A Treatise on Political Economy
* Each footnote is marked in the text by a colored-coded superscript and in this footnote file according to its authorship as follows:
Book II, Chapter I
1. My brother, Louis Say, of Nantes, has attacked this position in a short tract entitled, Principles Causes de la Richesse et de la Misère des Peuples et des Particuliers, 8vo. Paris. Déterville. He lays down the maxim, that objects are items of wealth, solely in respect of their actual utility, and not of their admitted or recognised utility. In the eye of reason, his position is certainly correct; but in this science relative value is the only guide. Unless the degree of utility be measured by the scale of comparison, it is left quite indefinite and vague, and, even at the same time and place, at the mercy of individual caprice. The positive nature of value was to be established, before political economy could pretend to the character of a science, whose province it is to investigate its origin, and the consequences of its existence.
2. In the earlier editions of this work, I had described the measure of value to be the value of the other product, that was the point of comparison, which was incorrect. The quantity and not the value of that other product, is the measure of value in the object of valuation. This mistake gave rise to much ambiguity of demonstration, which the severity of criticism, both fair and unfair, has taught me to correct. Fas est et ab hoste doceri.
3. 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 consumption, or for any other purpose, than as an object of a second exchange; so that, in reality, the product sold is exchanged for the 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bought with that dollar, the wheat has actually been bartered for the coffee, and the money that has intervened has withdrawn itself as completely, as if it had never appeared at all in the transaction. Wherefore it is quite correct to say, that relative value is determined by the relation of commodities one to another, and not solely by that of each commodity to money.
4. It must not be inferred from this passage, that I mean to say, that the productive agency exerted in raising a product, whose charges of production have amounted to a dollar, although it is saleable for 75 cents only, is therefore worth but 75 cents. My position merely implies, that this amount of productive service has, in such case, raised a value of 75 cents only, though it might have raised a value of a dollar.
Book II, Chapter II
7. 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 a distance from each other. The only fair way of comparing the wealth of one nation with that of another, is, by a moral estimate of the individual welfare in each respectively.
8. And will be so for the most part, though not entirely, wherever the members of the community have no other hope of subsistence, than from the product 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 is a complete answer to the position of Sismondi and Malthus, that economy of human productive exertion makes the multiplication of unproductive consumers, not only probable, but necessary. But where a poor-law or monastic establishment provides for the subsistence of the human agency thus rendered superfluous, there will probably be no increase of national revenue consequent upon a saving of productive agency; for the surplus labour is thereby released from the necessity of exertion in some other channel. With such institutions, the enlargement of productive power by machinery or otherwise may be very great, without any enlargement of national production, revenue, or wealth. Translator.
Book II, Chapter III
10. The cost of production is what Smith calls the natural price of products, as contrasted with their current or market price, as he terms it. But it results from what has been said above, that every act of barter or exchange, among the rest even that implied in the act of production, is conducted with reference to current price.
11. Within the last hundred years, the improvements of industry, effected by the advance of human knowledge, more especially in the department of natural science, have vastly abridged the business of production, but the slow progress in moral and political science, and particularly in the branch of social organisation, has hitherto prevented mankind from reaping the full benefit of those improvements. Yet it would be wrong to suppose they have reaped none at all. The pressure of taxation has indeed been doubled, tripled, or even quadrupled; yet population has increased in most countries of Europe; which is a sign, that a portion at least of the increase of products has fallen to the lot of the subject; and the population, besides being augmented, is likewise better lodged, clothed, and conditioned and I believe better fed too, than it was a century ago.
12. I find in the Recherches of Dupre de Saint Maur, that in 1342, an ox was sold from 10 to 11 livres tournois. This sum then contained 7 oz. of fine silver, which was worth about 28 oz. of the present day; and 28 oz. of our present money are coined into 171 fr. 30 c., (32 dollars,) which is lower than the price of an ordinary ox. A lean ox bought in Poitou for 300 fr., and afterwards fatted in Lower Normandy, will sell at Paris for from 450 to 500 fr. (84 to 93 dollars.) Butcher's meat has, therefore, more than doubled in price since the 14th century; and probably most other articles of food likewise; and, if the labouring classes had not at the same time been greatly benefited by the progress of industry, and put in possession of additional sources of revenue, they would be worse 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 multiply, and consequently to swell the demand for all objects of food. But their supply can not keep pace with the increasing demand, because, although the same surface of soil may be rendered more productive, it can not be so to an indefinite degree; and the supply of food by the channel of external commerce, is more expensive than by that of internal agriculture on account of the bulky nature of most of the articles of aliment.
13. Our data in relation to the products of former times are too few to enable us to deduce from them any precise result; but those at all acquainted with the subject will see, that, whether over or under-stated, will make no difference in the reasoning. The statistic researches of the present generation will provide future ages with more accurate means of calculation, but will add nothing to the solidity of the principles upon which it must be made.
14. Of this nature are the evil effects of taxation, (especially if it be exorbitant) upon the general wealth of the community, independently of its effects upon the individual assessed. The cost of production, and consequently the real price of commodities, are aggravated thereby, and their aggregate value diminished.
15. I have met with persons, who imagined themselves adding to national wealth, by favouring the production of expensive, in preference to that of cheaper articles. In their opinion, it is better to make a yard of rich brocade than one of common sarsenet. They do not consider, that, if the former costs four times as much as the latter, it is because it requires the exertion of four times as much productive agency, which could be made to produce four yards of the latter, as easily as one of the former. The total value is the same; but society derives less benefit; for a yard of brocade makes fewer dresses than four yards of sarsenet. It is the grand curse of luxury, that it ever presents meanness in company with magnificence.
16. Dupont de Nemours (Physiocratie. p. 117.) says, that "it must not be supposed, that the cheapness of commodities is advantageous to the lower classes; for the reduction of prices lessens the wages of the labourer, curtails his comforts, and affords him less work and lucrative occupation." But theory and practice both controvert this position. A fall of wages, occasioned solely by a fall in the price of commodities, does not diminish the comforts of the labourer, and, inasmuch as the low price of wages enables the adventurer to produce at a less expense, it tends powerfully to promote the vent and demand for the produce of labour.
Melon, Forbonnais, and all the partisans of the exclusive system, or balance of trade, concur with the economists in this erroneous opinion; and it has been re-affirmed by Sismondi, in his Nouveaux Prin. d'Econ. Pol. liv. iv. c. 6.; where the lower price of products is treated as an advantage gained by the consumer upon the producer, in despite of the obvious impossibility of any loss to the labouring or other productive classes, by a reduction tantamount only to the saving in the cost of production.
17. The Earl of Lauderdale published in 1807, a work, entitled, "Researches on the Nature and Origin of Public Wealth, and on the Causes which concur in its Increase;" the whole reasoning of which is built on this erroneous proposition, that the scarcity of a commodity, though it diminish the wealth of society in the aggregate, augments that of individuals, by increasing the value of that commodity in the hands of its possessors. Whence the author deduces the unsound conclusion, that national, differs in principle from individual wealth. He has not perceived, that, whenever a purchaser is obliged to make the acquisition by the sacrifice of a greater value, he loses just as much as the seller gains; and that every operation, designed to procure this kind of benefit, must occasion to one party a loss, equivalent to the gain of another.
He likewise refers this imaginary difference between the principle of public and of private wealth to this circumstance; that the accumulation of capital, which is an advantage to individual, is detrimental to national wealth, by obstructing the consumption, which is the stimulus of industry. He has fallen into the very common error of supposing, that capital is, by accumulation, withdrawn from consumption; whereas, on the contrary, it is consumed, but in a re-productive way, and so as to afford the means of a perpetual recurrence of purchase, which can occur but once in the case of unproductive consumption. Vide Book III. infrà. Thus it is, that a single error in principle, vitiates a whole work. The one in question is built upon this unsound foundation; and, therefore, serves only to multiply, instead of reducing the intricacies of the subject.*
18. The vast means at the disposal of Napoleon might have been successfully directed to this grand object, and then he would have left the reputation of having contributed to civilize, enrich, and people the world; and not of having been its scourge and devastator. When the Barbary shore shall be lined with peaceful, industrious, and polished inhabitants, the Mediterranean will be an immense lake, furrowed by the commerce of the wealthy nations, peopling its shores on every side.
