitution of private paper; but probably the public would, in such circumstances, apply again to a on sound principles.* bank conducted first of this passage, this very circumstance has hap- * Since the publication pened in respect to the bank of Paris, in 1814 and 1815, when that capital was and occupied by the allied armies. The advances of the bank to the besieged to individuals, which could not be recalled immediately, did government, and of which the shareholders can not for not exceed the capital the establishment, and its be called upon; to bearer, were all covered, either paper-issues, payable bv specie in hand, or by commercial paper of short dates. By this means, not- withstanding the the merc^Nants con- very critical circumstances of the moment, well to its tinued not employ do without; and they notes: which they could wore paid as usual in cash without interruption, during the whole of the hostile circulation, occupation: which shows once the utility of a bank of at and the advantage of leaving inviolate the convertibility of paper-issues.

280 CHAP. XXII. ON PRODUCTION. 2^ to explain, many schemes of agricultural This will serve why so issue of and convertible notes on ample banks for the circulating of a many other schemes similar nature, have landed security, and so in very little time, with more or less loss to the fallen to the ground is equivalent to paper of per- public* Specie and the shareholders payable at the moment; consequently it can only fect solidity, and by notes unquestionable credit, and payable on de- be supplanted of such notes cannot be discharged bare security, even and mand ; by a of the best possible kind. exchange in the nature of accommo- For the same reason, bills of as it is called, never be a sound basis for an issue can dation-paper, exchange are paid when due by of of convertible paper. Such bills a further term to run, and are fresh bills, that have negotiated with the deduction discount. When the latter fall due, they are met of a third payable at a still later date, which are discounted in by set bank discounts such bills, operation is no If the the like manner. expedient for borrowing of the, bank more than perpetuity; an in a second, the second with the third, the first loan being paid with so on. And the bank experiences the evil of issuing more and of its notes, than circulation will naturally absorb, and the credit of the for the the establishment will support; notes, borrowed upon such bills, do not help to circulate and diffuse real value, because they and contain no real value themselves; consequently, they represent to be exchanged for specie. It is on this account, continually recur the that of Paris, while it continued to be well ad- discount-bank ministered, did, as the present banks of France and England do still refuse, as far as it is to discount accommodation-paper. able, are similar equally mischievous, when a The consequences and government perpetuity, or even for a to in bank makes advances This was the cause very long period, the failure of the bank (a) of Not being able to obtain payment from government, of England. was unable to withdraw the notes it which the loan was made. in From that moment notes ceased to be convertible; and until the its of forced circulation. in 1822, enjoyed a resumption cash payments to bank with the The government, being itself unable the supply means payment, discharged that body from its liability to its own of creditors-! * In 1803, the land-bank of Paris was, for this reason, obliged to suspend the payment of its in cash; and to give notice, that they would be paid off by notes out of the of its real securities. instalments proceeds in his tract on the Paper Credit of Great f Thornton, written expressly Britain, (a) That say, advances its notes. A is to an individual, may ad- bank, like vance its capital, which then becomes more or less vested and fixed. The whole capital of the bank of England has been thus advanced; and there would have been no danger, had not advanced its notes also. When the advances of paper it ire made upon transferable securities, stock, exchequer bills, and the like, those securities may be sold for cash, or for the notes of the bank itself, so long as tfny retain their value, and thus the safety and solvency of the bank maintained, f is unnecessarily complex; for the government might itsel but this operation have sold, and thus have saved the brokerage or profit accruing upon the opera lion to the bank. T.

281 21H ON PRODUCTION. . BOOK of the notes bank issuing convertible money run The holders of a risk, little as the bank is well administered, and inde- so or no long a of confidence the government. Supposing total failure pendent of it at once for payment, the worst that can to bring all its notes upon is, to be paid in good bills of exchange at holders to the happen benefit of discount; that short dates, with say, to be paid the is to the of exchange,* whereon the bank has issued its with same bills the bank have much addi- capital of its own, there is so If notes. a under to no government subject but, control, or to tional security; a capital of the bank, nor the assets nominal contiol only, neither the its hands, offer any solid security whatever. The will of an arbi- in is all the trary prince to depend upon: and every act holders have is an act of imprudence. of credit capable far as I am is the effect of banks of judging, such of As and national their paper issues upon individuals and of circulation described wealth. This effect Smith in a quaint and ingenious is by The capital of a nation he likens to an extensive tract metaphor. the cultivated districts represent the produc- of country, whereupon and the high roads the agent of circulation, that is to tive capital, as the medium distribute the produce say, the money, that serves to of He then supposes a machine among the several branches society. be invented, for transporting to produce of the land through the the air; that machine would exact parallel of credit-paper. be the Thenceforward high roads might be devoted to cultivation. the * The commerce and industry of the country, however,' he con- tinues, * may be somewhat augmented, cannot be alto- though they so secure, when they thus, as it were, suspended upon the gether are paper-money, when they travel about upon the of Daedalian wings as view to justify the suspension of cash-payments by that establishment, with a positions of Smith upon this subject. He tells us, that the has attacked the upon the bank, which brought about the suspension, was oc- extraordinary run not by the excess of its casioned, on the contrary, by their partial issues, but, contraction. An excessive limitation of bank-notes," he observes, " will pro- " and to duce failures, failures must cause consternation, consternation must lead run upon the bank for guineas." By this reference to an extreme case, he en- a to support his paradoxical opinions. When a convertible paper has deavours of the country too large a portion of the metallic money, succeeded in driving out and the confidence in the paper happens suddenly to decline, great confusion and embarrassment will doubtless ensue, because the remaining agent of circulation to effect the business; great mistake to suppose, that is insufficient but it is a remedied by the multiplication of a paper, not enjoying the the deficiency can be of the public. If the bank of England was able to confidence survive the shock, it was because indispensable necessity of some agent of transfer, of some of the of money or other, in default of all others, in so commercial a country; be- paper cause the government and the bankers of Ijondon, who were interested in the safety of it for cash, until it should the bank, unanimously agreed not to call upon government should have paid in a to be is to say, until the condition pay; that its advances in actual value. The bank had lent to.the government more than its whole capital; for to that extent it might have gone with safety, its capital not being wanted discharge or convertibility of it* paper; had it not so for the done, the short bills in its possession would have been sufficient for the extinc- tion of its convertible paper.

282 CHAP. XXIL ON PRODUCTION. 279 solid ground of gold and silver. Over and above the accidents, to which they are exposed from the unskilfulness of the conductors Oi this paper-money, they are liable to several others, from which no prudence or skill of those conductors can guard them. An unsuc- cessful war, for example, in which the enemy get possession of the capital, and consequently of that treasure, which supported the credit of the paper-money, would occasion a much greater confusion in a country, where the whole circulation was carried on by paper, than in one, where the greater part of it was carried on by gold and silver The usual instrument of commerce having lost its value, no ex- changes could be made except by barter or upon credit. All taxes having usually been paid in paper-money, the prince would not have wherewithal either to pay his troops, or to furnish his magazines; and the state of the country would be much more irretrievable, than if the greater part of its circulation had consisted in gold and silver. A prince, anxious to maintain his dominions at all times in the state in which he can most easily defend them, ought upon this account to guard, not only against that excessive multiplication of paper- money, which ruins the very banks which issue it, but even against that multiplication of it, which enables them to fill the greater part of the circulation of the country with it.'* Forgery alone is enough to derange the affairs of the best con- ducted and most solid bank. And forgery of notes is more to be apprehended, than counterfeits of specie. The stimulus of gain is greater. For there is more profit to be made by converting a sheet 'jf paper into money, than by giving the appearance of precious -netal to another metal, that has some though very little, intrinsic -alue, especially if it be compounded or covered with a small por- tion of the counterfeited metal; and perhaps, too, the materials for the former operation are less liable to discovery. Besides, the coun- itself, terfeits of specie can never reduce the value of the specie because the latter has an intrinsic and independent value as a com- modity whereas, the mere belief that there are forged notes abroad, ; so well executed, as to be scarcely distinguishable from the genuine, s enough to bring both forged and genuine into discredit. For which reason, banks have sometimes preferred the loss of paying notes they know to be forged, to the hazard of bringing the genuine ones into discredit, by the exposure of the fraud. One method of checking the immoderate use of notes is, to limit them to a fixed and high denomination of value; so as to make them adapted to the circulation of goods from one merchant to another, but inconvenient for the circulation between the merchant and the consumer. It has been questioned whether a government has any right to prohibit the issue of small notes, where the public is willing to take them; and whether such limitation be not a violation of that liberty of commerce, which it is the chief duty of a government to protect. But the right undoubtedly is jusi as complete, as that of * Wealth of Nations, book ii. chap. 2.

283 280 ON PRODUCTION. BOOK I a building pulled down, because it endangers the ordering to be public safety. IV. ECTION Of Paper-Money. paper-money, have reserved The distinctive appellation I of to which the ruling power may exclusively for those obligations, in payment for all purchases, and compulsory circulation a give debts and contracts, stipulating discharge delivery of money. all a the I call them obligations, because, though authority that issues, bound they redeem them, at least not immediately, yet not is to promise of redemption at sight, which is abso- commonly express a or of redemption at a date expressed, for which lutely nugatory; is no there of security; or of territorial indemnity, the value of sort we shall presently inquire into. which government Such obligations, whether subscribed by the or by converted into paper-money by the public au- individuals, can be authorise the owners of money to pay thority only, which alone can The act is, indeed, an exertion, not of legitimate, but of in paper. a deterioration of the national money in arbitrary authority; being the extreme degree. Upon principles above established, it should seem, that a mo- the of all value as a commodity, ought to pass ney destitute none in for all free dealing subsequent to its issue; and this is always the case in practice sooner or later. The notes of what was improperly called Law's Bank, and the issued during the French assignats in or cancelled; those of revolution, were n^ver regularly called yet pass present for a single sol. not at the highest denomination would pass for How then, came they ever ? to more than their real value are many expedients of fraud and violence, which Because there a temporary efficacy. will always have the first place, a paper, wherewith debts can be legally, though In a of value from that single fraudulently, discharged, derives kind circumstance. Moreover, the paper-money may be made efficient the perpetually recurring claims to discharge public taxation. of Sometimes tariff" or maximum a price is established; which, in- of deed, soon extinguishes the production of the commodities affected by it, but to the paper-money a portion of the value of those gives in the very creation of a paper-money actually existence. Besides, the disappearance of metallic mo- with forced circulation occasions at par ; made to pass for, as it is with paper, it naturally seeks a ney market, where it can find its true level of value. The paper-money is thus left exclusive possession of the business of circulation; in the and the absolute necessity of some agent of transfer, in every civil- So ized community, will then operate maintain its value.* to urgent • Wherever a paper-money has been established, the difference between its

284 CHAP. XXII. ON PRODUCTION. 261 the paper-money England, consisting of the is this necessity, that of bank, notes at par with specie, simply by the has of the been kept to the of circulation. issues demands limitation of the Nations precipitated into foreign wars, before they have had time the requisite capital previously carrying them on, to accumulate for sufficient credit to borrow of their neighbours, have of and destitute recourse to paper-money, or some similar expe- almost always had Dutch, dient. their struggle with the Spanish crown for in- The in paper, dependence, issued money and of many other of of leather, of America, under similar circum- The materials. United States recourse to stances, likewise and the expedient had paper-money; the French republic to foil the formidable attack of the that enabled has immortalized the first coalition, of assignats. name Law been unjustly charged with the whole blame of the has the scheme that bears name. That he calamities resulting from his gathered from entertained just ideas respecting money, tho may be he published perusal native country, Scotland to tract* of a in his Scotch government to induce a bank of circulation. the establish in France, in 1710, was founded on the princi- The bank established set forth. Its notes were expressed ples there these words: in " The bank promises bearer at sight *##•##» to pay the in of the same weight and standard as the money of livres money at Paris," &c. this day. Value received was then but a private association, paid its notes The bank, which not yet regularly on demand: they were metamorphosed into paper- money. Matters remained on this footing, and went on very well, till the year 1719 ;f at which period the king, or rather the regent, repaid the and took the management into his own shareholders, calling it the The notes were then altered to hands, Royal Bank. this form: in it has utility, and its value value foreign markets, in the home market, where it has afforded a fruitful field for speculation, that has en- where has no utility, In 1811, 100 guineas in gold would purchase at riched many adventurers. for sterling, payable Paris a bill of exchange on London, in the paper which 140Z. the of England. Yet the difference between gold and paper was only currency the London market at the same period, was only 15 per cent: in was in this It way, that paper was of higher value in England than abroad. Accordingly, the I find from returns with which have been favoured, that gold in guineas or I bullion was smuggled into the ports of Dunkirk and Gravelines alone, in the years 1810, 11, 12, and to the amount of 33,875,090 dollars. There was a 13, in at large; but it was attended with more similar speculation other commodities # and difficulty; the import into France being very hazardous, although the risk was export from England in every possible way. Yet this traffic encouraged its level, for it must have produced bills on England in would soon have found such quantity, as to have brought the exchange to par at least, had not the con- London tinental subsidies a continual supply of bills on England furnished of without any return. *This work was translated into French while Law continued in the office of Controller-General of France; and is entitled Considerations on Commerce and Money. of the Vide Dutot. torn. ii. p. 200, for a detail t beneficial effects pi the kisti tution, as originally conducted.

285 ON PRODUCTION. BOOK I. to pay the bearer sight ******* " The bank promises at silver coin. Value received Paris," &c. hvres in at was a appearance, This alteration, slight radical onft as it was in to pay a fixe^ quantity of in substance. The first note stipulated in the Hurts current at the date quantity contained silver, viz. the notes. The second merely engaged to pay livres, and of issuing the a door whatever alterations an arbitrary power might so opened for make real value expressed by the word livre. to in the think proper called fixing the rate of the paper-money; whereas, And this was on it and making it a fluctuating value; was unfixing, the contrary, and Law strenuously opposed the fluctuations were truly deplorable. but principle was compelled to give way to power; the innovation; the and of power, when the consequences began to be felt, crimes to the fallacy principle. were confidently attributed of the issued revolutionary government were assignats by the The paper-money of the regency. The latter worth even less than the promise, at least, of paying in silver: and, though the payment a gave be greatly curtailed by a deterioration of the silver coin, yet might or later the paper might have been redeemed, if the govern- sooner had but in its issues, and more scrupulous ment been more moderate its engagements. But the assignats conveyed no right in fulfilling obtain to call but a right to purchase or silver; nothing the na for tional domains. Let us see what this right was really worth. The original assignats purported to be payable at sight, at the Caisse de where they were, in fact, never paid at VExtraordinaire, It is true, they were received payment for the national all. in individuals competition-price; but the value by domains bought at a determinate value to the •f these domains could never give any in propor- assignats, because their nominal value increased exactly that of the as declined. The government was not tion assignats to find the price of national domains advance, because it sorry wa$- thereby enabled withdraw a greater amount of assignats, and to to new ones, without enlarging the quantity consequently, re-issue It was not aware, that, instead of the national domains afloat. in the advancing assignats were undergoing a rapid deprecia- price, tion, that the further that depreciation was pushed, the more and assignats must be issued in payment of an equal quantity of supplies. The last no longer purported to be payable at sight assignats to, nor last The alteration was little attended because neither first in fact, ever paid at all. But their vicious origin was made were, The paper contained these words: more apparent. Assignat &c. hundred francs," " National domains— of one Now, what was the meaning the term one hundred francs ? What &f value did they convey the notion of? Was it the value of the quan- tity of of one hundred silver, heretofore known under the designation No; for 100 francs? could not possibly be obtained with an fr. assignat to that amount. Did it convey the idea of as much land, is might be purchased for 100 fr. in silver? Certainly not; for tiial

286 CHAP. XXII. ON PRODUCTION. 283 quantity of land could no more be obtained, even from the govern- ment, by an of 100 fr. than 100 fr. in specie. The domains assignat were disposed of at public auction for as many as they assignats would fetch; and the value of this paper had latterly so far declined, that one of 100 fr. would not buy an inch square of land. In short, setting aside all consideration of the discredit attached to that government, the sum expressed in an assignat presented the idea of no definite value whatever; and those securities could not but have fallen to nothing, even had the government'inspired all the con- fidence, of which it was so eminently destitute. The error was dis- covered in the end, when it was impossible any longer to purchase the most trifling article with any sum of assignats, whatever might De its amount. The next measure was to issue mandats, that is to say, papers purporting to be an order for the absolute transfer of the specific portion of the national domains expressed in the mandat: out, besides that it was then too late, the operation was infamously •executed

287 BOOK II. OF THE DISTRIBUTION OF WEALTH CHAPTER L OF THE BASIS OF VALUE; AND OF SUPPLY AND DEMAND. THE principal phenomena of production have been investigated [n the first book; wherein I have shown how human industry, with .he aid of capital and of natural agents and properties, creates every kind of utility, which is the primary source of value; and in what way social institutions and public authority operate to the benefit or the prejudice of production. This second book will be devoted to the consideration of the distribution of wealth: to which end it will be necessary, first, to analyze the nature of value, the object of dis- tribution ; secondly, to ascertain the laws, which regulate the dis- tribution of value, when once created amongst the various members of society, so as to constitute individual revenue. The valuation of an object is nothing more or less than the affirma- tion, that it is in a certain degree of comparative estimation with some other specified object; and any other oDJect possessed of value may serve as the point of comparison. A house, for instance, may bt valued in corn or in money. To say that it is worth 4000 dollars conveys a more accurate notion of its value, than to say that it is worth 4000 bushels of wheat, solely because the habit of reckoning the value of all commodities in coin makes it easier for the mind to form an idea of the value of 4000 dollars in other commodities, thai is to say, of the quantity of other commodities obtainable for that sum, than of that obtainable for 40G0 bushels of wheat. Yet, if wheat be 1 dollar a bushel, the degree of value, expressed by each is the same. In every act of valuation, the object valued is the fixed datum. In the instance first given, the house is the datum: it is a definite amount of materials, put together in a definite manner, upon a defi- nite site. But the point of comparison is variable in amount, ac- cording to the degree of estimation in the mind of the valuer. If valued at 4000 dollars, the house is reckoned to be equivalent to so many pieces of silver coin of the weight of 416 grains, with a mix

288 CHAP. I. ON DISTRIBUTION. 285 of 179-1664 parts alloy; if at 4500 dollars, or 3500 dollars, ture of variation of the of the commodity, that is the it is but a quantity So if that point be wheat, the comparison. likewise, specific point of variable quantity of that commodity would express the degree of value and arbitrary, when there is no Valuation is vague assurance that generally acquiesced in by others. The owner of the be it will reckon it worth 4500 dollars, while an indifferent per- house may more than 3500 dollars, and probably nei- son would value it at no right. ther would or a dozen other persons be But if be another, give specific amount of other commodities, say to willing for it a 4000 bushels of 4000 dollars, we may conclude the esti- or wheat, to be a A house that will fetch 4000 dollars in mate correct one. worth that sum.* But if one bidder only will give the market is and he is that price, to re-sell it without loss, he will give unable more than worth. (The only fair criterion of the* value of an it is is, the quantity other commodities at large, that can be object of exchange, whenever owner wishes to for it in the readily obtained this, in all commercial dealings, and in all money part with it; and called the current price.fl is valuations, What is it, then, that determines this-current price of commodities ? or desire of any particular object depends upon the The want and of physical man, the climate he may live in, moral constitution and of the particular society, in which the laws, customs, manners may happen to be enrolled. He has wants, both corporeal ana he intellectual, social and for himself and for his individual; wants His family. and reindeer are articles of the first necessity bear-skin to the Laplander; whilst their very name is unknown to the lana* rone of who cares for nothing in the world if he get but his Naples, of macaroni. Europe, courts of justice are considered in meal In maintenance social union; whereas the Indian to the dispensable of such establish- of America, the Tartar, and the Arab, feel no want of business here inquire, wherein these wants It is not our ments. to must take them as we data, and reason upon originate; existing them accordingly. My brother, Louis Say, of Nantes, has attacked this position * a short tract in entitled, la Richesse et de la Misere des Peuples et des Principales Causes de 8vo. Deterville. He lays down the maxim, that objects are Particuliers, Paris. of wealth, solely in respect of items actual utility, and not of their admitted their or utility. In the eye of recognised his position is certainly correct; but reason, in this science relative value is the only guide. Unless the degree of utility be measured by the of comparison, it is left quite indefinite and vague, and, scale of at the place, at the mercy and individual caprice. The iosi- even same time of value was to be established, before political economy could tive nature pre- tend character of a science, whose province it is to investigate to the origin, its and the consequences of its existence. f In the earlier editions of this work, I had described the measure of value to be the of the other product, that was the point of comparison, which value The quantity and not the value of that other product, is the mea- was incorrect. sure of value in the object of valuation. This mistake gave rise to mucn ambi- guity of demonstration, which severity of criticism, both fair and unfair, ban the ab hoste doceri. to correct. Fas est et taught me

289 28b ON DISTRIBUTION. BOOK 11 are satisfied gratuitous agency ot Of these wants, some by the air, water, natural objects; may be deno or as of solar light. These are The wealth, because they minated natural spontaneous offering is not called upon to earn them by of nature; and, as such, mankind exertion whatever; for are never any sacrifice or which reason, they are, that can of possessed exchangeable value. Other wants there satisfied by the employment only objects possessed of an be of not utility, which they could have been invested with without some human agency,—without having undergone some by modification of condition, and without some difficulty having been sur- change purpose. Of this kind are the products mounted agricul- for the of commerce, manufacture, in all their infinite ramifications. ture, and value attached; and for a very obvious reason; To them alone is any an act because the very act of production implies mutual exchange, of in which producer has given his personal agency for the product the by its exertion. Wherefore, will hardly resign it with- obtained he estimation, equivalent. These may is, in his an out receiving what wealth, both because an act of exchange is in be called social itself in the product obtained a social act, and because exclusive property by personal exertion, or by an act of exchange, can only be secured it is to be observed, is the only by social institutions. Social wealth, can form the subject of scientific research. part of human wealth, that Because only part that is the object of human estimation, 1. it is the at least of such estimation, as is not altogether arbitrary and men- or 2. tal. it is the only one which is created, distributed, and Because to any rules that can be assigned by human destroyed, according science. The knowledge of the of the quality, value, or ground-work exchangeable value, leads perception of its origin. rather to the social wealth invested with value by the necessity of are The items obtain them; and that something is produc- of giving something to been tive exertion. When once obtained, when this sacrifice has attainment, the made is really more wealthy; he ha9 in the party to satisfy more wants; and, if the wherewithal by object obtained this sacrifice unsuited to the personal wants of the owner, he may be use of it for the of some object of personal desire, make attainment the way of exchange for some other product; which other pro- by duct will itself be the of similar productive exertion; so that, result be a mere mutual transfer of the productive in fact, the exchange will exertion on either side, whereof the two products respectively are the result. When a of wheat is given for seven pounds of bushel is a of the productive agency exerted in coffee, there mere transfer the one, for that exerted in the creating of the other.* creation * It is scarcely necessary to mention, that when commodities are exchanged, not for one another, but for money, the case is nowise varied. No seller ever takes money for his own or for any other purpose, than as an object consumption, the a ot that, in reality, second exchange; product sold is exchanged for the so product bought with the price. When a bushel of wheat has been sold for dollar and 7 lbs. of coffee bought with that dollar, the wheat has actually been

290 CHAI«. I. ON DISTRIBUTION. 28? is a current value price established for pro- Wherefore, there *or well ductive service For, if the agency exerted as for as products. reward, of a wheat can obtain, as its of in the creation bushel in the a bushel of way or seven pounds of coffee of exchange, either wheat there to prevent its obtaining in the same way is indifferently, what yard of any other equivalent product, 5 yards of say a cotton cloth, a or any thing else? Should the bushel of ribbon, dozen plates, exchangeable less amount of any of the^e commodi- be for a wheat productive agency exerted in the creation of ties respectively, the proportionately less rewarded, than that exerted wheat would be in the specific commodity; of portion of the former the creation and a be attracted to the latter branch would production, until the of recompense labour in each department should find its fair level. of of productive agency current price peculiar to Each class has a productive agency exerted production of a If the in the itself. wheat can obtain for itself but 1-15 of its own product, bushel of it be to no more than 1-15 of entitled of any other pro- will the value by exchange for that quantity of wheat; for instance duct obtainable 1-15 of a to and so of other products. dollar: it is obvious, that current value of productive exertion Thus the the of an infinity of products compared one is founded upon value ;* that the value with another products is not founded upon that of of productive agency, as some authors have erroneously affirmed ;f and the desire of that since and consequently its value, origin- an object, ates in its utility, it is the ability to create the utility wherein ori- ginates that desire, that gives value to productive agency; which is proportionate importance of its co-operation in the value to the production, forms, in respect to each product indivi- of business and called, the cost of its production. dually, what is product is not confined to one human being, but The utility of a as in the whole class society at the least; to a case of parti- applies of of cular articles or to a whole community, as in that of clothing; most the articles of food that are adapted to human consumption of of sex or For this reason, the in general, without distinction age. for a specific object, or product, or act of productive exer- demand a certain degree of extent. The aggregate demand for sugar tion, has is in France to exceed 500,000 quintal* per annum. Even tie said individual demand of a specific product for individual consumption may be or less urgent. Whatever be its intensity, it may be more for the and the money that has intervened has withdrawn itself bartered coffee, as if it had never appeared at all in the transaction. Wherefore as completely, is is it determined by the relation of com- quite correct to say, that relative value that to modities one solely by another, of each commodity to money. and not * It must not be inferred from this passage, that I mean to say, that the pro- ductive agency exerted in a product, whose charges of production have raising 75 cents only, is therefore worto to a amounted saleable for dollar, although it is but 75 cents. My position merely implies, that this amount of productive ser- vice has, in such case, raised a value of 75 cents oily, though it might have raised value of a dollar. a Taxation. Prin. Pol. Econ. and i Iticardo,

291 288 ON DISTRIBUTION. BOOK II by the general name demand; and the quantity attainable called of given time, and for the satisfaction of those who are in at a ready may be supply the specific article, or amount in want called of the circulation. understood with some limitation; for there is no be But this must pleasure or utility, whereof the mere desire may not be object of always ready is receive whatever can unlimited, since every body to benefit contribute be or to his gratification. There must, therefore, demand; most effectual limitation is, the to some bounds and the give some other equivalent product for ability of desire to the object the porters in a commercial city might desire to have a coach All and more comfortable execution of their business, without six for the raising price of horses and carriages a tittle. The objects, which the has to give equivalent for the object of his each individual as an other than his products of are no own productive means, desire, the limited even in the case of the most wealthy member of which are society. is, in all of in every degree Wealth grada- countries, distributed the of mediocrity to the solitary pinnacle tion, from populous level of extreme affluence. Accordingly, the products most generally are really demanded by a limited number only, becaust desirable to they alone have wherewithal and even their ability obtain them; be may or less according to circumstances. Whence it may more be further concluded, that the same product or products may be in greater demand at a of price, and when attainable by less lower scale in utility, merely productive exertion, although nowise increased greater number to a and, on the of because accessible consumers; of price, because accessible at a contrary, less in demand higher scale smaller number. to a of severe winter, method should be hit upon a in a Suppose that, at 2 dollars each; probably manufacturing knit-waistcoats of woollen 2 dollars left, after satisfying more urgent wants, all who should have but who would provide themselves with these waistcoats; those a and a half left must still go without. If the should have but dollar be produced at one dollar and a half, these latter same article could and also might all be provided become consumers; and the consump- at be if they should c

292 CHAP. I. ON DISTRIBUTION. to spare. such cases, not only is the number ot either In consumption diminished, is reduced disu. of but the each consumer of may not be compelled, by a rise ot its consumer coffee Though a he must price, e *ent« to relinquish that beverage altogether, at all amount of his consumption; which is then like that of the curtail whom one discontinues, and the other remains two individuals, of willing able continue the use of the article. and to purchaser does as the In commercial speculation, not buy for his proportions his purchases to what he expects own consumption, he quantity he can sell depends upon the to sell. Since, then, the afford he can sell at, he will buy less according as the price price to and more according as it falls. rises, of In poor countries, objects the commonest use, and of infe- even the means great proportion of the rior price, frequently exceed of a countries, where shoes, though cheap, are are population. There teach of most of the inhabitants. The price of oui of this commo- noi fall to a level with the means of the people; because dity does is Stili belcv the bare cost of production. But, shoes of that level leather not to existence, those who are being absolutely necessary to procure these, wear wooden shoes, or go barefoot. unable (sabots) unhappily is case with an article of primary neces- When this the of the population must perish, sity, part least cease to be or at renewed. These causes of a general nature, that limit tho are the demand each product, and for all products in general. for l to supply, it consists of Jie whole In respect of any commodity which the for the time being <*re disposed to part with for owners in other words, sell at the current rate, and not an equivalent, to what of actually on sale at the time. The whole of this is merely is circulating the floating stock. Yet, strictly speaking, also called or circulation, except during the act of transit from no commodity is in to the purchaser, which is almost instantaneous. But the the seller bare act of has no influence on the terms of the bargain, to transit it is it is a mere matter of executive which commonly subsequent; The point of real importance is, the inclination of the detail. is in cir- owner the object of property. A commodity part with to culation, whenever it is in quest of a purchaser, which it may be in the most urgent need of, without altering its locality in the least. Thus, the in a shop or warehouse is in circulation; thus too, stock rent-charges, houses, the like, are'said to be in circulation, lands, and the expression is intelligible enough. Even industry is some- and either times and sometimes not, according as it is circulation in in quest of employment, or already employed. For the same reason, an object ceases to be in circulation, tne moment it is set for consumption or for export to an- apart, either or accidentally destroyed, or withdrawn by the ca- other market, price of its owner, or held back at a price, which amounts to a refusal sell. to Inasmuch as supply consists of those commodities only, wnicn a to be had at the current price or ordinary rate of the market, are