Book II, Chapter IV
21. The increased intensity of the demand for silver compared with its supply, consequent upon the discovery of America, is stated at 2½ to 1, because, but for this increase of demand, the tenfold supply would have reduced its value to one-tenth of what it had been previously to that event, and given to 100 oz. the value of 10 oz. only. But 100 oz. were only reduced to one-fourth of their former value, i. e. to the value of 25 oz.; which bears to 10 oz. the ratio of 2½ to 1. This could not have been the case, unless the demand for silver, compared with the supply, had advanced in that proportion. But the supply having increased tenfold in the same interval, if we would find the ratio of the actual increase of the demand for silver, whether for the purposes of circulation, of luxury, or of manufacture, since the first discovery of the American mines, we must multiply 2½ by 10, which will give 25. And probably this estimate will not exceed the truth, although 25 times may seem a prodigious advance. However, it would doubtless have been infinitely less considerable, but for the influx of supply from America; for the excessive dearness of silver would have greatly curtailed the use of it. Silver plate would probably be as rare as gold plate is now; and silver coin would be less abundant, because it would go further, and be of higher value.
23. 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 the charges of bringing the product to market.
24. In a poor country, after a dealer has disposed of his wares, he is sometimes a long while before he can provide himself with the returns he has in view; and, during the interval, the money-proceeds remain idle in his hands. Moreover, in a poor country, the investment of money is always difficult. Savings are slow and gradual, and are seldom turned to profitable account, until after a lapse of many years; so that a great deal of money is always lying by in a state of inaction.
25. Ricardo, whom I look upon as the individual in Europe the best acquainted with the subject of money, both in theory and in practice, has shown, in his Proposal for an economical and secure Currency, that, when the good government of the state may be safely reckoned upon, paper may be substituted for the whole of a metallic money; and a material possessed of no intrinsic value by skilful management, be made to supplant a dear and cumbrous one, whose metallic properties are never called into play by the functions of money.
27. Wealth of Nations, book i. c. 11. The manufacturing consumption of Birmingham and other towns has greatly increased since the date of that work.*
According, then, to Mr. Jacobs, the annual consumption of the precious metals, from 1810 to 1830, in their application to ornamental and luxurious purposes, he estimates as follows:
28. We are assured by Humboldt, that the produce of the mines of Mexico has, in the last 100 years, been increased in the ratio of 110 to 25; also, that such is the abundance of silver ore, in the chain of the Andes, that, reckoning the number of veins either worked superficially, or not worked at all, one would be led to imagine, that Europe has hitherto had a mere sample of their incalculable stores. Essai Pol. sur la N. Espagne, 8vo. tom. iv. p. 149.
The very slight and gradual depreciation of gold and silver, effected by their immense and increasing annual supply, is one amongst many proofs of the rapid and general advance of human wealth, whereby the demand is made to keep pace with the supply. Yet I am inclined to think, that their value, after remaining nearly stationary for a century, has within the last thirty years begun again to decline. The setier of wheat, Paris measure, which was for a long time, on an average, sold for 4 oz. of silver, has now risen to 4½ oz., and rents are raised upon every renewal of lease. All other things seem to be rising in the like proportion: which indicates, that silver is undergoing a depreciation of relative value.*
"We have estimated," says Mr. Jacobs, "the stock of coin in existence at 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.
"During the period we have been considering, and indeed for many years before, the comparative value of gold to silver had scarcely experienced any alteration. According to the view here taken, the amount of gold applied to purposes of luxury had far exceeded that of silver, perhaps in the proportion of four to one; but, on the other hand, the treasure transferred to India and China has consisted chiefly of silver, and much more gold had been brought to Europe from those countries than had been conveyed to them. It has before (twenty-fifth chapter of this inquiry) been attempted to be shown that the durability of gold in coin is in the proportion of four to one greater than that of silver. It has, too, been shown that the recently increased produce of the mines of Russia has consisted chiefly of gold. These circumstances, on which our limits do not admit of enlargement, might be shown to be sufficient to account for the equable rate of value which has been preserved between the two metals during a long period." American Editor.
Book II, Chapter V
29. It has been already seen, that the demand for every product is great, in proportion to the degree of its utility, and to the quantity of other products possessed 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 the demand.
30. In digesting the plan of this work, I hesitated for a long time, whether or no to place the analysis of value before that of production; to explain the nature 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 intelligible, it was necessary to have a previous knowledge of wherein the cost of production consists; and for that purpose to have a just and enlarged conception of the agents of production, and of the service they are capable of yielding.
31. In the above instance of the watch, many of the artisans are themselves the adventurers in respect to their own industry; in which case their receipts are profits, not wages. If the maker exclusively of the chain himself, buys the steel in its rude state, works it up, and sells the chain on his own account, he is the adventurer in respect to this particular part of the manufacture. A flax-spinner buys a few penny-worth of flax, spins it, and converts her thread into money. Part of this money goes to the purchase of more flax; this is her capital; another portion is spent in satisfying her wants; this is the joint profit of her industry and her little capital, and forms her revenue.
32. Even that portion of the gross value, which is absorbed in the maintenance or restoration of the vested capital or machinery. If his works need repairs, which are executed by the proper mechanic, the sum expended in them forms the revenue of that mechanic, and is to the clothier a simple advance, which is refunded, like any other, by the value of the product when completed.
33. Part of the value created is due to natural agency, amongst which that of land is comprised. But, as stated above in Book I., land is treated as a machine 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 whom it belongs. Mere verbal criticism is of little moment, when once the meaning is explained; it is the correctness of the idea, and not of the expression, that is material.
34. The term national revenue, has been sometimes incorrectly applied to the financial receipts of the state. Individuals, indeed, pay their taxes out of their respective revenues; but the sum levied by taxation is not revenue, but rather a tax upon revenue, and sometimes unhappily upon capital too.
Book II, Chapter VI
36. 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 in agriculture, employed in raising products for human sustenance, 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 authority, to say nothing of the vicissitudes of seasons, to be very gainful on the average.
37. The reasoning of this whole chapter is superfluous and inconclusive. Where value is left to find its natural level, one class of productive agency will, in the long run, be equally recompensed with another, presenting an equipoise of facility or difficulty, of repute or disrepute, of enjoyment or suffering, in the general estimation of mankind; this he states fully in the next chapter. If our author means here to say merely, that a large class of productive agency will receive a larger portion of the general product as its recompense or revenue, or that agency in permanent employ will obtain a regular and permanent recompense, he has taken a very circuitous mode of expressing a position, which is, indeed, almost self-evident. The grand division of productive agency is into corporeal and intellectual; whereof the former is, on the average, the more amply rewarded by the rest of mankind, because the latter, in some measure, rewards itself. Thus, the profits of printing and bookselling are, on the whole, more liberal than those of authorship; because the latter is partly paid in self gratification, in vanity, or conscious merit. Translator.
Book II, Chapter VII
41. Nay, even more than annuity interest on the sums spent in the education of the person who receives the salary; strictly speaking, it should be annuity interest upon the total sum devoted to the same class of study, whether it have or have not been made productive in its kind. Thus the aggregate of the fees of a physician ought to replace not only what has been spent in their studies, but, in addition, all the sums expended in the instruction of the students, who may have died during their education, or whose success may not have repaid the care bestowed upon them; for the stock of medical industry in 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 variance with fact, on account of the influence of moral considerations in the matter of national wealth, an influence that does not admit of mathematical estimation. 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.
43. From which, however, is to be deducted the average loss on the general balance 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, which is seldom attached in a high ratio even to the greatest excellence in the department of pure art. There is no instance of a sculptor or a painter arriving at the honours of the peerage, which have been placed within the reach of successful commercial enterprise. Translator.
44. Such of my readers as may imagine, that the sum of the production of a country is greater, when the scale of price is unnaturally high, are requested to refer to what has been said on the subject, suprà, Chap. 3, of this Book.
45. Smith is greatly embarrassed by his neglect of the distinction between the profits of superintendency, and those of capital. He confounds them under the general head of profits of stock; and all his sagacity and acuteness have scarcely been sufficient to expound the causes, which influence their fluctuations. Wealth of Nations, book i. c. 8. And no wonder he found himself thus perplexed; their value is regulated upon entirely different principles. The profits of labour depend upon the degree of skill, activity, judgment, &c. exerted; those of capital, on the abundance or scarcity of capital, the security of the investment, &c.