293 290 ON DISTRIBUTION. BOOK 11 by the cost production above that level, will commodity raised of produced, cease of the supply. Wherefore, or to to be form part the is high, more abundant, when current price the supply will be and more scanty when that price has declined. of supply ana Besides these universal and permanent limitations of a casual and transient nature, which others are demand, there always operate concurrently with the former. abundant vintage will lower the price of all The prospect of an hand, even before the wine single pipe of the expected vintage on a market; supply is brisker, and the sale to for the has been brought consequence of the anticipation. The dealers duller, anxious in are of in hand, in their stock of the competition of the to dispose fear the consumers, on the other hand, retard their new vintage; while in the fresh purchases, of gaining in price by the delay. expectation and immediate sale foreign articles all at once, A large arrival of relative excess supply above demand. by the of lowers their price, contrary, the expectation of a bad vintage, or the loss of On the voyage, will raise prices above many cargoes cost of on the the production. are some particular products, which nature or Moreover, there to monopoly, and thus prevented human institutions have subjected in from being supplied of a similar de- equal abundance with those Of are the wines of particular and celebrated scription. this kind the soil of which cannot be extended vineyards, extended by the demand. postage of letters is, in So the at most countries, charged a monopoly-price. Finally, whatever be the general or particular causes, that operate to determine the relative intensity of supply and demand, it is that intensity, which is the of price on every act of ex- ground-work for price, will be remembered, is merely the current change; it money. demand in for all objects of pleasure, value estimated The unlimited, did not the difficulty of attainment, or utility, would be and circumscribe the supply. On the other hand, or price, limit be it not the supply would restricted by the same cir- infinite, were or of attainment: for there can be no cumstance, the price, difficulty is producible would then be produced in un- doubt, that whatever so long as it could find purchasers at any price at limited quantity, all. and supply are the opposite extremes of the beam, Demand whence depend the scales of dearness and cheapness; the price is the point of the momentum of the one ceases, equilibrium, where of the other begins. and that meaning of the This at a given time and is the assertion, that, the price of a place, in proportion to the increase commodity rises of the demand and the decrease of the supply, and vice versa ; or in other words, that the rise of price is in direct ratio to the demand, and inveise ratio to the supply. of an object, or, The utility is the same thing, the desire to what obtain it, may possibly be unable to raise its price to a level w.tn M« <*ost of production. In this case it is not produced, because us ^u-.»-

294 CftAP. I. ON DISTRIBUTION. 291 duction would cost more than the product would be worth. Pro- caviar* would fetch at Paris would hardly bably the price that equal the charge of producing it there; for it is so little in request there, that it scarcely would bring the lowest price that it could be procured for, and consequently it is not produced; but elsewhere, i \s both produced and consumed in great quantities. When the price of any object is legally fixed below the charges of its production, the production of it is discontinued, because nobody is willing to labour for a loss: those, who before earned their liveli- hood by this branch of production, must die of hunger, if they find no other employment; and those, who could have purchased the product at its natural price, are obliged to go without it. The establishment of the fixed rate, or maximum, is a suppression of a portion of production and consumption; that is to say, a diminution of the prosperity of the community, which consists in production and consumption. Even the produce already existing is not so pro- perly consumed as it should be. For, in the first place, the pro- prietor withholds it as much as possible from the market. In the next, it passes into the hands, not of those who want it most, but of those who have most avidity, cunning, and dishonesty; and often with the most flagrant disregard of natural equity and humanity. A scarcity of corn occurs; the price rises in consequence; yet still it is possible, that the labourer, by redoubling his exertions, or by an in- crease of wages, may earn wherewithal to buy it at the market price. In the mean time, the magistrate fixes corn at half its natural price: what is the consequence 1 Another consumer, who had al- ready provided himself, and consequently would have bought no more corn had it remained at its natural price, gets the start of the labourer, and now, from mere superfluous precaution, and to take advantage of the forced cheapness, adds to his own store that por tion, which should have gone to the labourer. The one has a dou- ble provision, the other none at all. The sale is no longer regulated by the wants and means, but by the superior activity of the pur- chasers. It is, therefore, not surprising, that a maximum of price on commodities should aggravate their scarcity. A law, that simply fixes the price of commodities at the rate they would naturally obtain, is merely nugatory, or serves only to alarm producers and consumers, and consequently to derange the natural proportion between the production and the demand; which propor- tion, if left to itself, is invariably established in the manner most favourable to both. Hope, fear, malevolence, benevolence, in short, every human pa* sion or virtue may influence the scale of price. But it is the pro- vince of moral science to estimate the intensity of their effect upon actual price in every instance, which is the only thing we are here •o attend to. Neither need we advert to the operation of tne causes of a nature purely political, that may operate to raise the pi ice of a A. pickle made of the roe of sturgeons, a favourite condiment of Russian diet

295 29i» ON DISTRIBUTION. BOOK I) product aoovo the degree of its real utility. For these are of the same class with actual robbery and spoliation, which come under the department of criminal jurisprudence, although they may intrude themselves into the business of the distribution of wealth. The functions of national government, which is a class of industry, whose result or product is consumed by the governed as fast as it is pro- duced, may be too dearly paid for, when they get into the hands of usurpation and tyranny, and the people be compelled to contribute a larger sum than is necessary for the maintenance of good govern- ment. This is a parallel case to that of a producer without competi- whether he have got rid of them by force, or by accidental tors, circumstances. He may raise his product to what price he will, even to the extreme limit of the consumer's ability, if his monopoly be seconded by authority. But it is the province of the political philosopher, and not of the political economist, to teach us how this evil may be avoided. In like mariner, although it be the province of ethics, or of the knowledge of the moral qualities of man, to teach the means of ensuring the good conduct of mankind, in their mutual relations, yet, whenever the intervention of a superhuman power appears necessary to effect this purpose, those who assume to be the interpreters of that power must be paid for their service. If theii labour be useful, its utility is an immaterial product, which has a real value; but, if mankind be nowise improved by it, their labour not being productive of utility, that portion of the revenues of so ciety, devoted to their maintenance, is a total loss; a sacrifice with out any return. With the most earnest wish to confine myself within my subject it is impossible to avoid sometimes touching upon the confines ©1 policy and morality, were it only for the purpose of marking out their points of contact. CHAPTER II. THE SOURCES OP REVENUE. IT has been shown in Book I., that products are raised by the productive means at the command of mankind, that is to say, by human industry, capital, and natural powers and agents. The pro- ducts thus raised, form the revenue of those possessed of these means of production, and enable them to procure such of the necessaries and comforts of existence, as are not furnished gratuitously either by nature, or by their fellow-creatures. The exclusive right to dispose of revenue is a consequence of the »;x~lusive right, or property, in the means of production; and such of them, a^ are not the subject of human appropriation, **re not either

296 CHAP II. ON DISTRIBUTION 29 of productive means, sources of revenue; they form no par items or exclusive of human wealth, which implies appropriation pos and is no there wealth, unless where property for such thing session; as and is both acknow- established, and is known where possession and ledged secured. the justice of the right of property, it is unnecessary or The origin study of the nature, and progress of to investigate, in the human the of the soil, or the person from wealth. Whether actual owner derived possession, have obtained it by prior occu he its whom violence, or by fraud, can make no pancy, by difference whatever the of the production and business of its product or in distribution revenue. it is Perhaps to remark, that property in that scarcely necessary of productive means, which been called human industry, class has that distinguished the general name of capital, is far more in by and indisputable, than in the sacred of natural and remaining class and agents. The industrious faculties of man, his intelli- powers and dexterity, are peculiar to himself and gence, muscular strength, inherent in his And capital, or accumulated produce, is the nature. of and forbearance to exert'se the mere result human frugality of consuming, which, if fully exerted, would have destroyed faculty as fast as they were created, and these never could have products been existing property of any one; wherefore, no one else, but the he who has practised this self-denial, can claim the result of it with any show of is next of kin to the actual creation justice. Frugality the most unquestionable titles to of products, which confers of all them. in the property of production are some of them alienable, These several sources arts, &c.; and as land, implements as personal of some inalienable, are consumable, as are all the items of floating faculties. Some also as land. Some, too, there capital; others, inconsumable, that are, are neither alienable nor consumable, capable of destruction, yet are and as the human faculties, intellectual corporeal, which vanish with human existence. as are capable of consumption, as, for instance, the floating Such values, whereon production expends its may be consumed energies, in such manner either occasion a re-production, in which case as to they will still constitute a part of the means of production; or in such manner as to no further production, in which case they yield to to any part of those means, and are devoted cease pure de- form or struction, more less rapid. as well Although revenue, sources of production, is a con- as the stituent part of individual wealth, yet no one is reputed to reduce his fortune consumption of his revenue only, provided that by the he does not encroach upon his productive means; because revenue is a regenerating product, whereas the means of production, so long as they continue exist, are a constant and perpetual source of hew to products. The currei?* value of these appropriable sources of production is

297 294 ON DISTRIBUTION. BOOK II. on the same principles, that of all other objects; that established as conflicting influence is and demand. The of to say, by the supply it the demand does not made upon is, that only remark that need be the immediate use of originate in the enjoyment anticipated from or an implement of trade yields to field for a the particular source; direct enjoyment, which is the owner of estimation; their no capable has to the value of the product they are capable of value reference utility or the that product, in the raising, which itself originates of capable affording. it may be satisfaction of to are inalienable, as are the With regard those sources, that of mind and body, they can never human faculties subject of be the actual exchange, their value is a matter of mere mental estima- and the value they capable of producing tion, grounded upon may be productive means this description, which yield to aw the of Thus wages of 1 dollar a day, or of 365 dollars artisan year, may the a 1 to a vested capital yielding an equal annua be reckoned equivalent revenue. now that we And and cursory view of have taken this general the sources production and of revenue in the abstract, we may of a of their nature, which will lead enter upon more minute analysis the labyrinth of the science of us into and furnish political economy, us with a clue to some of its most intricate windings. The immediate result of these sources is not, strictly speaking, a product, but a us to a product. Pro- productive service that helps be considered result of an interchange ducts should, therefore, as the hand, of productive service on and the on the one actual products for the first time to the other, subsequently which, revenue appears shape in products; and these again may be exchanged for the of the same revenue will then other products, into which latter form be converted. of this matter will be rendered clearer by a The conception prac- tical illustration. piece of arable land yields an annual product, A of of wheat, whereof 200 bushels more or less, may say 300 bushels as resulting from the agency of the capital be considered and in- dustry employed cultivation, and the remaining 100 bushels in its the natural productive powers of the soil. The as resulting from revenue, yielded by the land to the proprietor, will have appeared first in the way of by the concurring productive service afforded of property, land: which productive service will have object the lent or cultivator for the sum of 100 bushels been transferred to the and this will of wheat, first act of exchange. If these 100 be the bushels of wheat be converted into specie, either by the proprietor himself or by the cultivator on his behalf, and in consequence of a mutual arrangement, this specie will still be the same identical the of money. revenue, though under secondary form This analysis will conduct knowledge of the real value of us to a levenue, which falls in with the general definition of value given in preceding chapter, namely, the amount of other objects the intended transfer What, b\ -vchange for the object of obtainable

298 CHAP. II. ON DISTRIBUTION. 295 is the object transfer, for which revenue is given in ex- then, of why, the productive service those means, mat the re change ( of may be obtained of. And what is revenue by ceiver possessed of we designate production 1 why, exchange, which the primary act of value of revenue is large in proportion, products. Wherefore, the to the value, quantity of the product obtained, to the not but to the utility created. of sum total find, that the ratio of national revenue, in the aggregate, we Thus amount of the product, and not by its value.* is determined by the is not so a variation in the rela- It with individual revenue; because of different products will operate to tive value of one swell that individual, class, at the expense of another. or of society live primary products Could each member on the revenue composed, the relative degree of revenue his is wiiereof nations, would, like that aggregate, depend upon the of in the of the product, upon the sum of utility created, and not amount its exchangeable value. But, in a state of society at all upon is impossible; each individual elevated above barbarism, this a much less quantity peculiar product, than consumes of his own other people, which he of his own. The grand of those buys with of individual importance to the point, therefore, is, the producer, quantity product not of his own creation, which he may be able of his own productive means, or with the products to procure with created by their agency. Suppose, for instance, the land, capital, and personal faculties of a to be engaged in the particular individual of saffron; will probably himself consume little or cultivation as he revenue will consist such other objects, as his his of no saffron, saffron can be exchanged for; and the ratio of annual crop of that be elevated by-a rise in the price of saffron; while that revenue will the consumers of that article will be proportionately reduced of to the full extent rise of its price. On the contrary, their reve- of the be in like manner by a fall of its price, to the nue will augmented of the revenue of the grower. prejudice in the Every saving of production, that is to say, every charges in the productive agency exerted to raise the same product, is saving an increase of the revenue of the community to an equal extent; as, for example, the contrivance to as much upon one acre of land raise or to effect with days' labour, what before as before upon two, two much as four; for the productive agency thus released required as be directed may increase of production, (a) And this acces- to the * Hence the futility of any attempt to compare the wealth of different nations, of France and England for instance, by comparison of the value of their respective national products. Indeed, two values are not capable of comparison, when placed at distance from each other. The only fair way a comparing the wealth of of one nation with that of another, is, by a moral estimate of the individual welfare in each respectively. mem be so for the most part, though not entirely, wherever the (i) And will l«ers of the community have no other hope of subsistence, than from the product

299 5*96 ON BOOK H DISTRIBUTION. oi revenue will accrue individual benefit of the contriver, sion to the contrivance so long to his own knowledge; can be as the confined of as the at large, as soon that notoriety shall have but consumers to him to limit his profits to the obliged awakened competition, and production. actual charges of transformed However revenue various acts of may be by the productive agency, which the is the exchange, commencing with revenue, it remains the same in primitive exhibition of substance, the moment of its ultimate consumption. The revenue yielded until an acre of arable land remains, by reality, the same, both after its in primary exchange, production, into the form of wheat, by the act of its secondary transformation into silver coin, even although and after purchasers. soon as the wheat have been consumed But, as by the silver coin into an object of the revenued individual converts his that object is simply consumed, the value of his and consumption, to exist, and is revenue thenceforth ceases and lost, destroyed although silver coin, whose form it once assumed, continue in the of the It not be imagined still to existence. in the hands must exist temporary holder of the coin, although lost to the receiver of reve- nue ; but is equally lost to mankind at large; for the actual holder of the of it by the transfer of coin must have obtained possession of his own, some source of revenue before in other revenue or of possession. own his added to capital, it thenceforth ceases to be is When revenue such, to be capable of satisfying the wants of the revenue, or, as it can only yield an proprietor; an item of increased revenue, being productive capital, consumable manner of capital, that is to in the for in way as to yield a product in say, and return such exchange the value consumed. When capital or land, or personal service, is let out to hire, its productive power is transferred to the renter or adventurer in pro- duction, in of a given amount of products agreed upon consideration It is a of speculative bargain, wherein the renter beforehand. sort the risk of profit takes loss, according as the revenue he may and realise, or the product obtained by the agency transferred, shall ex- ceed or fall short of the rent or hire he is to pay. Yet one revenue may only and, though a borrowed capital realised; yield to can be of their own productive means; for the whole surplus of revenue thus created, is sure to go, in the end, to the appropriators of the natural sources of production; leaving those, whose productive means are merely personal, to employ them upon some other object, or upon an enlarged production of the same object. And this Sismondi and Malthus, that economy of is a complete answer to the position of human productive exertion makes the multiplication of unproductive consumers, not only probable, but necessary. But where a poor-law or monastic establish- ment provides for the subsistence of the human agency thus rendered superfluous, there will probably be no incrpase of national revenue consequent upon a saving of productive agency; for the surplus labour is thereby released from the neces- sity of exertion in some other channel. With such institutions, the enlargement «*f productive power by machinery or otherwise may be very great, without any •jnlargemerit of national production, revenue, or wealth. T.