47. By the term labourer, I mean, the person who works on account of a master-agent, or adventurer, in industry; for such as are masters of their own labour, like the cobbler in his stall, or the itinerant knife-grinder, unite the two characters of adventurer and labourer; their profits being in part governed by the circumstances detailed in the preceding section, and partly by those developed in this. It is necessary also to premise, that the labour spoken of in the present section is that, which requires little or no study or training; the acquisition of any talent or personal skill entitles the possessor to a further profit, regulated upon the principles explained, suprà, sect. 1. of this chapter.
49. The evidence examined before a committee of the House of Commons of England, in 1815, leads to the conclusion, that the high price of food, at that period, had the effect of depressing, rather than elevating the scale of wages. I have myself remarked the similar effect of the scarcities in France, of the years 1811 and 1817. The difficulty of procuring subsistence either forced more labourers into the market, or exacted more exertion from those already engaged; thus occasioning a temporary glut of labour. But the necessary sufferings of the labouring class at the time must inevitably have thinned its ranks.
51. The second and last of these circumstances are neither of them necessarily, universally, or permanently, followed by the depression of the rate of wages. When a new object of import does not supersede one of either home or foreign production, it must tend to raise the rate of wages, as it can only be procured by enlarged home production. The emigration of consumers, continuing to draw subsistence from the country they desert, leaves in activity an equal mass of human labour, though possibly with some variation of employment. Besides it may be temporary only, as that of the English to the continent, and of the Irish both to England and to the continent; who possibly might be brought back by an improvement of domestic finances or of domestic security and comfort. Translator.
52. Saving-banks have succeeded in several districts of England, Holland, and Germany; particularly where the government has been wise enough to withhold its interference. The Insurance Company of Paris has set one on foot, upon the most liberal principles and with the most substantial guarantee. It is to be hoped, that the labouring classes in general will see the wisdom of placing their little savings in such an establishment, in preference to the hazardous investments they have often been decoyed into. There is besides a further national advantage in such a practice, namely, that of augmenting the general mass of productive capital, and consequently extending the demand for human agency.*
"During the last century, a number of Friendly Societies have been established by the labourers in different parts of Great Britain, to enable them to make provision against want. The principle of these societies usually is, that the members pay a certain stated sum periodically, from which an allowance is made to them upon sickness or old age, and to their families upon their death. These societies have done much good; but they are attended with some disadvantages. In particular, the frequent meetings of the members occasion the loss of much time, and frequently of a good deal of money spent in entertainments. The stated payments must be regularly made; otherwise, after a certain time, the member (necessarily from its being in fact an insurance) loses the benefit of all that he has formerly paid. Nothing more than the stated payments can be made, however easily the member might be able at the moment to add a little to his store. Frequently the value of the chances on which the societies are formed, is ill calculated; in which case either the contributors do not receive an equivalent for their payments, or too large an allowance is given at first, which brings on the bankruptcy of the institution. Frequently the sums are embezzled by artful men, who, by imposing on the inexperience of the members, get themselves elected into offices of trust. The benefit is distant and contingent; each member not having benefit from his contributions in every case, but only in the case of his falling into the situations of distress provided for by the society. And the whole concern is so complicated, that many have hesitation in embarking in it their hard-earned savings."] American Editor.
55. The "multiplication of mankind" is not, as is here asserted by our author, alone dependent upon "agricultural products;" but, likewise, upon every other description of commodities essential to human maintenance and support. Food, or subsistence, is unquestionably indispensable to the existence of man; but not more necessary to his prolonged being and health, than raiment, shelter, and fire. The position of Mr. Malthus, which limits population to subsistence only, and which is here taken for granted and adopted by our author, is not accurate or just; and by the more recent political economical inquirers has, therefore, either been modified or abandoned. Professor Senior, in his "Two Lectures on Population, delivered before the University of Oxford in Easter Term, 1828," in considering the general principles, adopts the following proposition, as what appears to him an outline of the laws of population: "That the population of a given district is limited only by moral or physical evil, or by the apprehension of a deficiency in the means of obtaining those articles of wealth; or, in other words, those necessaries, decencies and luxuries, which the habits of the individuals of each class of the inhabitants of that district lead them to require." American Editor.
Book II, Chapter VIII
59. This is strongly illustrated by the unfunded and the funded debt of Great Britain. The former, in the shape of exchequer and treasury bills, bears a rate of interest considerably lower than the latter in the shape of stock; because the bills are convertible readily at par; whereas, the usual rise and fall of the capital stock is much greater, than the interest upon it for short periods. Translator.
60. The personal restraint of the debtor has nowhere been carried to such extreme length as in England. Not only was a debtor at one time liable to imprisonment pendent lite, and before the debt was legally established, and that for the smallest sum; but the term of his imprisonment in execution after judgment, was absolutely unlimited. The hardship, in both these particulars, was partially remedied before the erection of our insolvent code; and that code has still further alleviated the condition of the debtor. But the whole system is vitiated, and in a great measure, neutralised, by total neglect of all measures for the prevention of insolvency, in limine. The grand expedient is, publicity of property; which, in the first place, gives the creditor the means of estimating beforehand, and with more accuracy, the grounds and fair extent of his debtor's credit; and in the next, enables him, in case of default, to resort to those means, instead of endeavouring to discover or extort them by personal restraint. Thus it is, that one error of policy is sure to engender another. Translator.
61. See the description of the Plague at Florence, as given after Boccaccio by Sismondi, in his admirable Histoire des Républiques d'Italie. A similar effect was observed at several of the most dreadful epochs of the French revolution.
64. Suprà, Book I. chap. 11. It has been remarked that the rate of interest is usually somewhat lower in towns, than in country places. Wealth of Nations, book i. c. 9. The reason is plain. Capital is for the most part in the hands of the wealthy residents of the towns, or at least of persons who resort to them for their business, and carry with them the commodity they deal in, i. e. capital, which they do not like to employ at much distance from their own inspection. Towns, and particularly great cities, are the grand markets for capital, perhaps even more than for labour itself; accordingly, labour is there comparatively dearer than capital. In the country, where there is little unemployed capital, the contrary is observable. Thus, usury is more prevalent in country places; it would be less so, if the business of lending were more safe and in better repute.*
65. Vide suprà, Book I. chap. 10, 11, on the mode of employing, and on the transformation and accumulation of capital. What is here said does not militate against the positions laid down in Book I. chap. 22. on the representatives of money. A bill of exchange, with good names upon it, is only an expedient for borrowing of a third person actual and positive value, in the interim between the negotiation and the maturity of the bill. Bills and notes, payable on demand, or at sight, whether issued by the government, or by private banking-establishments, are a mere substitution of a cheap paper agent of circulation, in the place of a costly and metallic agent. The monetary functions of the metal being executed by the paper, the former is set free for other objects; and, inasmuch as it is exchangeable for other commodities or implements of industry, a positive accession is made by the substitution to the natural capital; but no further. The degree of the accession is limited strictly to the amount of value required for the business of circulation, and dispensed with by this expedient; which amount is a mere trifle, in comparison with the total value of the national capital.
66. Many loans on interest are made without bearing that name, and without implying a transfer of money. When a retail dealer supplies his shop by buying of the manufacturer or wholesale dealer, he borrows at interest, and repays, either at a certain term, or before it, retaining the discount, which is but the return of the interest charged him in addition to the price of the goods. When a provincial dealer makes a remittance to a banker at Paris, and afterwards draws upon his banker, he lends to him, during the time that elapses between the arrival of the remittance and the payment of the draft. The interest of this advance is allowed in the interest account which the banker annexes to the merchant's account current. In the Cours d'Economie Politique, compiled by Storch, for the instruction of the young grand-dukes of Russia, and printed at Petersburgh, tom. vi. p. 103, we are informed, that the English merchants, or factors, settled in Russia, sell to their customers at a credit of twelve months, which enables the Russian purchaser of current articles, to realize long before the day of payment, and turn the proceeds to account in the interim; thereby operating with English capital, never intended to be so employed. It is to be presumed, that the English indemnify themselves for this loss of interest, by the additional price of their goods. But the average rate of profit upon capital in Russia is so high, that even this round-about way of borrowing is sufficiently profitable to the native dealers.
67. This is no contradiction to the former position, that the precious metals form part of the capital of society. They form an item of capital, but not of disposable, or lendable capital; for they are already employed, and not in search of employment;—employed in the business of circulating value from one hand to another. If their supply exceed the demand for this object, they are sent to other parts, where their price continues higher; if their general abundance lower their price everywhere, the sum of their value is not increased, but a larger quantity of them is given in exchange for the same value in other commodities.
68. If interest were always low in proportion to the greater supply of money, it would be lower in Portugal, Brazil, and the West Indies, than in Germany, Switzerland, &c., which is by no means the case.
69. Essays of D. Hume, part ii. ess. 4. Wealth of Nations, book ii. c. 4. It is well for the student in political economy, that Locke and Montesquieu have not written more upon it; for the talent and ingenuity of a writer serve only to perplex a subject he is not thoroughly acquainted with. To say the truth, a man of lively wit can not satisfy his own mind without a degree of speciousness and plausibility, which is of all things the most dangerous to the generality of readers, who are not sufficiently grounded in principle to discover an error at first sight. In those sciences, which consist in mere compilation and classification, as in botany or natural history, one can scarcely read too much; but in those dependent upon the deduction of general laws from particular facts, the better course is to read little, and select that little with judgment.
70. This omission is justified by Smith, on the following grounds. "Let us suppose," says he, "that in some particular place, where the common annual profits of a manufacturing stock are 10 per cent, there are two different manufactures, in one of which the coarse materials annually wrought up cost only 700l., while the finer materials in the other cost 7000l. If the labour in each cost 300l. per annum, the capital employed in the one will amount only to 1000l.; whereas that employed in the other will amount to 7300l. At the rate of 10 per cent, therefore, the undertaker of the one will expect a yearly profit of 100l. only, and that of the other 730l.;" and he goes on to infer, "that the profit is in proportion to the capital, and not to the labour and skill of inspection and direction." But the instance put is altogether inconclusive; and it is equally easy to suppose the case of two manufactures, carried on in the same place, and in the same line, each with an equal capital of 1000l. the one under the conduct of an active, frugal, and intelligent manager, the other under that of an idle, ignorant, and extravagant one; the former yielding a profit of 150l. per annum, the latter one of 50l. only. The difference in this case will arise, not from any difference in the respective capitals employed, but from the difference in the skill and industry employing them; which latter qualities will be more productive in the one instance than in the other.
72. To say nothing of the other motives, that attract industry towards any particular profession or repel it thence, which have been noticed in the preceding chapter. These motives sometimes operate all in the same direction, and then the profits of both industry and capital rise or fall together; when they act in opposite directions, the difference on the profit of capital balances that on the profit of industry; or vice versâ.
73. [The reasoning of this whole section appears to me to be unsound and inconclusive. There is no distinction in point of productiveness, between any of the various employments of capital. There can, in short, be no line drawn between the different productive channels, into which capital may be directed. Whatever occupations tend to supply the wants and increase the comforts and accommodations of life, are, in the strictest sense of the word, equally productive, and nearly in the same proportion augment the national wealth. The capital employed in the carrying-trade between one foreign country and another is as advantageous to the individual and nation to which it belongs, as the capital employed at home. For, as has been already remarked in relation to the profits of industry (vide note page 6) in the absence of all restraints, the profits of all the different employments of capital, will be on an equality or nearly approaching it, inasmuch as any material difference will cause its diversion to a more productive channel, and thus restore the equilibrium. In a word, capital flows into the carrying-trade only because it yields a greater profit than it otherwise would do, did it not take that direction.
Moreover, there is no exception to the general principle, that what is most productive to the individual is also so to the community at large. Notwithstanding the contrary assertion of our author, in the foregoing section, a capital lent to, or employed in, a foreign country, if it yield to the proprietors and nation the highest rate of interest, must necessarily afford the national revenue as much, and extend the same assistance to the national industry, as if it were employed within the pale of the nation. If, for example, a capital lent abroad, give employment to foreign industry and natural agents, it is because its productive service, when things, I must again repeat, are left to take their natural course, will yield a larger revenue to its owners. Were not this the case, this capital would not seek employment abroad, but remain at home. The revenue produced by capital employed abroad, if the proprietor does not himself at the same time emigrate there, must be the means of calling into activity, and giving a greater development to the productive faculties of the national industry and land, as this revenue must be consumed, either productively or unproductively at home.] American Editor.
Book II, Chapter IX
74. In the preceding chapter, I have given the interest, precedence of the profit, of capital, because the former helps to render the latter more intelligible. I have here adopted a contrary arrangement, because the consideration of the profit of land elucidates the subject of rent.
76. Destutt de Tracy. Commentaire sur l'Esprit de Lois, c. 13. Ricardo* Prin. Of Pol. Econ. and Tax. c. 2.
77. According to these writers, even the interest of capital is not given as the recompense of its concurrence in the business of production. I have already exposed the fallacy of this opinion, suprà, chap. 8. sect. 2.
79. This catalogue of adverse circumstances, all bearing more strongly upon the profit of land, than upon that of other sources of revenue, explains the frequent and unavoidable remission of rent to the farmer, and proves the accuracy of M. de Sevigne's judgment, when she writes from the country:—"I wish my son could come here and convince himself of the fallacy of fancying oneself possessed of wealth, when one is only possessed of land." Lettre 224.
80. This is not universally true. In England, where agriculture has attained a high degree of perfection, arable farms require much larger capitals than formerly; and a farmer is commonly a much richer man, than the majority of the tradesmen in his neighbourhood. Translator.
Book II, Chapter X
82. If, however, this capital be the fruit of his personal frugality, he robs France of no part of her wealth existing previous to his arrival. Had he continued resident there, the aggregate of the capital of France would have been increased to the full extent of his accumulation; but, in taking the whole away with him, he takes no more than his own earnings, and no value but what is of his own creation, in so doing, he commits no individual, and, therefore, no national wrong.
83. In the common course of things, such an addition is a national benefit, because it is an accession to the secondary source of production, i. e. industry. But defective human institutions may convert a benefit into a curse; as where a poor-law system gives gratuitous subsistence to a part of the population, capable of labour, but not incited by want. In such case, every additional human being may be a burthen instead of a prize; for he may be one more on the list of idle pensioners. Translator.
85. Raynal tells us, that, inasmuch as the East India Company derived a revenue from Bengal, to be consumed in Europe, it must infallibly drain it of specie in the end, since the company is the only merchant, and imports no specie itself. But Raynal is mistaken in this. In the first place, private merchants do carry the precious metals to India, because they are of more value there than in Europe; and that very reason also deters the servants of the company, who may have made fortunes in Asia, from remitting them in specie.
And if it were to be suggested, that a fortune, remitted to Europe, is less substantial and more speedily dissipated, when it arrives in the shape of goods, than when in that of specie, this again would be an error. The form, that property happens to assume, does not affect its substantiality; when once transferred to Europe, it may be converted into specie, or land, or what not. It is the amount of values, and not the temporary form they appear under, which, in this colonial connexion, as in that of international trade, is the essential circumstance.
86. This is a harsh word, yet probably justified by the history of the original acquisition. But the scene has now changed; the servants of the sovereign company no longer look to spoliation as a public or private resource, but are content with the liberal remuneration of laborious duties, civil, military, and financial. A slight examination of the connexion between Britain and her Asiatic dependencies will show, how small a balance is remitted to the former in any shape; and it should be remembered that part, even of this, is but the interest of loans raised in England, for the purposes of Indian administration, though not always of a wise or paternal character. Translator.
87. The complete interception of all export of objects of value would not help them towards the point of intent; because free communication occasions a much greater influx than efflux of wealth. Value, or wealth, is by nature fugitive and independent. Incapable of all restraint, it is sure to vanish from the fetters that are contrived to confine it, and to expand and flourish under the influence of liberty.
Book II, Chapter XI
88. Although all products are necessary to the social existence of man, the necessity of food being of all others most urgent and unceasing, and of most frequent recurrence, objects of aliment are justly placed first in the catalogue of the means of human existence. They are not all, however, the produce of the national territorial surface; but are procurable by commerce as well as by internal agriculture; and many countries contain a greater number of inhabitants than could subsist upon the produce of their land. Nay, the importation of another commodity may be equivalent to an importation of an article of food. The export of wines and brandies to the north of Europe is almost equivalent to an export of bread; for wine and brandy, in great measure, supply the place of beer and spirits distilled from grain, and thus allow the grain, which would otherwise be employed in the preparation of beer or spirits, to be reserved for that of bread.