300 CMAP. III. ON DISTRIBUTION. 297 an annual product cent, instead of 5 per the adventurer of 10 per pays cent, which of interest, yet the revenue of the in the he shape it 10 per productive service cent.; for capital, the affords, will not be the recompense of the productive is in that gross product included capital and of the industry that has turned agency, both of the it to account. each individual is proportionate to the The actual revenue of products disposal, being either the immediate fruit of at his quantity productive means, or the result of of his those transformations from his revenue may have undergone, until it its primitive state, which the shape of the ultimate object of his consumption. have assumed of The ratio or of utility inherent in it, can only be that quantity, its current price dealings of mankind. In estimated from in the revenue is individual the equal to the value derived of an this sense, productive means; which value, however, is the greater, his from to the objects of his consumption, in proportion to the in respect cheapness of his command of other those objects, which augments his own than immediate products. the revenue of a nation is the more considerable, In like manner, i. e. to the of the value whereof it consists, in proportion intensity of the value of its aggregate productive powers, and to its high rela- tive degree to the value of the objects of external attainment. The value of be high, even where that of pro- productive agency must is low; should be always recollected, that, since the in- ducts for it value depends upon of quantity of objects obtainable in tensity the other words, the agency of the national exchange, revenue, or, in of production, is large, in proportion to the sources and abundance cheapness products derived from them. of the m. CHAPTER AND RELATIVE VARIATION OP PRICE. OP REAL price of an article is the quantity THE money it may be worth; of current price, the quantity it may be sure of obtaining at the par- ticular place. Its locality is material, for the desire of a specific object varies in to the quantity procurable according to the relation locality. The price obtained upon sale of an article represents all other the To say, that articles procurable with that price. price of an eP the of broad-cloth is 8 dollars, implies, that it is exchangeable either for so much coined silver, or for so much of any other product or pro iucts procurable with that sum. Money-price is selected as may be for the purposes of an illustration, in preference to price in com •modities large, merely for greater simplicity; but the real and ulti at commodities. of exchange is, not money, but mace object

301 298 ON DISTRIBUTION. BOOK II. in this sense, divided into buying price and selling Price, may be say, the price given to of an object, price; that is to obtain possession for the of its possession. price obtainable relinquishment and the at the time of The price paid for every product, its original attain- creation, is, the charge of the productive agency exerted, or ment cost of its production.* Tracing upwards to this original or the product, of a unavoidably come to other products; for the price we productive agency only have been defrayed by other of can charge daily wages of the weaver engaged in producing products. The products; they consist either broad-cloth articles of his are of the the money wherewith he may procure them. daily subsistence, or of are equally products. Wherefore the production, both which as well subsequent interchange of products, may be said to re- as the a barter one product for another, conducted upon solve itself into of their respective current prices. there is one of a comparison But most assiduous attention, the important particular, that requires the or of which has led to abundance of error and neglect oversight and has made the works of many writers calcu- misrepresentation, lated only to the students in this science. mislead ell of has, in the production, required the An broad-clotn, that of productive agency at the price of 8 dollars, will have purchase sum in the manufacture; but if three-fourths only of that cost that productive agency made to suffice for its production; if, sup- can be posing one kind of productive agency only to be requisite, 15 in- stead of of a single workman be enabled to complete 20 days' labour the same broad-cloth will cost 6 dollars to the the product, ell of same rate wages. In this case the current price at the of producer, of human productive agency will have remained the same, although production will have varied in the ratio the cost the difference of of 6 dollars and 8 dollars. But, as this difference in the rela- between the cost of tion between and the current price of the production product holds prospect of larger profit than ordinary in this out a it a larger proportion of pro- particular channel, naturally attracts the exertion of which, by enlarging ductive agency, supply, the reduces again current price to a level with the bare cost of pro- the duction.f This kind of variation in the price of a product I shall call real variation of it is a positive variation, involving no price, because in the object exchange, and both may, and of equivalent variation cotemporaneous variation of the any actually does occur, without of productive agency, of the price, either it is products wherewith recompensed, those, for which the or of of this real specific object variation is procurable. * Vide Wealth of Nations, book i. c. 5. ; The of production is what Smith calls cost natural price of products, as the contrasted with their current or market price, as he terms it. But it results from what has been said above, that every barter or exchange, among the rest act of even that implied in the act of production, is conducted with reference to current price

302 CHAP. IIL ON DISTRIBUTION. 29U is otherwise with regard variation of price of products It to the existence already to their re- one to in another, without reference the of the last vintage production. When wine spective cost of at 40 dollars the tun, will fetch no that a month before sold more dollars, money and all other objects of desire to the wine- 30 than price to him; vender have actually advanced productive in for the in the wine, receives a recompense of but 30 agency exerted raising 40 dollars in a money, and of commodities of like dollars, instead in abatement whereas, is an in the instance proportion, which of £; equal amount of productive agency will receive an above cited, an in all other products; for a degree of equal recompense agency, which has both cost received 6 dollars, will be equally well paid and one that cost received 8 dollars. with and former case, then, real variation, the wealth of the the of a In accession; in the community will have received of relativt an latter, it will have remained stationary; and for this plain reason , variation, in the one case all the purchasers of cloth, will be so much because, the richer, without the any poorer; while in the other seller being of the one class will exactly equipoised by the cor- the gain be of the In the former case, a larger amount responding loss other. be procured with an of products will of production, equal charge and without any alteration the revenues of either buyers or in sellers: there will be more actual wealth, more means of enjoyment, with- out any increased expenditure of productive means; the aggregate utility will be the quantum of products procurable for augmented; be enlarged; which are but varied expres- the same price will all same meaning. of the sions is derived this accession of enjoyment, this larger But whence wealth, that nobody pays for ? supply the increased com- of From by human intelligence over the productive powers mand acquired by nature. A power has been and agents presented gratuitously rendered available for had before been not human purposes, that or not to any human object; as in the instance of known, directed and steam-engines: or one before known and available wind, water, and is directed with superior skill as in the case of every im- effect, in mechanism, whereby human or animal power is as- provement sisted or expanded. The merit of the merchant, who contrives, by good management, to the same capital suffice for an extended make is to that of the engineer, who simpli- business, precisely analogous or renders it more productive. fies machinery, The discovery of a new or vegetable, possessed mineral, animal, the properties of utility in a novel form, or in a greater degree of of abundance or perfection, is an acquisition of the same kind. The productive means of and a larger product mankind were amplified, by an of human exertion, when rendered procurable equal degree was substituted indigo woad, sugar for honey, and cochineal for for •he Tyrian dye. In all these instances of improvement, and those uf similar nature that may be hereafter effected, it is observable. a of man- the means of production placed at the disposal Jiat, since

303 300 ON DISTRIBUTION. BOOK II in reality more powerful, product raised always kind become the quantity, increases as it diminishes in value. We in in proportion of consequences shall presently see the this circumstance.* at once; A fall of price may be general and affect all commodities and affect certain commodities only; as I shall or it may be partial by example. to endeavour explain Suppose that, when stockings were made by knitting only, thread- given quality, amounted to the price of 1 stockings, the of a dollar we the rent of rhe land whereon the pair. Hence, should infer, that profits upon labour and capital of the culti- the the flax was grown, flax-dresser and spinner, with those likewise of vators, those of the dollar the stocking-knitter, amounted altogether to the sum of a for stockings. Suppose that, of consequence of the inven- each pair in of a stocking-machine, 1 dollar will buy two pair of stockings tion of instead As the competition has a tendency to bring the one. to a level with cost of production, we may infer from this price the outlay land, capital, and labour, necessary the in reduced price, that pair of stockings, is still to produce more than 1 dollar; thus, two no of production, the product raised is doubled in with equal means And what is a convincing proof that this fall is positive, quantity. the is of what profession soever, may thence- fact, that every person, a of his own forward obtain pair of stockings with half the quantity A capitalist, the holder of 5 per cent, stock, was particular product. before obliged to the annual interest of 20 dollars to the pur- devote chase pair of stockings; he now gives the interest of 10 dollars of a only. A tradesman selling his sugar at 33 J cents per lb. must be- fore have sold 3 of sugar to buy a pair of stockings, now he need lb. lj lb.: therefore sacrifices in the pair of stockings only but sell he means he production the formerly devoted to the acquisition half of same object. of the We have hitherto supposed this product alone to have fallen in Let us suppose two products to fall, stockings and sugar: price. by an commerce, of that 1 lb. of sugar cost 22 cents improvement of 33 In this case all purchasers of sugar, including instead cents. has likewise fallen, will sacrifice, the stocking-maker, whose product the the in lb. of sugar, but half purchase productive means, of 1 which they before allotted for that purpose. The truth of this position may be easily ascertained. When sugar was at 33^ cents per lb. and stockings at a dollar the pair, the stock- * Within the the improvements of industry, effected by last hundred years, of in the department of natural the advance human knowledge, more especially the business of production, but the slow progress science, have vastly abridged and political science, and particularly in the branch of social organisa- in moral has hitherto prevented mankind from reaping the full benefit of those im- tion, provements. Yet it would be wrong to suppose they have reaped none at all. The pressure of or even quadrupled; taxation has indeed been doubled, tripled, has increased yet population most countries of Europe; which is a sign, that in a portion at least of the increase of products has fallen to the lot of the subject; and population, besides being augmented, is likewise better lodged, clothed the and conditioned and I century ago. fed too, than it was a believe better

304 (•MAP. III. ON DISTRIBUTION. 30] was obliged sell one pair of stockings, before he could ing-maker to lbs. of and, as the charges of producing this pair of buy 3 sugar: he in of 3 lbs. dollar, sugar at thft stockings were reality bought one in his own productive means; in like manner a dollar value price of grocer bought a pair of stockings for 3 lbs. of sugar, that is as the case als say, in his for one dollar value of his peculiar produc- to >, who tive means. to half \ But both these commodities have fallen or productive means equivalent to 50 one their price, pair only, buy 3 lbs. cents, sugar; and 3 lbs. of sugar, procurable at would of of production amounting to 50 cents, will suffice to pur- a charge a pair of stockings. Wherefore, if two chase of products, kinds which have set one against the other, and supposed to pass in we the one for the other, both have fallen in price at the exchange can authorised positive infer, that this fall is a are we not same time, to reference and has no relation to the prices of commodities fall, or to another ? that commodities in general may fall at one and the one and yet the diminution of same time, some more, some less, that may be no loss to any body 1 price is for in modern times, although wages stand It this reason, that, the same relation to corn as they did four or five hundred in nearly years ago, yet the lower classes now enjoy many luxuries, that were of and household furniture, then denied them; many articles dress a for instance, have suffered of value; and that the real diminution same individuals are more scantily supplied with others, as with butcher's meat and a real in- game,* because they have sustained of value. crease cost in the the procurement, of Every saving production implies equal product exertion of a smaller amount of of an either by the larger product by the exertion of productive agency, or of a equal are the same thing; and it is sure to be followed both Agency, which enlargement of the product. It may be thought, perhaps, an by of production may possibly take place without any that this increase of demand; and, therefore, that the price corresponding increase that I Recherches of Dupre de Saint Maur, in the in 1342, an ox was * find to 11 livres tournois. This sum then contained 7 oz. of fine sold from 10 silver, which was worth about 28 of the present day; and 28 oz. of our present mo- oz. is are ney fr. 30 c, (32 dollars,) which coined into lower than the price of 171 an ordinary ox. A lean ox bought in Poitou for 300 fr., and afterwards fatted in Lower Normandy, will sell at for from 450 to 500 fr. (84 to 93 dollars.; Paris in price since Butcher's meat has, therefore, more than doubled the 14th cen- and probably most other articles ; food likewise; and, if the labouring tury of at the same time been greatly benefited by the progress classes had not indus- of try, and possession of additional sources of revenue, they would put in worse be fed than in the time of Philip of Valois. This may be easily explained. The growing revenues of the industrious classes have enabled them to the demand for multiply, and consequently to swell of all objects But their supply can not keep pace with the increasing de- food. mand, because, although the same surface of soil may be rendered more produc- by the tive, so to an indefinite degree; and the supply of food it can not be chan- nel of external commerce, is more expensive than by that of internal agriculture •>n account of the bulky nature of most of the articles of aliment.

305 302 ON DISTRIBUTION. BOOK II. of the product may fall below cost of its production, current the reduced scale. even is a groundless apprehension; But on its this sphere of strongly to expand the so of con- fall price tends for the I sumption, that, to meet with, in all the instances have been able demand has invariably outrun the increasing powers of the increase improved production, operating upon of same productive an the of means; so that every enlargement the power of productive agency demand has created of that agency, in the preparation more for a improvement. by the of the product cheapened striking example has Of this by the invention of a been afforded art of printing. By this expeditious method of multiplying the the o* a literary work, each copy costs but a twentieth part of copies what was for manuscript; an equal intensity of total before paid off only twenty times number of demand, would, therefore, take the probably say, that within the mark to but a hundred it is copies; many are now consumed. So that, where there was for- as times one copy only of the value of 12 dollars of present money, merly are now a of there which is 60 hundred copies, the aggregate value of each single copy reduced to 1-20. Thus dollars, though that be price, consequent upon a real variation, does not the reduction of a nominal diminution of occasion even wealth.* On other hand, and by the rule of contraries, as a the ad- real vance of price must always proceed from a deficiency in the product raised by equal productive means, it is attended by a diminution in the general stock of for the rise of price upon each portion wealth; not counterpoise reduction that takes place in the tota does the commodity; nothing of the greater relative of the to say quantity object clearness consumption to the consumer, and of his of the of in comparison. consequent impoverishment a murrain, or a bad system of management, to cause a Suppose of any kind of live stock, of sheep for instance, the price scarcity but not in to the reduction of the supply; be- will rise, proportion in proportion as they grow dearer, the cause demand will decrease. If there were one-fifth of the present number of but it is very sheep, probable their price would advance to no more than double; so, tha. in place of five sheep, which might together be worth 20 dollars at 4 dollars each, there would remain but one at 8 dollars. valued of wealth article of sheep, notwithstanding The diminution in the computed at 60 per cent., the increased price, must therefore be is considerably more than a moiety, f which data * Our relation to the products of former times are too few to enable ug in to deduce from them precise result; but those at all acquainted with the any subject will see, that, whether over or under-stated, will make no difference in iJie reasoning. The statistic researches present generation will provide of the future ages with more accurate means of calculation, but will add nothing to the solidity of the principles upon which it must be made. t Of this nature are the evil effects of taxation, (especially if it be exorbitant) upon general wealth of the community, independently of its effects upon the the individual assessed. The cost of production, and consequently the real price ot commodities, are aggravated thereoy, and their aggregate value diminished.

306 CHAP. III. ON DISTRIBUTION. 303 it may be affirmed, that every real reduction pnce, Thus, of reducing instead of produce raised, in point of the of nominal value a of price reduces, instead that fact, augments it; and real increase to say nothing of the quantum of of adding to the general wealth; is former case and in the human enjoyment, which in the multiplied, would capital error to imagine, that it latter abridged. Besides be a price, or in a real fall a reduction in the price paid of other words, as to the producer as to productive exertion, occasions much loss consumer. real depreciation of commodities is a to the gain A consumer, without curtailing the profits of the pro- benefit to the The stocking-maker, dollar manufactures two ducer. who for one stockings instead of one, gains as much upon that sum as if pair of the price of a it were The landed proprietor receives single pair. the same rent, although, better rotation of crops, the tenant by a and cheapen produce of his land. Whenever, should multiply the labourer, means devised to to the are without additional fatigue quantity of work he can perform, the ratio double daily the of his is not reduced, although his product is sold at a lower price.* gains to confirm and explain a maxim, which This will serve been has hitherto imperfectly understood, and even disputed many writers, by of political reasoners; namely, that country is" rich anil and sects a proportion in the price of commodities is low.f plentiful, as I For argument's sake, put the rnatter in the most favouraDlo will light those who dispute this maxim, and suppose them to for an urge extreme rase, namely, that, by successive economical reductions, the charges of production are at length reduced to nothing; in which case, it evident there can no longer be rent for land, interest upon u I have met with persons, who imagined themselves adding national wealth, * to in preference to that of cheaper articles. by favouring the production of expensive, a yard of it is of common better to make In their opinion, rich brocade than one consider, that, if the former costs four times sarsenet. They do much as not as it is it requires the exertion because four times as much productive the latter, of be made to produce four yards of the latter, as easily as one agency, which could is the same; but society derives less benefit; for of the former. The total value of brocade makes fewer dresses than four yards sarsenet. It is the a yard of that luxury, ever presents meanness in company with magnifi- grand curse of it cence. Dupont de Nemours (Physiocratie. p. 117.) says, that " it must t not be sup- posed, that cheapness of commodities is advantageous to the lower classes the ; for the reduction of prices lessens the wages of the labourer, curtails his com- forts, and affords him less work and lucrative occupation." But theory and practice both controvert this position. A of wages, occasioned solely by a fall the in the commodities, does not diminish of comforts of the labourer, fall price as the low price of wages enables the adventurer to produce at a and, inasmuch it less expense, to promote the vent and demand foi Jie pro tends powerfully duce of labour. Forbonnais, and all the partisans of the exclusive system, or balance Melon, of trade, concur with the economists in this erroneous opinion; and it has been re-affirmed by in his Nouveaux Prin. d'Econ. Pol. liv. iv. c. 6., Sismondi, here w lower price of products is treated as an advantage gained by the con- the sumer upon the producer, in despite of the obvious impossibility of any loss to the the labouring other productive classes, by a reduction tantamount only to or saving in the cost of production.

307 304 ON DISTRIBUTION. BOOK II or wages on labour, and consequently, no longer any revenue capital, productive classes. What then? the I say, these Why to then, of no classes would human want would longer exist. Every object stand are as the air or the same predicament in the water, which of being either produced or pur- consumed without the necessity is chased. to provide him- In like manner as every one rich enough he be to provide himself with every other air, so self with would very acme imaginable product. This would wealth. Po- be the of no be a science; we should have no litical economy would longer learn the mode acquiring wealth ; for we should find to of occasion it ready made to our hands. instance of a Although there to nothing in be no product falling and becoming worth no more than mere water, yet some prbe, as fuel in kinds have undergone prodigious abatements; those places where coal-pits have been discovered; such abatement? are so and of complete abundance, many approximations to that imaginary state of. * have just been speaking in If different commodities have fallen different ratios, some more, plain they must have varied relative value to it is others less, in fallen, stockings, for instance, has each other. That which has value relatively to that which has changed fallen, as butcher's its not and as have fallen in equal proportion, like stockings meat; such in our hypothesis, have varied in real und sugar not in rela- though tive value. a real relative variation of There is this difference between and a former is the change of value, arising from an altera- price: that a of tion of production ; the latter, a change, arising from the charges an alteration of the ratio of value of one particular commodity to other commodities. Real variations are beneficial to buyers, with- out injury to and vice versa; but in relative ones, what is sellers; by the seller lost by the purchaser, and vice versa. A gained is warehouse 100,000 lbs. wool at 20 cents per in his of dealer, having worth 20,000 dollars; if, by reason lb., extraordinary de- is of an to 40 cents per lb., that portion of his capi- mand, wool should rise be doubled, but all tal will to be exchanged for wool goods brought will lose much in relative value as the wool will gain. A person as of 100 it by of wool, who could before have obtained in want lbs. of wheat valued of disposing, say at 20 dollars, must now 20 bushels dispose twice that quantity. He will lose the 20 dollars gained of by the wool-dealer; and-the nation be neither enriched nor im- poverished.* * Earl of Lauderdale published in 1807, a work, entitled, " Researches on The of in Wealthy and on the Causes which concur he Nature and Origin Public 1 the whole of which is built on this erroneous proposition, us Increase;" reasoning the scarcity of that commodity, though it diminish the wealth of society in the a aggregate, augments that of individuals, by increasing the value of that commo- the dity of its possessors. Whence the author deduces hands unsound in the conclusion, that national, differs in principle from individual wealth. He has not perceived, that, whenever a purchaser is obliged to make the acquisition by lh*» sacrifice of a greater value, he loses just as much as the seller gains; ana

308 CIUP. III. ON DISTRIBUTION. 305 of this kind take place between nation and an When sales one nation, that sells the has advanced in other, the commodity, which of and the purchas- amount the advance, relative price, gains to the a rise of ing nation loses precisely to the same extent. Such price general stock of wealth, existing in the world, to the adds nothing only be enlarged by the production of some new utility, which can of price estimation ; whereas, in other that may become the object or always loses what another gains: cases, all and so 3t is one with fluctuations prices the kinds of jobbing transactions, founded upon of one upon another. probability, the time is not In the Euro- all very distant, when at to their real interests, will renounce the pean states, awake length colonial dominion, and aim at the independent colo- costly rights of nization those tropical regions nearest to Europe; as of some of parts Africa. The vast cultivation of what are called colonial of not fail supply Europe in the products, that would ensue, could to probably most moderate prices. Such and greatest abundance, at shall then have stock on hand, purchased at the old merchants as loss upon that stock; but their loss will prices, certainly will make a be a clear gain to the consumer, who will for a time enjoy this kind at a price inferior to the charge of production ; the mer- of produce, chants will gradually replace their dear-bought produce, by other of equal quality, raised with superior intelligence consumer ; and the the advantage superior cheapness and multiplied will then reap of body; for the merchant will both buy enjoyment, with no loss to any and human industry will have made and sell cheaper; rapid stride, a and opened road to affluence and abundance.* a new to procure this kind of benefit, must occasion to that every operation, designed one party a loss, equivalent to the gain of another. He likewise refers this imaginary difference between the of public principle of private wealth this circumstance; that the accumulation of capital, and to advantage individual, is detrimental to national wealth, by ob- is an to which consumption, which is the stimulus of structing He has fallen into the industry. supposing, the very common error of that capital is, by accumulation, withdrawn contrary, on the consumed, but in a re-produc- from consumption; whereas, it is and so as to afford tive way, means of a perpetual recurrence of purchase, the which can occur once in the case of unproductive consumption. Vide Book but infra. a it is, that a single error in principle, vitiates III. whole work. Thus in is The one built upon this unsound foundation; and, therefore, serves question to multiply, instead only reducing the intricacies of the subject, (a) of * The vast means at the disposal of Napoleon might have been successfully directed to and then he would have left the reputation of hav- this grand object, to and people the world; and not of having been ing contributed civilize, enrich, The error of Lauderdale is analogous to that of (a) and of Malthus, Sismondi and arises from notion, that an extension of productive power makes the an extension of unproductive consumption necessary; whereas, it is thereby ren- dered possible, or at the utmost probable only. The state, as well as its' sul»- jects, in a way conducive to the further extension of productive may consume power, and the state, like an individual, is powerful and wealthy m proportion and to *o extent of the productive sources in its possession, the it e feitiJity %/' tiose sources. T.

309 306 ON DISTRIBUTION. BOOK TL IV. CHAPTER PRICE, AND OF THE PECULIAR VALLE OP NOMINAL VARIATION OP COIN. OF BULLION AND OF elevation depression of the price of com- treating and IN of the in money, no notice modities, although value has been expressed to say value money itself; which, of the truth, the of has been taken part in real, plays even in relative variation of the price of no or One is always ultimately bought with other commodities. product first instance money. When for in the in another, even when paid wool is doubled, it is the price the quantity of purchased with twice the exchange be made directly, of every other commodity, whether the intermediate agency of money. The baker, or through who could have bought wool with 6 lbs. of bread, or, with its 1 lb. of in money, cents, will be obliged to sacrifice 12 lbs. of price say 20 obtain cents necessary to to purchase 1 lb. of wool at the 40 bread proposed to compare together the But, if it be its advanced price. not of stockings, meat, sugar, wool, bread, &c, but of relative value, any one those articles with that of money itself, we shall find, that of all may undergo, and often has, in money, like other commodities, a real variation; that is to say, a variation fact, undergone in the cost its production; and a relative one, that is of say, a change of to value, in comparison with other products. Since the of the American mines, silver, having fallen discovery a fourth former value, has lost three-fourths of its to about of its r other products, w hose price has, meanwhile to all relative value that of corn, for instance; consequently remained stationary; as to seller oz. silver for 1 of (about 43 bushels) of wheat, 4 one must give in the which, 1500, was to be had for 1 oz. or thereabout. A year commodity, which, since that period, have fallen to half its may was to one-quarter, will, therefore, have price, while silver falling its relative value to silver, for this commodity then cost doubled 1 oz., would now be worth and silver, had it not fallen itsi if 4 oz. of in value; but having itself lost one-half its value, it is sold for but 2 oz.; that twice as much silver as at the former period. is to say, for is the of of real and of relative variation in the price Such effect But, of silver. these variations, there have been vast independently in the denomination given, alterations different periods during at the interim, to the same quantity of pure metal, which should make us place very little reliance on the accuracy of our estimate of real and relative variation. In an ounce of silver would purchase 1 setter of 1514, wheat, its scourge and devastator. When the Barbary shore shall be lined with peace- ful, industrious, and polished inhabitants, the Mediterranean will be an immense wealthy nations, peopling inke, by the commerce of the furrowed its shores on every side.

310 CHAP. IV. ON DISTRIBUTION. 30? is now worth this was a relative variation of silver to which 4 oz.; silver then wheat. This quantity 30 sous;* was of denominated of the same denom- same quantity and, had the silver still preserved now be called 1205. or 6/r. Thus, wheat at 6 ination, 4 oz. would silver have would have risen relation to silver, or in jr. the setter comparison with wheat. There would, however, have in fallen nominal variation. But 4 oz. been silver are now denominated no of fr. so that there has been a nominal as well as a 24 instead of 6/r.; real relative The and relative variation,—a mere verbal alteration. been in the ratio of 4 to 1; but the nominal value variation has of has declined in the ratio of lb to 1, since 1514. money is obvious, therefore, that one cannot form an idea It the value of of commodity from its estimate of money price, except during a a of time, within a space of territory, in which neither the space and coin, under- value of its material, has of the denomination nor the change; else be valuation will any merely nominal, and gone the of To say that the setier of convey no fixed idea value whatever. for 30 sous in 1514, without explaining wheat sold then value the of 30 is giving us a price, that conveys either no idea at all, or sous, if it be to affirm, that the setter of wheat was a fallacious one, meant 30 sous of present money. In comparing values, the then worth of denomination is useful only inasmuch as it designates the coin of pure metal contained in the sum specified. It may serve quantity to denote the quantity of the metal; but never serve as an index of value at any of time, or of place. distance is scarcely necessary point out the effects of an alteration in It to metal, which a fixed denomination is given, upon of to the quantity individual property. Such an expedient can national and neither nor the real, or diminish the relative value, either of increase even or of any other commodity. If 1 oz. of silver the metal struck be into crowns instead of one, two crowns will be paid wherever two was is to say, 1 oz. of silver will be given in one given before; that so that the value of silver will either case: have varied. But not when sale has been made on a for a given time, and payment credit stipulated in crowns, the seller may be liable to receive ^ oz. in each crown, instead of 1 oz. to the intention of the coniract- according of the old denomination different ing parties. This transfer to a of the one party, to portion metal will, therefore, unjustly benefit of the other. For every profit to one the injury is a loss individual to another, unless arise from actual production, or from greater it in the economy of production, which is equivalent to actual charges production. With regard to the peculiar and inherent value of bullion or of money, it of all other commodities, in the uses originates, like that to which applicable, as we have before observed. The degree it is of that value is greater or less, according as its use is more or less * Traite Historique, Leblanc: and, Essai sur les Monnaies, by Dupre d« Saint Maur

311 308 ON DISTRIBUTION. BOOK II. tve, its or less necessary, and its supply extern employment more less abundant. more or the most common materials of money Gold silver, though and in an not are then such while can not act as uncoined state; they of money. In the present condition money, material but the raw at his turn bullion into coin of society, every individual can not therefore, coin may be of considerably higher value pleasure; and, of the same standard weight and quality, if the de- than bullion of coin more urgent than the demand for bullion. But for be mand never be perceptibly higher bullion value than coin of equal can in and quality; because the latter may be readily converted weight the into The reason why coin so seldom much exceeds former. bullion value is, that the avidity of governments, which are in of the business coinage, to profit by the difference monopolists of bullion, the them into and error of overstock- between coin has led market with their manufacture of coin. Thus it is, that coin ing the in value below, and rarely much elevated above is never depressed the bullion. Wherefore, of the circumstances, that have detail or the occasion of variations in the hitherto been, may hereafter be, of gold or silver bullion, will serve intrinsic value same time at the to explain the variations of their value in the peculiar character of money. It has already been noticed,* that the ten-fold supply of those metals, poured into the in consequence of the discovery of market did not effect corresponding reduction of their value to America, a what was at before been. For, the demand for them of • 'v it had contemporaneous increase by the the same period greatly enlarged luxury. All the leading states "of of commerce, manufacture, and before been wholly destitute of industry : the circulation had Europe as capital or for of products, whether was very mere consumption, trifling amount. Industry and productive energy made a sudden in all and the commodity em- and simultaneous effort over Europe; as the material of money, the ployed of exchange, could not agent but come more in demand, upon the greater extent and frequency of mutual dealings. About the same time, the new route to the Eastern ocean, by the Cape of Good Hope, was discover- rounding and of adventurers into that direction; the ed, drew abundance of the East obtained a more general consumption; but products no other products of her own to offer in exchange, Europe, having was compelled give the precious metals, of which India absorbed to an immense quantity. Nevertheless, the multiplication of products tended to the of wealth; mere higlers grew up increase and diffusion and the fishing towns wto opulent merchants, Holland already of reckoned amongst their citizens individuals worth 200,000 dollars. The costly objects, that none bat princes could before aspire to possess, became attainable by the commercial classes; and the in greater creasing taste plate and expensive furniture created a for * Suprd, book i. chap. 21. sect. 7.