89. The practice of infanticide in China proves, that the local prejudices of custom and of religion there counteract the foresight which tends to check the increase of population; and one can not but deplore such prejudices; for the human misery resulting from the destruction is great, in proportion as its object is more fully developed, and more capable of sensation. For this reason it would be still more barbarous and irrational policy to multiply wars, and other means of human destruction, in order to increase the enjoyments of the survivors; because the destructive scourge would affect human beings in a state more perfect, more susceptible of feeling and suffering, and arrived at a period of life when the mature display of his faculties renders man more valuable to himself and to others.
90. The Hospice de Bicetre, near Paris, contains, on the average, five or six thousand poor. In the scarcity of the year 1795, the governors could not afford them food, either so good or so abundant as usual; and I am assured by the house-steward of the establishment, that at that period almost all the inmates died.
It would appear from the returns given in a tract entitled "Observations on the Condition of the Labouring Classes," by J. Barton, that the average of deaths, in seven distinct manufacturing districts of England, has been proportionate to the dearness, or, in other words, to the scarcity of subsistence. I subjoin an extract from his statements.
From the same returns it appears, that the scarcity occasioned less mortality in the agricultural districts. The reason is manifest: the labourer is there more commonly paid in kind, and the high sale-price of the product enabled the farmer to give a high purchase-price for labour.*
91. Not but that accidental causes may sometimes qualify these general rules. A country, where property is very unequally distributed, and where a few individuals consume produce enough for the maintenance of numbers, will doubtless subsist a smaller population, than a country of equal production, where wealth is more equally diffused. The very opulent are notoriously averse to the burthen of a family; and the very indigent are unable to rear one.
92. Vide Stewart, On Political Economy, book i. c. 4. Quesnay Encyclopédie. art. Grains. Montesquieu, Esprit des Lois, liv. 18. c. 10. and liv. 23. c. 10. Buffon, ed. de Bernard, tom. iv. p. 266. Forbonnais, Principes et Observations, p. 39, 45. Hume, Essays, part 2. Ess. 2. Œuvres de Poivre, p. 145, 146. Condillac, Le Commerce et le Gouvernement, part 1. chap. 24, 25. Verri, Reflexions sur l'Economie Politique, c. 210. Mirabeau, Ami des Hommes, tom. i. p. 40. Raynal, Histoire de l'Etablissement, liv. 21. s. 23. Chastellux, de la Félicité Publique, tom. ii. p. 205. Necker, Administration des Finances de France, c. 9. and Notes sur l'Eloge de Colbert. Condorcet, Notes sur Voltaire, ed. de Kepl. tom. xlv. p. 60. Smith, Wealth of Nations, book i. c. 8, 11. Garnier, Abrégé Elémentaire, part 1. c. 3. and Préface de sa Traduction de Smith. Canard, Principes d'Economie Politique, p. 133. Godwin, On Political Justice, book viii. c. 3. Clavière, De la France et des Etats Unis, ed. 2. p. 60, 315. Brown-Duignan, Essay on the Principles of National Economy, p. 97. Lond. 1776. Beccaria, Elementi di Economia Publica, par. prim. c. 2, 3. Gorani, Recherches sur la Science du Gouvernement, tom. ii. c. 7. Sismondi, Nouv. Prin. d'Econ. Pol. liv. vii. c. 1. et seq. Vide also, more especially, Malthus, Essay on Population, a work of considerable research; the sound and powerful arguments of which would put this matter beyond dispute, if it indeed had been doubted.
93. The simple laws of population, or their general principles, which are few and plain, are examined, discussed, and established with great ability by Professor Senior, of Oxford, as well in the two lectures on Population we have already referred to, as in his subsequent correspondence with Mr. Malthus, to which these lectures gave rise, and which Mr. Senior has subjoined to them, in an appendix. Full justice is done, by Mr. Senior, to the originality and depth of Mr. Malthus's views on Population, as well as to their great importance, at the time he first gave them to the public; the inaccuracy, nevertheless, in his statement of the general proposition, namely, the tendency of every people to increase in their numbers, more rapidly than in their wealth, is clearly pointed out, and the errors which flow from it satisfactorily exhibited. "If a single country," says Mr. Senior, "can be found in which there is now less poverty than is universal in a savage state, it must be true, that under the circumstances in which that country has been placed, the means of subsistence have a greater tendency to increase than the population." American Editor.
97. "Une nuit de Paris reparera tout cela." It requires the care and expenditure of twenty successive years to replace the full-grown man, that a cannonball has destroyed in a moment. The destruction of the human race by war is far more extensive than is commonly imagined. The ravage of a cultivated district, the plunder of dwelling-houses, the demolition of establishments of industry, the consumption of capital, &c. &c. deprive numbers of the means of livelihood, and cause many more to perish, than are left on the field of battle.
98. Upon this principle, no capital improvement of the medicinal or chirurgical art, like that of vaccination for instance, can permanently influence national population; yet its influence upon the lot of humanity may be very considerable; for it may operate powerfully to preserve beings already far advanced in age, in strength, and in knowledge: whom to replace, would cost fresh births and fresh advances; in other words, abundance of sacrifices, privations, and sufferings both to the parents and the children. When population must be kept up by additional births, there is always more of the suffering incident to the entrance and the exit of human existence; for they are both of more frequent occurrence. Population may be kept up with half the number of births and deaths, if the average term of life be advanced from forty to fifty years. There will, indeed, be a greater waste of the germs of existence; but the condition of mankind must be measured by the quantum of human suffering, whereof mere germs are not susceptible. The waste of them is so immense, in the ordinary course of nature, that the small addition can be of no consequence. Were the vegetable creation endowed with sensation, the best thing that could happen to it would be, that the seeds of all the vegetables, now rooted up and destroyed, should be decomposed before the vegetable faculties were awakened.
99. If population depends on the amount of product, the number of births is a very imperfect criterion, by which to measure it. When industry and produce are increasing, births are multiplied disproportionately to the existing population, so as to swell the estimate; on the contrary, in the declining state of national wealth, the actual population exceeds the average ratio to the births.
102. In a pamphlet entitled, Considerations on British Agriculture, published in 1814, by W. Jacob, a member of the Royal Society, and a well-informed writer upon agricultural topics, we are told, (p. 34,) that England ceased to be an exporter, and became an importer, of wheat, about the year 1800.
104. By judicious colonization, I mean colonization formed on the principles of complete expatriation, of self-government without control of the mother-country, and of freedom of external relations; but with the enjoyment of protection only by the mother-country, while it should continue necessary. Why should not political bodies imitate in this particular the relation of parent and child? When arrived at the age of maturity, the personal independence of the child is both just and natural; the relation it engenders is, moreover, the most lasting and most beneficial to both parties. Great part of Africa might be peopled with European colonies formed on these principles. The world has yet room enough, and the cultivated land on the face of the globe is far inferior in extent to the fertile land remaining untilled. The earl of Selkirk has thrown much light on this matter, in his tract on Emigration and the State of the Highlands.
105. The want of capital prevents the employment of machinery for expediting the operations, like the thrashing machine in common use in England. This makes a larger supply of human agency requisite in agriculture; and the more mouths there are to be fed, the smaller will be the surplus produce, which alone is disposable.
106. There is good reason to believe, that the total population of England is more than the double of that employed in her internal agriculture. From the returns laid before parliament, 1811, it appears there were in Great Britain, inclusive of Wales and Scotland, 895,998 families employed in agriculture; and that the total number of families amounted to 2,544,215, which would give but a third of the population to the purposes of agriculture.
Supposing him to be correct, France, within her old boundary, could maintain, on this principle, a population of 41 millions, supposing her merely to double her agricultural population; and of 60 millions, supposing her industry were equally active with that of Great Britain.*
It is the general remark of travellers, that the traffic of the great roads of France is much less, than might be expected, in a country possessing so many natural advantages. This may be attributed chiefly to the small number and size of her towns; for it is the communication from town to town that peoples the great road; that of the rural population being principally from one part of the village or farm to another.
107. This position is too general. A pastoral nation, devoting the whole of its territory to pasture, could spare a very small proportion of its population for commerce and manufacture; witness Tartary and the Pampas of South America. Where a dense manufacturing and commercial population makes it advantageous to the land-holder to devote his land to pasture, and look to foreigners for the supply of corn, as in Holland, a small proportion of the population may, indeed be required for domestic, but a large proportion will be required for the animation of foreign agriculture. Translator.
108. [The slow progress of agriculture in these provinces of France is not attributable to the want of towns in the midst of them; towns and cities are a consequence, not the cause of the general prosperity of a country. Nor would the adoption of a different policy from that which recommends the purchase of manufactures from foreign countries with the raw produce of domestic agriculture, improve the situation of these districts. A system of policy which should attempt by restraints or encouragements, to divert a portion of the capital and industry employed in agriculture or commerce from those channels towards the erection of a town, or the establishment of a manufactory, with a view to promote the better cultivation of the soil, would be subversive of this end.
To what causes then must the misery, said by our author to prevail in those provinces, be ascribed, or what has retarded their agricultural improvement? The prosperity of agriculture, as well as that of every other branch of industry, depends upon the unrestrained operation of individual interest; not only furnishing motives to exertion, but knowledge to direct that exertion. All that is necessary to enable a state to reach the highest pitch of opulence, is not to disturb the action of this important principle. The obstacles, it will accordingly be found, which have opposed the progress of improvement in the countries alluded to, may be traced to the interference by the public authorities with the salutary operation of this powerful motive of action, or, in other words, to their bad laws and political institutions. Sometimes imposing restraints on the cultivator, and exposing him to numberless oppressions, either by prescribing the mode in which the soil shall be cultivated, or the products it shall yield. And, when not thus directly interfering with the business of production, prohibiting the exportation of the raw produce of the soil, and thereby depriving it of the best market. At other times harassing the husbandman with taxation, the shameful inequalities of which, whilst they relieve the higher orders, permit the burden to fall, almost exclusively, on his shoulders, or depriving him of the freedom of trade from province to province within his own country; but, above all, by perpetuating the inheritance of landed property in particular bodies or families, without the power of alienation. These are a few of the corrupt and barbarous laws which have retarded the agriculture, not of these particular provinces of France only, but of many of the fairest portions of Europe.] American Editor.
109. [The local position of Washington, perhaps, is not as advantageous as that of some of the other cities of the Union; it certainly, however, has not been adverse to its progress in population and wealth. In the year 1800, when Washington became the seat of the general government, its whole population amounted to 3,210; according to the census, it contained in 1810, 8,208 inhabitants, in 1820, 13,247 inhabitants, and in 1830, 18,828 inhabitants. In the year 1820 the whole number of buildings was 2,208, of which 925 were of brick. By the assessment valuation of the year 1830, the whole number of buildings was 3,125. It cannot, therefore, be said to have been outstripped by most of the other cities in the progress of improvement.] American Editor.
110. There is some stretch of imagination in this. Probably the Egyptian Thebes was itself the centre of manufacture and commerce in its day, and not its entrepot; indeed, there is no reason to suppose a very active intercourse between India and Europe to have existed at so early a period; and, if it had, Thebes would hardly have been the entrepot. But central India furnishes itself instances of cities containing as large a population. Nineveh and Babylon seem to have been quite as populous; each was probably the central point of an enormous domestic industry. Translator.
Book III, Chapter I
1. Some materials are capable of receiving and discharging the same kind of value many times over; as linen, which will undergo repeated washing. The cleanliness given it by the laundress, is a value wholly consumed on each occasion, along with a part of that of the linen itself.
2. The values not consumed sooner or later in a useful way are of little moment; such are provisions spoiled by keeping, products lost accidentally, and those whose use has become obsolete, or which have never been used at all, owing to the failure of the demand for them, wherein value originates. Values buried, or concealed, are commonly withdrawn but for a time from consumption; when found, it is always the interest of the finder to turn them to account, which he cannot do without submitting them to consumption. In this case, the only loss is that of the profit derivable from them during the period of their disappearance, and may be reckoned equivalent to the interest for that time.
The same observation applies to the minute savings, successively laid by until the moment of investment, the aggregate of which is, doubtless, considerable. The loss, resulting from this inertness of capital, may be partially remedied by moderating the duties on transfer, by extending to the utmost the facility of circulation, and by the establishment of banks of deposite, in which capita may be safely vested, and whence it may readily be withdrawn. In times of political confusion, and under an arbitrary government, many will prefer to keep their capital inactive, concealed, and unproductive, either of profit or gratification, rather than run the risk of its display. This latter evil is never felt under a good government.
4. It is probable, that, in all countries, anywise advanced in industry, the revenues of industry exceed those of capital and land united, and, consequently, that the consumption of those deriving income solely from industry, and wholly dependent for subsistence upon their personal faculties, exceeds that of both capitalists and landlords together. It is not uncommon to meet with a manufactory, that, with a capital, say of 120,000 dollars, will pay daily in wages to its people, 60 dollars, which, with the deduction of Sundays and holidays, makes 18,000 dollars per annum; if to this be added, 4000 dollars more for the net profits of personal superintendence and management, it will give a total of 22,000 dollars per annum, for the revenue of industry alone. The same capital, vested in land at but 20 years' purchase would yield a revenue of 6000 dollars only.
The cultivation by métayers, the very lowest description of farmers, gives to them, and their subordinate labourers' industry, a revenue equal to that of the land jointly with the capital, which is advanced by the proprietor.
Book III, Chapter II
6. This may be illustrated by the burning of fuel in a grate or furnace. The fuel burnt, serves either to give warmth, or to cook victuals, boil dyeing ingredients, and the like, and thereby to increase their value. There is no utility in the mere gratuitous act of burning, except inasmuch as it tends to satisfy some human want, that of warmth for instance; in which case, the consumption is unproductive; or inasmuch as it confers upon a substance submitted to its action, a value, that may replace the value of the fuel consumed; in which case the consumption is productive.
If the fuel, burnt for the sake of warmth, produce either no warmth at all, of very little; or that burnt to give value to a substance, give it no value, or a less value than the value consumed in fuel, the consumption will be ill-judged and improvident.
7. There is unquestionably a sort of talent requisite in the expenditure of a large income with credit to the proprietor, so as to gratify personal taste, without awakening the self-love of others; to oblige without the sense of humiliation; to labour for the public good, without alarming individual interests. But this kind of talent is referable rather to the head of practical, whilst its influence upon the rest of mankind falls within the province of theoretical, morality.
Book III, Chapter III
8. The raw materials of manufacture and commerce are, the products bought with a view to the communication to them of further value. Calicoes are raw material to the calico-printer, and printed calicoes to the dealer who buys them for re-sale or export. In commerce, every act of purchase is an act of consumption; and every act of re-sale, an act of production.
10. There is almost insuperable difficulty in estimating with precision the consumption and production of value; and individuals have no other means of knowing, whether their fortune be increased or diminished, except by keeping regular accounts of their receipt and expenditure; indeed, all prudent persons are careful to do so, and it is a duty imposed by law in the case of traders. An adventurer could otherwise scarcely know whether his concern were gainful or losing, and might be involving himself and his creditors in ruin. Besides keeping regular accounts, a prudent manager will make previous estimates of the value that will be absorbed in the concern, and of its probable proceeds; the use of which, like that of a plan or design in building, is to give an approximation, though it can afford no certainty.
Book III, Chapter IV
11. It is strange, that so acute a writer should not have perceived, that the mischief of pure individual vanity can never be very formidable, because the pleasure it affords loses in intensity, in proportion to its diffusion. Indeed as far as individual consumption is concerned, attacks upon luxury are mere idle declamations; for the productive energies of mankind will always be directed towards an object, with a force and in a degree porportionate to the intensity of the want for it. It is the extravagance of public luxury alone that can ever be formidable; this, as well as public consumption of every kind, it is always the interest of the community at large to contract, and that of public functionaries to expand, to the utmost. Translator.
12. The lending at interest what might have been spent in frivolity is of this latter class; for interest can not be paid, unless the loan be productively employed; in which case it will go in part to the maintenance of the labouring classes.
14. In a wholesome state of society, when public institutions are not needlessly multiplied, and all tend to the common purpose of public good, this very impatience and anxiety is conducive to the welfare, and not to the injury, of society. Indeed, great inequality of fortune seems to be a necessary accompaniment to social wealth and great national productive power. It is the prospect of great prizes only, that can stimulate to the extreme of intellectual and corporeal industry; and there is no instance on record of a nation far advanced in industry, in which great inequality of fortune has not existed. One bishopric of Durham will tempt more clerical adventurers, than five hundred moderate benefices and the example of a single Arkwright or Peel will stimulate manufacturing science and activity more than a whole Manchester of moderate cotton spinning concerns. Translator.