312 LHAP IV. ON DISTRIBUTION. 300 for gold silver to be employed on those objects demand and question, the of those metals would have prodi Beyond all value of mines America been then oppor giously advanced, had not the tunely discovered. Their discovery completely turned the scales. The rapid increase for gold and silver was far of the use and demand more than coun- increasing supply, which completely glutted terbalanced by the the of great reduction has been the market. Hence their value, which which would have been far greater still, before observed upon, and of the circumstances just stated, whereby but for the concurrence the was silver, in commodities at large, price checked in of or its value limited to one-fourth, instead of being depressed in its fall, and oqua) the is to say, to one-tenth. ratio with increased supply, that penetration the of This counteracting force must have escaped would Locke, have said, that the tenfold increase of silver, or he not since year 1500, necessarily raised the price of commodities in the a tenfold degree. -The instances he might have cited in support few by no means sufficient establish its accuracy ; of his position, were to greater number and variety products might be mentioned, a far for of well as for silver, the demand compared with the sup- for which, as to 1, had ratio of 2\ in the between 1500 and the date ply increased the work of Locke in question.* But, although this of true may be of some particular products, may not be so of abundance of others, it of 1500. the demand has not advanced at all since for some which the others of while has kept pace with the progressive* supply and consequently the ratio of their value remained station- demand, ary, with the exception of trifling temporary variations arising from causes of by the way, should teach a nature wholly distinct; which, the necessity, this science, of submitting insulated facts to the us in reasoning: fact will not subvert theory, unless the whole of for test facts applicable be taken into consideration, as well as the of the the circumstances, that whole vary the nature of those facts • may of hardly possible in any case. is whfch of the demand for silver compared with its * The increased intensity supply, consequent upon discovery of America, is stated at 2^ to 1, because, but the of the tenfold supply would have reduced its value to for this increase demand, of what it had been previously to that event, one-tenth given to 100 oz. the and value of 10 oz. only. But 100 oz. were only reduced to one-fourth of theii former value, i. e. to the value of 25 oz.; which bears to 10 oz. the ratio of 2] to 1. not have been the case, unless the demand for silver, compared This could the had advanced in that proportion. But the supply having with supply, in the same interval, if we would find the increased tenfold of the actual ratio increase demand for silver, whether of the purposes of circulation, of for the luxury, or of manufacture, since the first discovery of the American mines, we must multiply 2\ which will give 25. And probably this estimate will by 10, prodigious advance. the 25 times not exceed seem a truth, although How- may ever, it would doubtless have been infinitely less considerable, but for the in- flux of supply from America; for the excessive dearness of silver would have greatly curtailed Silver plate would probably be as rare as golf? the use of it. «>late is now; and silver coin would be less abundant, because it would £0 fur iher, and be of higher value

313 310 ON DISTRIBUTION. Boot IL Tho \\ riters of the Encyclopedie have fallen into the same error, in stating,* that a household establishment, wherein the silver plate should not have varied in quantity or quality from the middle of the sixteenth century to the present time, would be but one-tenth as rich in plate now as at the former period. Whereas, its comparative wealth would be reduced to one-fourth only; since, although the increase of supply has depressed that value to ,Vo, the increase of demand, on the other hand, has raised it to fA.f It is deserving of attention, that the major part of the coin is in constant circulation, in the appropriate sense of the word, as defined above. In this respect it differs from most other commodities; for they are in circulation only so long as they are in the hands of the dealers, and retire from it as soon as transferred to the consumer. Money, even when employed as capital, is never desired as an object of consumption, but merely as one of barter; every act of purchase is an offer of money in barter, and a furtherance of its circulation. The only part withdrawn from circulation is what may be hoarded or concealed, which is always done with a view to its re-appearance. Gold or silver, in the shape of plate, embroidery, or jewellery, is in circulation only while in quest of, or in readiness for a purchaser; which it ceases to be, when it reaches the possession of the con- sumer. The general use of silver amongst all the civilized nations of the world, coupled with its great facility of transport, makes it a commo- dity of such extensive demand, that none but a very large influx of fresh supply can sensibly affect its value. Thus, when Xenophon, in his essay on the revenues ot Athens, urges his countrymen to give more assiduous attention to the working of the mines of Attica, by the suggestion, that silver does not, like other commodities, decline in value with the increase in quantity, he must be understood to say, that it does not perceptibly decline. Indeed, the mines of Attica were too inconsiderable in their product, to influence the value of the stock of that metal then existing in the numerous and flourishing states upon the borders of the Mediterranean Sea, and in Persia and India; between all which and Greece the commercial intercourse was sufficiently active, to keep the value of silver sta- tionary in the Grecian market. The driblet of silver, furnished by Attician metallurgy, was a mere rivulet trickling into an ocean of existing supply. It was impossible for Xenophon to foresee the influx of the American torrent, or to guess at the consequence of its irruption. If silver were, like corn and other fruits of the earth, an object of human food and sustenance, the enlargement of the sources of its * Art. Monnaies. \ If we are to believe Ricardo, the increase of demand has no effect upon value, which is determined solely by the cost of production. He seems not to have perceived, that it is demand that makes productive agency an object of appreciation. A diminution of the demand for silver bullion would throw all those mines out of work, of which the lower scale of price was not adequate to ll>c charges of bringing the product to market.

314 CHAP. IV. ON DISTRIBUTION. 314 not have lowered value; for the strong impulse o*. supply would its multiplication the human race, towards to a level of the their species of the demand keep means with the subsistence, would have made of supply. The tenfold multiplication of pace with the increase followed by a of the demand for it; corn would be tenfold increase to consume it; and corn as it inasmuch would engender new mouths same average of would maintain nearly to other the relative value commodities. # variations why the of silver are of the This will explain, value and considerable in amount. Their slow- in both slow operation, owing ness universality of the demand, which prevents is to the of and their a moderate variation supply from being sensjoly felt; to the of the metal, which prevent the in- magnitude limited uses of demand from keeping pace with crease rapid increase of supply a Silver utility for the purposes of plate, furniture, and orna- has as well those of money; and is the more copiously ment, as for those objects, national proportion to the degree of on employed in peculiar character of money is proportionate wealth. Its use in the moveable and immoveable objects of property, thai to the quantity of to be circulated ; wherefore, coin would be more abun- there may be in in dantly required poorer nations, were not the follow- richer than to control this general rule. ing circumstances superior rapidity of 1. of money and com- The circulation, both in a state of national opulence, which makes a modities smaller quantity money requisite, in proportion to the total of commer- of cial dealings. The same sum in a rich country will effect perhaps ten successive operations of exchange in the same space of time, as one in a the multiplication of commo- poor country.* Wherefore, to be circulated necessarily attended with a co-extensive dities is not demand money. The business of circulation is of the for increase agent of extended; and but the circulation becomes more active efficient. 2. In a state of national opulence, credit is a more frequent sub- for money. In Chap. XXII, of the preceding book, stitute it has been shown portion of the national money may be dispensed how a by the of convertible paper, without any resulting with employment By this expedient, the use of metal money, and, inconvenience/)" money, the for silver for the purposes of consequently, is demand considerably diminished. Nor is convertible paper the sole expe- * In a poor country, after a dealer has disposed of his wares, he is sometimes a long while before he can the returns he has in view; and, provide himself with the the money-proceeds remain idle in his hands. Moreover, during interval, a poor country, the investment of money is always difficult. Savings are in are seldom turned to profitable account, jntil after a lapse elowand gradual, and is so a of many years; of money that always lying by in a state of great deal inaction. f Ricardo, whom I look upon as the individual in Europe the best acquainted and in with of money, both in theory subject practice, has shown, in his the Proposal for an economical and secure Currency, that, when the good govern- ment the state may be safely reckoned upon, paper may be substituted for the of bv of a metallic money ; and a material assessed of no intrinsic value whole

315 ON DISTRIBUTION. PKX>K a of substitution amongst industrious and commercial people; dicnt an of every covenants, as well as sales on private obligations kind and money-credit, and even mere debtor and creditor credit, transfers of accounts current, have effect precisely analogous. an and consequently the demand, Thus metal mo- the necessity, for equal ratio with the progressive multiplica- in ney never advances other products; and it may be truly said, that the tion a of richer is, the is the amount of its coin, in comparison with nation smaller other nations. of to determine the exchange- Were the quantum the supply alone a commodity, silver would stand to gold in the ratio of able value of silver and gold are produced by metallurgy as 45 to 1.* to 45 ; for 1 the demand for silver is greater than But gold; its uses are both for far more general more various; and thus its relative value and far 1 to 15. is prevented from falling lower than the demand for the precious metals is occasioned by A portion of use; decay although less subject to by their gradual destruction for, still perishable certain degree; are and than most products, they in a the be considerable upon the im- doubtless wear, though slow, must of gold and silver in constant use, as mense quantity in the well character money, as in the various objects of spoons, forks, gob- of dishes, large jewellery of all sorts. There is likewise a lets, and in gilding. Smith asserts, that and consumption the manu- plating of facturers in his time, worked up annually, as Birmingham alone, r as the worth of 50,000/. in these w ays.f much A further allowance skilful management, be to supplant a dear and cumbrous one, whose me- made are never called into play functions of money. tallic properties by the Pol. sur la 8vp. torn. iv. p. 222. Humboldt. Essai Nouvelle Espagne, * of Nations, book i. c. 11. The manufacturing consumption of t Wealth Bir- and other towns has greatly increased since the date of that work.(l) mingham Mr. Jacobs, in his work on the precious metals, (1) which we have already to had occasion refer, has shed much light on the consumption, as well as on to of the and silver, both before and since the production, discovery of the gold the His is devoted to an inquiry into American continent. twenty-sixth chapter consumption of the precious metals from 1810 to 1830. This chapter abounds with highly instructive and curious details, which it would be here impossible to present, but the grounds of the following statements, also taken which furnish the and which fully demonstrate the great increase in the from same chapter, of gold and silver, in what our author, consumption this note, calls "the in manufacturing consumption," since date of Dr. Adam Smith's work on the the Wealth Nations, to which he refers. of According, then, to Mr. Jacobs, the annual consumption of the precious pur- metals, from 1830, in their application to ornamental and luxurious to 1810 poses, he estimates as follows: In Great Britain, ... 2,457,221/. France, '. 1,200,000 Switzerland, 350,000 ... . The rest of Europe, . . 1,605,490 America, 280,630 Making the whole amount, ... 5,893,341/. equal to 28,288,036 dollar*. AMERICAN EDITOR.

316 CHAP. IV. ON DISTRIBUTION. 313 be made the consumption of embroidery, tissue, book-bind- must for down ing, &c, all which may to other purposes. as be set finally lost the to knowledge of which dies with Add buried hoards, the this shipwreck. by and the the possessor, quantity lost go on If the nations as mosi of the world increasing their wealth, last three centuries, their want of them certainly have done for the as of in conse- precious metals will progressively advance, the well gradual wear, which will be greater quence proportion to of the in as of their increasing use, the multiplication and increased aggregate other commodities, which will create value for a of larger demand and transfer If the produce of the of the purposes circulation. keep pace with the mines the precious do not increasing demand, in and less of them value, given in exchange for metals will rise be in general. other products progress of mining shall keep If the pace with advances of human industry, their value will remain the as it seems have done for the last two centuries; during stationary, to demand supply have regularly advanced together.* the and which assured by Humboldt, that the produce of the mines of Mexico * We are has, the 100 years, been increased in the ratio last 110 to 25; also, that such is in of of silver ore, in the chain the abundance the Andes, that, reckoning the num- of ber veins eitherjvorked superficially, or not worked at all, one would be led of has had a mere sample of their incalculable to imagine, that Europe hitherto Essai Pol. sur la N. Espagne, 8vo. torn. iv. p. 149. stores. and gradual depreciation of gold and silver, effected by their The very slight and increasing annual supply, is one amongst many proofs of the rapid immense and general advance of human wealth, whereby the demand is made to keep pace with the Yet I am inclined to think, that their value, after remain- supply. for a century, within the last thirty years begun again ing nearly stationary has setier wheat, Paris measure, which was for a long time, on The of to decline. silver, has now risen to 4T oz., and an average, sold are for 4 oz. of rents of lease. All other things seem to be rising in the raised upon every renewal is undergoing a depreciation of rela- like proportion: which indicates, that silver (1) tive value. In a former note referred to the great decline, since the year 1809, in we (1) the whole mines, both in this and in the eastern continent, of the productiveness on authorities which Mr. Jacobs has given, in his learned work on the pre- the cious metals. From the same work, we here extraot his concluding observations of the twenty-sixth chapter, in relation to the stock of coin now in existence, by which it the twenty years from 1810 to 1830 will appear, that during of and silver coin amounted to nearly one-sixth part of the the diminution gold whole stock. We have estimated," says Mr. Jacobs, " the stock " coin in existence at of the end of the year 1809 to have been 380 million pounds; and the additions made to it between that period and the year 1829, at the rate of 5,186,800 pounds annually, would make it 103,736,000 pounds. 1809, the of coin left From 380,000,000 we deduct for loss in by abrasion, at the rate of 1 part in 400 in each year, which in years would amount to 18,095,220*., thus leaving the 20 in 1829 361,904,780*. To which may be added the supply from the mines, ... 103,736,000 Thus showing 465,640,780.'

317 814 ON DISTRIBUTION. BOOK II f if supply of those metals outrun the pro^rirss of general And, he seems wealth, at this moment, they will fall in re- to be as it doing at be other commodities large. Metal-mouey will thereby spect to of rendered more cumbrous; and silver will but the other uses gold be more widely diffused. long and tedious task to expose all the It would be a false reason- and in the perpetual confusion of ing erroneous views, originating variation, that ana- cost so much time to of the different kinds it has the distinguish. enough to put and reader into a condition lyze It is to discover their fallacy, and himself the tendency of mea- estimate sures avowedly directed influence public wealth, by operating to the scale value. upon of V. CHAPTER OP IN WHICH REVENUE IS DISTRIBUTED AMONGST SOCIETY. THE MANNER the value of things, and which ope- causes, which determine THE in the way described in the preceding chapters, apply without rate to all things possessed of value, however perishable; exception to the productive service yielded amongst others, therefore, by in- land, and state of productive activity. Those, dustry, capital, in a had at their disposal who have these three sources of any one of From which must be deducted that converted and ornaments, ... into utensils 5,612,611 And that transferred into Asia, . . . 2,000,000 7,612,611 annually. Or in twenty years, 152,252,220 This would show the at the end of 1829 to be, 313,1388,560/. estimated amount at the end of 1809, 66.611,440/. Or less than diminution nearly one-sixth part in the twenty years." Or of a 1 we " During the , and indeed for many years period have been considering the comparative value of gold to silver had scarcely experienced any before, 1 alteration. According view here taken, the amount of gold applied to to the of in the had far exceeded that of silver, perhaps purposes proportion of luxury treasure transferred four but, on the other hand, the one; to India and China to has consisted chiefly of silver, and much more gold had been brought to Europe from those countries than had to them. It has before (twenty- been conveyed of of to be shown that the durability fifth chapter this inquiry) been attempted to one in gold proportion of four coin greater than that of silver. It is in the has, too, been shown that the recently increased produce of the mines of Russia lias consisted chiefly gold. These circumstances, on which our limits do not of admit of enlargement, might be shown to be sufficient to account for the equable metals during rate value which has been preserved between the two of a long id" AMERICAN EDITOR

318 CHAP. V. ON DISTRIBUTION. 315 are the ve iders what we shall here denominate pro. production, of consumers of its product are the purchasers. ductive agency; and the in every other commodity, rises Its relative value, like that direcl of supply. ratio to the demand, and inverse ratio to the adventurers, The wholesale employers tiie/ of industry, or as of brokers between the venders ana have been called, kind are but a quantum of productive agency upon a a the purchasers, who engage demand for that product.* particular product, proportionate to the manufacturer, The farmer, merchant, is constantly occupied the the price, which consumer of a given product will the the in comparing give for it, with the necessary charges of its production; and can if him to it, he is the organ of a that comparison determine produce productive agency applicable to this object, and demand for all the one of the bases of the thus furnishes of that agency. value On other hand, the agents of production, animate and inani- the and human labour, supplied in larger or mate, land, capital, are action the various motives, that to the smaller quantity, according of detailed in the succeeding chapters; thus forming the other will be of the value which their agency is rated.f bases at value the whole Every product, when completed, repays by its of productive agency employed in its completion. A amount great part this agency has been paid for before the entire completion of of by the product, and must have been advanced somebody: other part has been remunerated on its completion; but the whole is always for ultimately out of the paid of the product. value By exemplifying the mode, way of which the value of a pro- in duct is distributed amongst all that have concurred in its produc- tion, let us a watch, and trace from the commencement, the take its smallest parts have been procured, and in which manner in which been paid every one of the infinite number of their value to has concurring producers. first place we find, that the In and steel, used in the gold, copper, its construction, have been purchased of the miner, who has received in exchange for these products, the wages of labour, interest of capi- and rent paid to the landed proprietor. tal, in of The dealers the original producer, re-sell to metal, who buy in watchmaking, thus reimbursed their ad- those engaged and are paid and profits of their business into the bargain. vance, the It has been already seen, that * demand for every product is great, in the proportion to the degree of its utility, and to the quantity of other products pos- sessed by others, and capable of being given in exchange. In other words, the utility of an object, and the wealth of the purchasers, jointly determine the extent of demand. the hesitated In plan of this work, I the for a long time, whether or + digesting to place the analysis no value before that of production; to explain the nature of of the quality produced, before entering upon the investigation of the mode of its production. But it appeared to me, that to make the foundation of value previous knowledge intelligible, to have a was necessary of wherein the cost it of production consists; and for that purpose to have a just and enlarged concep- tion of the agents of oroduction, and of the service they are capable of yielding