Book III, Chapter V
15. On this ground sumptuary laws are superfluous and unjust. The indulgence proscribed is either within the means of the individual or not: in the former case, it is an act of oppression to prohibit a gratification involving no injury to others, equally unjustifiable as prohibition in any other particular; in the latter, it is at all events nugatory to do so; for there is no occasion for legal interference, where pecuniary circumstances alone are an effectual bar. Every irregularity of this kind works its own punishment. It has been said, that it is the duty of the government to check those habits, which have a tendency to lead people into expenses exceeding their means; but it will be found, that such habits can only be introduced by the example and encouragement of the public authorities themselves. In all other circumstances, neither custom nor fashion will ever lead the different classes of society into any expenses, but what are suitable to their respective means.
17. I remember being once in the country a witness of the numberless minute losses that neglectful housekeeping entails. For want of a trumpery latch, the gate of the poultry-yard was forever open: there being no means of closing it externally, it was on the swing every time a person went out; and many of the poultry were lost in consequence. One day a fine young porker made his escape into the woods, and the whole family, gardener, cook, milk-maid, &c., presently turned out in quest of the fugitive. The gardener was the first to discover the object of pursuit, and in leaping a ditch to cut off his further escape, got a sprain that confined him to his bed for the next fortnight: the cook found the linen burnt that she had left hung up before the fire to dry; and the milk-maid, having forgotten in her haste to tie up the cattle properly in the cow-house, one of the loose cows had broken the leg of a colt that happened to be kept in the same shed. The linen burnt and the gardener's work lost, were worth full twenty crowns; and the colt about as much more: so that here was a loss in a few minutes of forty crowns, purely for want of a latch that might have cost a few sous at the utmost; and this in a household where the strictest economy was necessary, to say nothing of the suffering of the poor man, or the anxiety and other troublesome incidents. The misfortune was to be sure not very serious, nor the loss very heavy; yet when it is considered, that similar neglect was the occasion of repeated disasters of the same kind, and ultimately of the ruin of a worthy family, it was deserving of some little attention.
20. Though it is not every subject that allows equal scope to poetical genius, it does not seem, that error affords a finer field than truth. The lines of Voltaire on the system of the world, and on the discoveries of Newton regarding the properties of light, are strictly conformable to the rules of science, and nowise inferior in beauty to those of Lucretius on the fanciful dogmas of the Epicurean school. But if Voltaire had been better acquainted with the principles of political economy, he would never have given utterance to such sentiments as the following:
Un grand état, s'il en perd un petit.
Cette splendeur, cette pompe mondaine,
D'un regne heureux est la marque certain.
Le riche est né pour beaucoup dépenser....
The progress of science compels those who covet literary fame, to make themselves acquainted with general principles at the least; without a close adherence to truth and nature, there is little chance of permanent reputation, even in the poetical department.
De Gens, qui ne dépensent rien;
Je ne sais d'homme nécessaire,
Que celui dont le luxe épand beaucoup de bien.
La Fontaine, Avantage de la Science.
"Were the rich not to spend their money freely," says Montesquieu, "the poor would starve." Esprit des Lois, liv. vii. c. 4.
22. There are other circumstances that contribute to veil the residence of the court in an atmosphere of human misery. It is there, that personal service is consumed by wholesale; and that is of all things the most rapidly consumed, being, indeed, consumed as fast as produced. Under this denomination, is to be comprised, the agency of the soldiery, of menial servants, of public functionaries, whether useful or not, of clerks, lawyers, judges, civilians, ecclesiastics, actors, musicians, drolls, and numerous other hangers-on, who all crowd towards the focus of power and occupation, civil, judicial, military, or religious. It is there also, that material products seem to be more wantonly consumed. The choicest viands, the most beautiful and costly stuffs, the rarest works of art and fashion, all seem emulous to reach this general sink, whence little or nothing ever emerges.
Yet, if the accumulated values, that are drained from every quarter of the national territory to feed the consumption of the seat of royalty, were distributed with any regard to equity, they would probably suffice to maintain all classes in comfort and plenty. Though such drains must always be calamitous, because they absorb value, and yield no return, at any rate the local population might be pretty well off; but it is notorious that wealth is nowhere less equally diffused. The prince, the favourite, a mistress, or a bloated peculator, takes the lion's share, leaving to the subordinate drones the pittance assigned to them by the generosity or caprice of their superiors.
The residence of an overgrown proprietor upon his estate then only tends to diffuse abundance and cheerfulness around him, when his expenditure is directed to objects of utility, rather than of pomp; in which case he is really an adventurer in agriculture, and an accumulator of capital in the shape of improvements and ameliorations.
23. [About 140,000 dollars. Some English ladies wear jewels of greater value; but some read the passage in Pliny Quadringenties, instead of Quadragies Sestertium. This would make the jewels of Paulina worth 1,400,000 dollars; the more probable sum.] American Editor.
24. In favour of luxury, the following paradoxical argument has been advanced; for what is too ridiculous to be hazarded in such a cause? "That since luxury consumes superfluities only, the objects it destroys are of little real utility, and therefore the loss to society can be but small." There is this ready answer: the value of the objects consumed by luxury must have been reduced by the competition of producers to a level with the charges of production, wherein are comprised the profits of the producers. Objects of luxury are equally the product of land, capital, and industry, which might have been employed in raising objects of real utility, had the demand taken that direction; for production invariably accommodates itself to the taste of the consumers.
Book III, Chapter VI
25. Although the capitalist and landholder receive their interest and rent originally in the shape of money, and have, therefore, no occasion to go through any previous act of exchange, to obtain wherewithal to pay the tax, yet such a previous exchange must have been effected by the adventurer, who turns the land or capital to account. The effect is precisely the same, as if the rent or interest had been paid in kind; that is, in the immediate products of the land or capital; and the landholder or capitalist had paid the tax either by the direct transfer of part of those products, or by first selling them, and afterwards paying over the proceeds. On this subject, vide suprà, Book II. chap. 5, for the mode in which revenue is distributed amongst the community.
26. Dr. Hamilton, in his valuable tract upon The National Debt of Great Britain, illustrates the absurdity of the position here attacked, by comparing it to the "forcible entry of a robber into a merchant's house, who should take away his money, and tell him he did him no injury, for the money, or part of it, would be employed in purchasing the commodities he dealt in, upon which he would receive a profit." The encouragement afforded by the public expenditure is precisely analogous.
27. It is mere usurpation in a government, to pretend to a right over the property of individuals, or to act as if possessing such a right; and usurpation can never constitute right; although it may confer possession. Were it otherwise, a thief, who had once, by force or fraud, obtained possession of another man's property, could never be called upon to make restitution, when overpowered and taken prisoner, for he might set up the plea of legitimate ownership.
28. The reader will readily perceive, that this and many other passages, were written under the pressure of a military despotism, which had assumed the absolute disposal of the national resources, and suffered no one to express a doubt of the justice and policy of its acts.
29. Fenelon, Vauban, and a very few more, of the most distinguished talent, had a confused idea of the ruinous tendency of this system; but they failed in impressing the rest of the world with the same conviction; for want of just notions on the subject of the production and consumption of wealth. Thus Vauban, in his Dixme royale, says, 'the present misery of France is attributable, not to the rigour of the climate, the character of the inhabitants, or the barrenness of the soil: for the climate is most favourable, the people active, diligent, dexterous, and numerous: but to the frequency and long continuance of war, and the ignorance and neglect of economy.' Fenelon had expressed the same sentiments in several admirable passages of his Telemaque, but they passed for mere declamation, as well they might; for he was not qualified to prove their truth and accuracy.
30. When Voltaire tells us, speaking of the superb edifices of Louis XIV., that they were by no means burthensome to the nation, but served to circulate money in the community, he gives a decisive proof of the utter ignorance of the most celebrated French writers of his day upon these matters. He looked no further than the money employed on the occasion; and, when the view is limited to that alone, the extreme of prodigality exhibits no appearance of loss; for money is, in fact, an item, neither of revenue, nor of annual consumption. But a little closer attention will convince us of the fallacy of this position, which would lead us to the absurd inference, that no consumption whatever has occurred within the year, whenever the amount of specie at the end of it is found to be nowise diminished. The vigilance of the historian should have traced the 167 millions of dollars expended on the chateau of Versailles alone, from the original production by the laborious efforts of the productive classes of the nation, to the first exchange into money, wherewith to pay the taxes, through the second exchange into building materials, painting, gilding, &c. to the ultimate consumption in that shape, for the personal gratification of the vanity of the monarch. The money acted as a mere means of facilitating the transfers of value in the course of the transaction; and the winding up of the account will show, a destruction of value to the amount of 167 millions of dollars, balanced by the production of a palace, in need of constant repair, and of the splendid promenade of the gardens.