319 316 ON DISTRIBUTION. BOOK II. Th»i respective mechanics, who fashion the different parts whereof a waich to the watchmaker, who, in paying is composed, sell them advance of the them, refunds the their previous value, together with the of laboui pays, besides, interest upon that advance; wages and may hitherto incurred. This very complex operation of payment to the aggregate of those united single sum, equal be effected by a same way, the watchmaker deals with the me- values. In the chanics that furnish the dial-plate, the glass, &c, and such ornaments he may fit to add,—diamonds, enamel, or any thing he think as pleases. of the individual purchaser of the watch for his own use Last all, watchmaker the whole of his advances, together with refunds to the each part respectively, and pays him besides, a profit on on interest and industry. his personal skill We find, then, that the of the watch has been shared total value all its producers, perhaps long before finished; and amongst it was much more numerous than have described or are I those producers generally imagined. Among them, probably, may be found than is who has bought the watch, and himself, the unconscious purchaser it in his fob. For who knows but he may have advanced his wears to a mining adventurer, or a dealer in metal; or to the own capital of a or to an individual who acts himself in director large factory; of these capacities, but has undcrlent to one or none per- more such sons part of the funds he has a at interest from the iden- borrowed tical consumer of the watch ? It has it is by no means necessary for a pro- been observed, that to be perfected use, before the majority of its concurring duct for have been reimbursed that portion value they have can of producers completion; in a great many cases, these producers contributed to its product has the have even consumed their equivalent long before arrived at perfection. Each successive producer makes the advance his precursor of the then value of the product, including the to it. His labour already expended upon in the order of successor him in the addition of such value production, reimburses turn, with the product may have received in passing through as hands. his Finally, the last producer, who generally the retail dealer, is com- is by the pensated for the aggregate of all these advances, consumer •plus the concluding operation performed by himself upon the product. The whole revenues community are distributed in one arid of the the same manner. That portion the value produced, which accrues in this manner of the landed proprietor, is called the profit of to which is some- land; times transferred to the farmer, in consideration of a fixed revt. The portion assigned to the capitalist, or person making the ad- vances, however minute however short a period of time, is and for called the profit of capital; which capital is sometimes lent, and I he profit relinquished condition of a stipulated interest. on called to the mere mechanic or labourer is The portion assigned

320 CHVP. V OxV DISTRIBUTION. 317 profit of which is sometimes relinquished for certain the labour; wages.* e&ch respective share of the total value class receives Thus, its its ana produced; revenue. Some classes this share composes re- as as they receive consume and ceive their share piecemeal, fast are the most numerous, it; they comprise most of the and these for land-holder and the capitalist, who do not The labouring classes. themselves turn their means to account, receive their revenue period- twice, or ically, once a year, according to the or perhaps four times nris the contract with the transferee. But, in whatever manner te of derived, always analogous in its nature, and may be a revenue it is actual value produced. Whatever valt»e an indi- must oiiginate in in satisfaction wants, without having either vidual receives of his indirectly concurred in or of some kind or other, directly production be wholly either a must or a spoliation; there is no gratuitous gift other alternative. is in this that the total value of products is distributed It way, members community; I say, the total value, the amongst of the the whole value produced, as does not go to ono because such part of concurring producers, is received by the rest. The clothier of the farmer, pays his workmen in every department, buys wool of the the cloth, and sells result of their united exertion, at a price that the reimburses advances, and affords himself a profit. He never all his as or as the revenue of his own industry, any thing reckons profit, net surplus, after deducting all charges and outgoing; more than the but those outgoings are an advance of their respective reve- merely nues previous producers, which are refunded by the gross to the value of the cloth. The price paid to the farmer for his wool, is the compound of the of the cultivator, the shepherd, several revenues the landlord. Although farmer reckons as net produce only and the his landlord servants of the surplus remaining after payment and his them these payments are items of revenue,— in husbandry, yet to one, to the wages to the other; to the and the revenue of rent one, to the other, the revenue of his industry. The aggregate his land, all these is defrayed out of the value of the cloth, the wholef of of the of some «one or other, and is entirely ab- which forms revenue in that way. sorbed In the above instance of the watch, many of the artisans are themselves the * adventurers respect to their own industry; in which case their receipts are in profits, not wages. If the maker exclusively of the chain himself, buys the steel in its it up, and sells the chain on his own account, he is rude state, works in flax- to this particular part of the manufacture. A the adventurer respect a few it, and of flax, spins Bpinner buys converts her thread into penny-worth of this money goes to the purchase of more flax; this is hei eap- money. Part ital; another portion is spent in satisfying her wants; this is the joint profit of her industry and her and forms her revenue. little capital, of the absorbed is t Even that portion in the maintenance gross value, which or restoration vested capital or machinery. If his works need repair*, of the which are executed by the proper mechanic, the sum expended in them forms is the revenue that mechanic, and is to the clothier a simple advance, which of refunded, like any other, by the value of the product when completed.

321 3i8 ON DISTRIBUTION. II BOOK it appears, that term net produce applies only to the Whence the each separate producer individual revenue in or of adventurer the of individual revenue, the total that aggregate industry; but is equal to the gross produce revenue land, of the community, of its industry. Which entirely subverts system of the capital, the and but the net last century, who considered nothing economists of the land as forming revenue, and produce of the therefore concluded net was all that the community had to consume, that this produce admitting obvious inference, that the whole of what of the instead also be consumed by mankind.* has been created, may the mere excess If national revenue consisted value produced of of ine- be above value consumed, this most absurd consequence would a nation consumes in the year the total vitable, namely, that, where its of it will have no revenue whatever. Is a man annual product, possessed an income of 2000 dollars a year, to be said to have no of he may think proper spend the whole of it ? revenue, because to profit derived his individual from of The whole amount by an industry, within and year, is called his annual land, capital, the The aggregate of the revenues of all the individuals, revenue. a national revenue.f is its whereof Its sum is the nation consists, value the national product, minus the portion exported; for gross of of one nation, is like that of one individual to the relation another. The profits individual are limited to the excess of an income of his above his expenditure, which expenditure, indeed, forms the reve- nue of other persons, but, if those persons be foreigners, must be reckoned in the of the revenue of the respective nations estimate for instance, when consignment of they may belong to. Thus, a made Brazil to the amount of 2000 dollars, and the is ribbons to cotton, in estimating the resulting product to returns received in dealing, act of export made to Brazil in pay- France from this the of be deducted. Supposing the investment of ment the cptton must to procure, say 40 bales ribbons cotton, which, when they reach of France, will fetch 2400 dollars, dollars only of that sum will 400 to to the France, and the residue of that of Brazil. go revenue all mankind form but one vast nation or community, Did would it be equally true respect to mankind at large, as to the internal in pro- duct of each insulated nation, that the whole gross value of the product would be revenue. But so long as it shall be necessary to consider the as split into distinct communities, taking human race of the is due to natural agency, amongst which that of * Part value created is comprised. But, as stated above in Book land land is treated as a machine I., or instrument, and its appropriator as the producer that sets it in motion; in like manner as the productive quality of capital is said to be the productive quality of the capitalist to it belongs. Mere verbal criticism is of little moment, whom the when once is explained; it is the correctness of the idea, and not meaning of the expression, that is material. f The term national revenue, been sometimes incorrectly applied to the has Imancial receipts of the state. Individuals, indeed, pay their taxes out of their lospeciive revenues; but the sum levied by taxation is not revenue, but ra'her a •ax upon revenue, and sometimes unhappily upon capital too.

322 CHAP. V. ON DISTRIBUTION 319 tin independent interest, this circumstance mist taken into each be nation, whose imports exceed the account. Wherefore, its ex- a in value, gains extent of ihe excess; which in revenue ports to the external commerce. A nation profit the excess constitutes of its of 20,000 dollars, and import to the to the that should export value 24,000 dollars wholly in goods, without any money passing of value profit of 4000 dollars, in on either side, would make a direct contra- to the of the partizans of the balance of trade.* diction theory perishable products consumed within of The voluminous head the very moment of production, as in the case of year, nay, often at the nevertheless an item of national revenue. all immaterial products, is are but so many values produced and consumed in For what they the satisfaction human wants, which are the sole characteristics of of revenue ? of individual national revenue is made in the The estimation and of that every collection of values, under whatever way, as of same form ; as of the estate of a deceased person. Each varieties of pro- is in money or successively valued For instance, the duct coin. of France are said to amount revenues millions of dollars to 1300 which no means implies, that the commerce of France produces a by of in specie. Probably a very small amount of return that amount or none at all, may have been imported. All specie, is meant that by the assertion is, that the aggregate annual products of the nation, valued separately and successively in silver coin, make the total value above stated. The of making the estimate in only reason is, the greater facility acquired habit of forming an idea money by unchangeable value specific amount of money, than of the of a of that facility, it would be quite other commodities. Were it not for and to say, make estimate in corn; the that the revenues to as well to 1,300,000,000 bushels of of France amounted at wheat, which one dollar bushel, would make precisely the same amount. the the to hand of the values Money facilitates circulation from hand and capital; but is itself not an item of composing both revenue annual revenue, not an annual product, but a product of being or metallurgy, of a date more or less remote. previous commerce The same coin has effected the circulation of the former year, possibly of the and has all the while remained the former century, in amount; value of its material have declined in nay, if the same nation will even have lost upon its capital existing the the interim, the form under money; just in the same way as a merchant of would lose upon the fall of price of the goods in his warehouses. Thus, although the greater part of revenue, that is to say, of value produced, is the money, the momentarily resolved into money, quantity silver coin itself, is not what constitutes revence; reve- of nue is value produced, wherewith that quantity of silver coin has * Their profit arises from increase value effected by the transport upon of Dcth the expert and the import, by the time they have reached their destination espectively.

323 ;J2() ON DISTRIBUTION. BOOK IL and, as that value assumes form of money but for been bought; the money a moment, the same identical pieces of many are of made use or of a purpose of paying for the receiving course year, times in the specific portions revenue of revenue. Indeed, some portions of form of money at all. The manufacturer, that the never assume workmen himself, pays part of their wages in food; boards his su fai of th'e mechanic's revenue is paid, that this greater notion consumed, without having once taken shape of and received, the instant. In the United States of America, and money, even for an uncommon it is not in countries similarly circumstanced, for the derive from the to of his own estate, food, lodging, colonist produce for the whole of his establisnment; receiving and con- and raiment his suming in kind, without any intervention of whole revenue money whatsoever. I think to warn the reader against confound- I have said enough money, into which revenue may converted, with revenue the be ing establish a conviction that the revenue of an itself; and to indivi- or of a nation, is not composed of the money received in lieu dual, the products of his or their creation, but is the actual product or of its value, which, by a of exchange, may undoubtedly arrive process its in the shape of a bag of crown pieces, or in any at destination •ther shape whatsoever. in the shape of money or otherwise, No value, whether received can form a of annual revenue, unless it be the product, of portion »ie price product, created within the year : all else is capital,— of a 5 property passing from one hand to another, either in exchange, as : gift, or by For an item of capital, or one of revenue, inheritance. be transferred paid any how, whether in the shape of per- nay or real, moveable or or imircveable property, or of money of ronal matter what shape it assume, revenue differs from capital no But, in this, that it is the result or product of a pre-existing essentially or source, whether land, capital, industry. has with some been a matter of doubt, whether the same value, It has by one individual as the profit or which already been received of his land, capital, or industry, can constitute revenue revenue the of second. For instance, a man a 100 crowns in part of receives his personal revenue, and lays it out in books; can this item of revenue, thus converted into books, and in to his that shape destined to form Tevenue of the printer, consumption, further contribute the other concurring agents in the production of bookseller, and all the and be by them consumed a second time 1 the books, difficulty The may solved thus. The value forming the revenue of the be first .ndividual, derived from his land. capital, or industry, and by him consumed in the shape of books, was not originally produced in that form. There has a double production: 1. Of corn perhaps by been and the industry of the farmer, which has been converted the land into crown pieces, and paid as rent to the proprietor : 2. Of books by products have •.he capital industry of the bookseller. The two and been subsequently interchanged one for the other, and consumed

324 CHAP. VI. ON DISTRIBUTION. 321 by the producer other: having arrived at the particular each of the their respective wants. form adapted to The opinion of the lawyer, So likewise immaterial products. of is &2 product of their respective talents of the advice the physician, their peculiar productive means. If the and knowledge, which are to purchase their assistance, gives for it merchant have occasion he converted into money. Each of his own of a commercial product them .ultimately consumes his own revenue respectively, transformed object best adapted to his peculiar occasions. into the VI. CHAPTER OF WHAT BRANCHES OF PRODUCTION YIELD THE MOST LIBERAL RECOMPENSE TO PRODUCTIVE AGENCY. aggregate value of a product, THE just described, in the way refunds different concurring producers the amount of their to its in most cases, profit, that constitutes advances, with the addition of a ; are profits r revenue. productive agency But the not of equal the of in all its branches; some yielding but a very scanty revenue amount the land, capita], or industry, embarked in them ; while others for give i*n exorbitant return. True is, that productive agents always endeavour to direct their it .,0 those employments, in which the profits are the greatest, and agency thus, their competition, have as much tendency to lower price, as by demand has to raise it; but the effects of competition can not always so nicely proportion the to the demand, as in every case to supply an equal remuneration. Some kinds labour are seantily ensure of in not accustomed to them; and supplied, countries where people are is ofteii so sunk in a particular channel of production, that capital it can never transferred to any other from that wherein it was be the may stubbornly resist that originally embarked. Besides, land of cultivation, whose products kind greatest demand. are in the One cannot trace the fluctuation of profit on each particular occa- sion. A wonderful change may be effected by a new invention, a hostile invasion, or a siege. Such partial circumstances may influence of but can not destroy their or derange the operation general causes, No dissertation, however voluminous, could general tendency. be made to embrace every individual circumstance, that by possibility may influence the relative value of objects; but one may specify general causes, such as have an uniform activity; thereby and enabling every one, \* hen the particular occasion inay«present itself, 1.0 estimate the effect produced by the operation of partial and tran sient circumstances.

325 ON DISTRIBUTION. BOOK TX at first sight, will on inquiry be It may appear extraordinary but largest profit found generally true, that not on* the is the made, are but upon those which dearest commodities least indispensable, or and least to be dis- rather on those, which are the most common the demand for these latter is necessarily per- fact pensed with. In for it is stimulated by manent and grows with every ; actual want, of the of production; inasmuch as nothing tends to increase means increase population more, than providing the means of its subsistence. for on the contrary, does not expand with The demand superfluities, producing them. An extraordinary run, the increased power of way, can never take place but in large towns, may by the which, the current considerably above the raise is to natural price; that say, above actual cost of production; or a change of fashion the it infinitely below that point. Superfluities may again depress all, but of secondary want even to the rich are, objects after themselves; for them is limited to the very .and the demand of persons that can indulge in them. When a casual small number to calamity obliges individuals reduce their expenditure, when their are curtailed by the ravages of war, by taxation, or by revenues the arti- of retrenchment are always the natural scarcity, first items of this And cles may serve, perhaps, least necessary consumption. why the to explain, to the raising of productive agency directed superfluities, is generally worse paid than that otherwise employed. I say generally, for it is possible enough that, in a great metropolis, where the for luxuries is more urgent than elsewhere, and demand of fashion, however absurd, more implicitly obeyed than the dictates nature; where will, perhaps, be content the eternal laws a man of dinner, so he may appear in the evening circle in to lose his embroi- it is in such a place possible, that price of the gew- dered ruffles, the may sometimes very liberally reward the gaws and capital labour devoted their production. But, except in such particular cases, to and for contin- balancing one year's profits with another, allowing it has been ascertained, that the adventurers in the gent losses, of superfluities make the most scanty profits, and that production their workmen worst paid. The manufacturers of the finest are the laces in-Normandy and Flanders are a'very indigent set of people; and at of gold-embroidery are absolutely clothed Lyons, the workers Not but in rags. that very considerable profits have occasionally been derived from such articles. A hat-maker has been known to a fortune by a fancy hat; but, make all the profits made on taking superfluities, and deducting the value of goods remaining unsold, or, though sold, never paid for, we shall find that this class of products affords, on the whole, the scantiest profit. The most fashionable tradesmen are oftenest in the of bankrupts. list of general use Commodities attainable by a greater number of are persons, and are in demand with almost every class of society. Tlje chandelier is to be found only in the mansions of the rich ;'but the meanest cottage is furnished with the convenience of a candlestick :

326 CHAP. VI. ON DISTRIBUTION. 323 for candlesticks therefore, regular, and always more the demand is, chandeliers; and, even brisk than that in the for most opulent coun- of is far greater than that of the total value the candlesticks try, the chandeliers. are unquestionably those The articles most of human food of demand for them recurs daily; and no occu- use; the indispensable regular as those which minister to pations are so human sustenance. it is the most certain profit, notwithstand- Wherefore, they that yield effects brisk competition.* The butchers, bakers, and the of ing Paris, are pretty sure to porkmen, a fortune sooner or of retire with I have it from pretty good authority in such matters, later; indeed, and real property sold in that half the houses Paris and the environs, is bought tradesmen in those lines. up by is on this account, that individuals nations, who understand It and acting for their true interest, unless they have very cogent reasons in preference to the production of what otherwise, apply themselves 1706, negotiated tradesmen call current articles. Mr. Eden, who, in part of Great Britain the treaty of commerce concluded by the on de Vergennes, went upon this principle, in stipulating the* free M. import of " The few the common English earthenware into France. of we may sell you," said the English agent, " will be dozens plates of Sevres porcelain we a poor set-off against the magnificent services shall take of to the vanity of the French agent you." This appeal But, as soon as the English earthenware was admit- was decisive. ted, its lightness, cheapness, convenience and simplicity of form, recommended it to the its regular most moderate establishments; in a short time, amounted many millions, and continued import, to exportation Sevres the war. The of increasing every year until china, was a mere trifle in comparison. current articles, besides being more considerable, The scale for is A tradesman is never long in disposing of likewise more steady. common linen shirting. I have selected from the class of manufacture might The examples in the easily be paralleled and commercial branches. A agricultural is in lettuces than in pine-apples, much larger value consumed at large; and the superb shawls of Cachemere throughout Europe in in a very poor object in trade, France, comparison with the are, plain cotton goods of Rouen. Wherefore, it is a bad speculation for a nation to aim at the export of objects of and the import of objects of general utility. luxury, and few France supplies Germany with fashions 6nery, which very can make use of; and Germany makes the return in persons tapes * I speak here of the adventurers, masters, or tradesmen; the mere labourer or journeyman benefits only, as it were, by re-action. The farmer, who is an adventurer agriculture, employed in raising products for human sustenance, in lies under disadvantages, that very much curtail his profits. His concerns are too much at the mercy of his landlord, and of the financial exactions of public of authority, nothing of the vicissitudes to say seasons, to be very gainful on the average.

327 324 ON DISTRIBUTION. BOOK U in files, scythes, shovels, tongs, other hard- and otliei merceries, and common ware and oils of France, the use. But for the of wines by nature, together with a annual product of a soil highly favoured superior execution, France would derive less of few products ad- vantage from Germany than Germany from France. The same said of the French trade with the may of Europe, (w) be north VII. CHAPTER OF THE REVENUE OP INDUSTRY I. SECTION the Profits of Industry in general. Of THE demand of products, general motives, which stimulate the the demand for any product have been above investigated.* When is very lively, the productive agency, through whose whatever, it is means alone is likewise in brisk demand, which "obtainable, its ratio value: this is true generally, of every necessarily raises of productive agency. Industry, capital, land, of all yield, kind and paribus, largest profits, when the general demand for ceteris the is most active, affluence most expanded, profits most wide- products and and ly diffused, prolific. production most vigorous the we have seen that the demand for some In preceding chapter, is always more steady and products for others. Whence, active than we have inferred, that the agency directed to those particular pro- ducts, receives the most ample remuneration. Descending in our progress more and more into particular detail, * Book I. c. 15. The reasoning this whole chapter is superfluous and inconclusive. (a) of left natural level, find its is one class of productive agency to Where value long run, be equally recompensed with another, presenting an equi- in the will, or poise of facility or disrepute, of enjoyment or suffering, in difficulty, of repute the general estimation mankind; this he states fully in the next chapter. If of a our author means here to say merely, that large class of productive agency will a larger portion of the receive as its recompense or revenue, or general product that agency in permanent employ will obtain a regular and permanent recom- pense, he has a very circuitous mode of expressing a position, which is, taken The productive agency of indeed, almost self-evident. is into grand division and vorporeal whereof the former is, on the average, the more intellectual; amply rewarded by the rest of mankind, because the latter, in some measure, rewards Thus, the profits of printing and bookselling are, on the whole, itself. more liberal than those of authorship; because the latter is partly paid in self gratification, in vanity or conscious merit. T.

328 CHA#. VII. ON DISTRIBUTION. 325 in this, and some following chapters, what cases we shall examine in industry bear the profits or a less proportion to those of a of greater and together with the reasons win land, vice versa ; capital and of or land, are certain ways of employing industry, capital, more profit able than others. the comparison of the relative profits of in- To begin, then, with those of capital and land, we dustry, the to shall find these bear of a demand for a highest ratio, where abundance capital creates industrious agency; great mass in Holland before the as it did of as it very dearly paid there; revolution. Industrious agency was countries like still United States of America, where popu- is in the and consequently, the human agents of production, spite of lation, their rapid increase, bear proportion to the demands of'an unli- no mited extent land, and of the daily accumulation of capital by the of of frugal habits. prevalence man is generally In countries thus circumstanced, the condition of who live in idleness upon the the most comfortable; because those, their capital profits land, are better able to live on moderate of and who live upon the profits of their own industry profits, than those only; the the resource of living on their capital, can, former, besides add the of industry to their other revenue; when they please, profits the mere mechanic or labourer but pleasure to the can not add at profits of his industry those of capital and land, of which he possesses none. Proceeding next to compare the profits of different branches of industrious agency one we shall find them greater or with another, in proportion, degree of danger, trouble, or fatigue, less 1st, To the their being more less agreeable; 2dly, To or to or attending them, irregularity of the occupation; 3dly, the regularity the degree or To or talent that may be requisite. of skill of these causes tends to diminish the quantity of labour Every one in circulation in to vary its natu- each department, and consequently of It is scarcely necessary to cite examples in support ral rate profit. of propositions so very evident. the agreeable or disagreeable circumstances attending Among an occupation, must reckoned the consideration or contempt which be are partly paid in honour. Of any it entails. Some professions given price, the more is paid in this coin, the less may be paid in any other, without deducing the of price. Smith remarks, ratio the the poet, and the philosopher, are almost wholly that scholar, in personal consideration.—Whether with reason or from pre- paid comic judice, this the case with the professions of a entirely is not actor, a dancer, and innumerable others; they must, therefore, be paid in money what they are denied in estimation. " It seems absurd first sight," says Smith, " that we should despise their at persons, and yet reward their talents with the most profuse liberality Whilst we do the one, however, we must of necessity do the othei Should the public opinion or prejudice ever alter with regard to such occupations, their pecuniary recompense would quickly diminish*

329 &26 ON DISTRIBUTION. BOOK IL e would apply them, and the cc mpetition would More pcojr to price of far quickly reduce the their labour. Such talents, though so as is imagined. Many means from being common, rare are by no who disdain to make this people possess them in great perfection, and ruany more are capable of acquiring them, if any them; use of honourably made by them."* thing could be the functions national administration are In some countries, of same time with high honour requited and at the large emolument; so, where, instead only being open to free competition, it is but of professions, they like other occupations disposal of and are in the A to its true interest, is nation, awake not to royal favour. careful but to lavish this double recompense upon official mediocrity; its pecuniary bounty, where husband prodigal of distinction and it is authority. is dearly paid; the labourer must Every temporary occupation for well time he is employed, as for that as be indemnified for the waiting for employment. A job coachmaster during which he is days for the employed, than may appear must charge more he is for his and capital embarked, because the busy sufficient trouble pay for the days must any thing else would be ruin to idle ones; him. hire of masquerade dresses is expensive for the same The the whole year. of the carnival must pay for the reason; receipts a innkeeper must charge high an Upon for indifferent cross road, entertainment; some days before the arrival of for he may he another traveller. However, the proneness of mankind to expect, that, if there be a single lucky chance, it be sure to fall to their peculiar lot, will a portion industry dispropor- attracts towards particular channels of profit they hold perfectly fair lottery,' to the tionate out. «In a author of the Wealth of Nations, 'those who draw prizes says the those gain that is lost by all who draw blanks. In a pro- ought to for one that succeeds, that one ought fession, where twenty fail to gain that should have been gained by the unsuccessful twenty.'f all are far from being paid according this Now many occupations to same author states The belief that, how extravagant rate. his the fees soever counsellors at law of celebrity may appear, the of annual gains of all the counsellors of a large town bear but a very small proportion to their annual expense; so that this profession, must, in its subsistence from some other indepen- great part, derive of dent source revenue. It is hardly necessary to state, that these several causes of differ- in the ratio of profit ence same, or each in an may act all in the opposite direction; or that, in the former case, the effect is more intense; whereas, in the latter, the opposite action of one controls waste atjj neutralizes It would be a other. of time to prove, the Ina the agreeable circumstances of a profession may balance the uncertainty product: or that a business that does not furnish of its TWld Wealth of Nations, book i. c. 10. I •

330 CHAP. VII. ON DISTRIBUTION. 32^ and is moreover attended with danger, must constant occupation, he double increase indemnified of by a salary. the of inequafity in the pro- perhaps The last, principal cause and is, the degree of skill it may require. fits of industry in general to any the of a superior When skill requisite calling, whether attainable only long and expensive is or subordinate character, by certain training, that training must every year have involved a total outlay forms expense, accumulated capital. In such and the an remuneration includes, over above the wages of labour, its case, and capital advanced in the training, and an interest an interest upon the the ordinary rate; capital advanced has been higher than for the and no longer than the life of the individual. It actually sunk, exists should, therefore, calculated as an annuity.* be It this reason, that all employments of time and talents, is for a liberal education, better paid than those, which which require are capital which ought yield is to require less education. Education the ordinary profits of industry. interest, independent of facts, it is true, that militate against this principle; but are There are capable of explanation. The priesthood is sometimes very thev yet a ill paid;")* religion, founded upon very complicated doctrines, a long course of and obscure historical facts, requires in its ministers and and such study and probation necessarily call study probation, an advance of capital; it would seem requisite, therefore, for the for of the continued existence the salary of the clerical profession, that pay the minister should on the capital expended, as well as interest the wages of his personal trouble, which the profits of the inferior clergy rarely exceed, particularly in It must, Catholic countries. be ascertained, whether public have not themselves however, the maintenance education of clerical in the advanced this capital and public charge; in which case, the public advancing students at the find people enough may execute the duties for the to the capital, their labour, or a bare subsistence, especially where of mere wages is no family to be there for. provided * Nay, even more than annuity interest sums spent in the education of on the the it should be annuity inter the person who receives salary; strictly speaking, the total sum devoted to the same class of study, whether it est upon or have have been made productive in its kind. Thus the not of the fees of a aggregate physician ought to replace not only what has been spent in their studies, but, in addition, all the expended in the instruction of the students, who may feums or not have repaid the have died during their education, whose success may for the stock of medical industry in care bestowed upon them; actual existence could never have been reared, without the loss of some part of the outlay devoted to medical instruction. However, there is little use in too minute attention to accuracy in the estimates of political economy, which are frequently found at in the variance with fact, of the influence of moral considerations account on matter of national wealth, an influence that does not admit of mathematical esti- mation. The forms of algebra are therefore inapplicable to this science, and serve only to introduce unnecessary perplexity. Smith has not once had recourse to them. 11 do not mean to include the superior orders of the clergy, whose benefice* are extremely rich and well paid, though upon principles of state policy.

331 328 ON DISTRIBUTION. BOOK h nen, besides expensive training, peculiar natural talent "W is particular branch required the supply is still more of for a industry, to the and must consequently be bet- proportion limited demand, in but two or three ter paid. A great nation will probably contain a superior picture, or modelling a beau- painting artists capable of such objects, then, be tiful statue; in demand, those few can if much and, of the profit is charge almost what they please; though much return with interest capital advanced in the acquisition of the of but profit it their a very large surplus, (a) A art, yet the brings leaves or physician, will have spent, of his celebrated painter, advocate, or own six or eight thqusand dollars at most, in relations' money, acquiring ability from which his gains are derived; the interest the sum calculated annuity, is but 800 dollars; so that, if he of this as an there remains annual sum of 3000 by his art, an make 6000 dollars wholly dollars, which salary of his skill and industry. If is the is to be set down as property, his every thing affording revenue for- tune years' purchase may be reckoned 50,000 dollars, even at ten him not to a sol. supposing have inherited SECTION II. of the Man )fthe Profits Science. of The philosopher, the man who makes it his study to direct the laws of nature to the greatest possible benefit of mankind, receives a very small proportion of the of that industry, which products the knowledge, whereof derives such prodigious advantage from he same time depository and the promoter. The cause of at the the is his disproportionate payment seems to speak technically, to be, that, in a moment, an immense stock of his he throws into circulation, is one that suffers very little by wear; product, which that it is so long before operative industry obliged to resort to him for a fresh is supply. The scientific acquirements, without which abundance manu- of are probably iacturing processes could never have been executed, of and a the result course of experi- long study, intense reflection, and delicate, that are the joint occupation ments equally ingenious of the highest degree of chemical, medical, and mathematical skilL But the so much difficulty, is probably knowledge, acquired with in a few the channel of public lec- transmissible pages; and, through is to be deducted the average loss (fl) From which, however, general on the oalance of less successful competitors in the same line. It does not appear, that, in England at least, any allowance is to be made for personal consideration, «rhich seldom attached in a high ratio even to the greatest excellence in the is department of pure art. There is no instance of a sculptor or a painter arriving the at honours of the peerage, which have been placed within the roach of suc- cessful commercial enterprise. T,

332 CHAP. VIL ON DISTRIBUTION. 3C9 or of the press, circulated in much greater abundance, than tures, is consumption; is required it spreads of itself, and. or, for rather, any those, to recur to never being imperishable, there is necessity originally emanated. it from whom price the Thus, of things to the natural laws, whereby according knowledge will be very is determined, this superior class paid : of ill is to say, it a very inadequate portion of the value that will receive product, from which it has contributed. It is the a sense of to of conceive to this injustice, that every nation, sufficiently enlightened the immense benefit of scientific purs