Even land, though imperishable, may be consumed in the shape of the value received for it. It has been asserted, that France lost nothing by the sale of her national domains after the revolution, because they were all sold and transferred to French subjects; but what became of the capital paid in the shape of purchase-money, when it left the pockets of the purchasers? Was it not consumed and lost?
31. In the execution of the national military enterprise, two different values pass through the hands of the government or its agents: 1. The value paid in taxes by the public at large: 2. The value received in supplies and services from the parties affording them. For the first of these no return whatever is made; for the second, an equivalent is paid in wages or purchase-money. Wherefore, there it has no ground for saying that the government refunds with one hand what is received with the other; that the whole transaction is a mere circulation of value, and causes no loss to the nation; for the government returns but one, where it receives two; the loss of the other half falls upon the community at large. Thus, the national, being but the aggregate of individual wealth, is diminished to the extent of the total consumption of the government, minus the product of the public establishment; as we shall presently see more in detail.
32. It has been seen in the concluding chapter of Book II. that, inasmuch as population is always commensurate with production, the obstruction of the progressive multiplication of products is a preventive check to the further multiplication of the human race; and that the waste of capital, the extinction of industry, and the exhaustion of the sources of production, amount to positive decimation of those in actual existence. A wicked or ignorant administration may, in this way, be a far more destructive scourge, than war with all its atrocities.
33. By government, I mean, the ruling power in all its branches, and under whatever constitutional form; it would be wrong to limit the term to the executive branch alone; the first enactment of a law is as much an act of authority, as its subsequent enforcement.
34. The consumption of a nation may undoubtedly exceed its aggregate annual revenue; but we can hardly suppose that of Great Britain to have done so; for she has evidently been advancing in opulence, up to the present time, whence it may be inferred, that her consumption, at the very utmost, only equals her revenue. Gentz, who will hardly be accused of underrating the financial resources of that country, estimated her total annual revenue at no more than two hundred millions sterling; Dr. Beeke at two hundred and eighteen millions, inclusive of one hundred millions for the revenues of industry. Granting her to have made some further progress since those estimates were made, and that her total revenue in 1813 had advanced to two hundred and twenty-four millions, we are told by Colquhoun, in his Wealth, Power, and Resources of the British Empire, that her public expenditure in that year amounted to one hundred and twelve millions. By this statement it should seem, that her public expenditure then amounted to the half of the total expenditure of the nation! Moreover, the expenses of her central government do not include all her public charges; there are to be added, county and parish rates, poor rates, &c. &c. The business of government might be conducted, even in extensive empires, at a charge of not more than one per cent. upon the aggregate of individual revenue; but, to attain this degree of perfection, a vast improvement is still requisite in the department of practical policy.*
Estimating, on such authority, the annual income of Great Britain and Ireland at 500 millions sterling, we perceive that this income, even after the payment of the taxes, enormous as they have been, is much greater now than at any former period of her history; and there therefore can be no doubt that a continued augmentation of the national capital must take place, even in defiance of many obstructions. The public expenditure, too, of the same kingdom, is in course of gradual reduction. During the late war, as has been observed by our author, on the authority of Colquhoun, the public expenditure of the year 1813 amounted to 112 millions, whereas in 1830 it was about 34 millions, in 1831, 33 millions, and in 1832 not so much by 100,000l. sterling. American Editor.
36. Memoires du Prince Eugene par luimème, p. 187. The authenticity of this work has been contested, as well as the Testament Politique of Richelieu. If not themselves the authors, they must at least have been men of equal capacity, of which there is still less probability.
37. He contrived to meet the charges of the American war, without the imposition of any additional taxes. He has been reproached, indeed, with having incurred heavy loans; but it is obvious, that, so long as he found means to pay the interest upon them without fresh taxation, they were nowise burthensome upon the nation; and that the interest must have been defrayed by retrenchment of the expenditure.
39. The expressions, credit is declining, credit is reviving, are common in the mouths of the generality, who are, for the most part, ignorant of the precise meaning of credit. It does not imply confidence in the government exclusively; for the bulk of the community have no concern with government, in respect to their private affairs. Neither is it exclusively applied to the mutual confidence of individuals; for a person in good repute and circumstances, does not forfeit them all at once; and, even in times of general distress, the forfeiture of individual character is by no means so universal, as to justify the assertion, that credit is at an end. It would rather seem to imply, confidence in future events. The temporary dread of taxation, arbitrary exaction, or violence, will deter numbers from exposing their persons or their property; undertakings, however promising and well-planned, become too hazardous; new ones are altogether discouraged, old ones feel a diminution of profit; merchants contract their operations; and consumption in general falls off, in consequence of the decline and the uncertainty of individual revenue. There can be no confidence in future events, either under an enterprising, ambitious, or unjust government, or under one, that is wanting in strength, decision, or method. Credit, like crystallization, can only take place in a state of quiescence.
40. A mere sketch is all that can be expected in a work like the present: a complete treatise on government would be equally appropriate with a survey of the arts, when it became incidentally necessary to touch upon the processes of manufacture. Yet, either would be a valuable addition to literary wealth.
41. This rule must be taken with some qualification. The habitual largesses of corn, distributed by the emperors to the people of ancient Rome, were material objects of public consumption. So likewise the provisions of all kinds consumed in hospitals and prisons, and the fireworks used on occasions of public display or rejoicing, for the amusement of the people at large.
From the official account of the receipts and disbursements of the United States, in the year 1806, presented by Mr. Gallatin, then Secretary of the Treasury, it appears that the total expenditure fell short of twelve millions of dollars, of which eight millions went to pay the interest of the public debt; leaving a sum of four millions only for the charge of government, that is to say, the civil, judicial, military, and other public functions of a population of twelve millions: which is wholly defrayed by taxes on imports.*
The whole public expenditure of the people of the United States necessarily embraces the local disbursements of the different states, as well as the expenditure of the general government. Of the former, we have, as yet, no means of presenting our readers with any accurate or official account, and we will not venture to indulge in any loose estimates. Of the latter, however, we are enabled to furnish a tabular view, extracted from the letter of the Secretary of the Treasury to the Chairman of the Committee of the House of Representatives on Retrenchment, April 9, 1830, and from the subsequent annual Treasury Reports, which will exhibit an authentic and accurate view of the receipts and expenditures of the Federal Government, from the 4th of March, 1789, the period of its commencement, to the 31st of December, 1832, the last date to which the accounts have been all made up.
We also subjoin the last official revision of the population returns of the several states and territories, according to the five enumerations of the years 1790, 1800, 1810, 1820, and 1830.
43. An example occurs to me of a city of France, whose municipal administration was both mildly and efficiently conducted before 1789, at a charge of 1000 crowns per annum only, but under the imperial government, though it cost 30,000 fr. (5,580 dollars) afforded no security against the caprice and arbitrary will of the sovereign.
44. Several times during the last century the Molinist priesthood refused to execute their clerical duties in favour of the Jansenists, in spite of all the government could do; on the pretence, that it was better to obey the divine command as conveyed by the voice of the Pope, than that of any human authority.*
45. The Greeks, until the second Persian war, and the Romans, until the siege of Veii, regularly made their military campaigns in that interval. Nations of hunters or shepherds, that pay little attention to the arts, and none to agriculture, like the Tartars and Arabs, are less circumscribed in time, and can prosecute their warlike enterprises in any quarter, that promises booty, and furnishes pasturage. Hence the vast area of the conquests of Attila, Genghis Khan, and Tamerlane and of the Moors and the Turks.
46. It has been calculated that every soldier, brought into the field by Great Britain, during her last war with America, cost her twice as much as one on the continent of Europe. And the other charges of warfare must of course be aggravated by the distance in an equal ratio.
47. This is too generally expressed. Where security from external attack is only to be had by means of a professional soldiery, the soldier is a productive agent—productive of the immaterial product, security from external attack, than which, under certain circumstances, none can be more valuable. Translator.
48. Those who deny the progressive influence of human reason must have studied history to very little purpose. The perfidy and cruelty of war have considerably abated, in Europe, more than in Asia or America, and most of all amongst the most polished of the European nations. The ungenerous character of some recent military enterprises roused so much public indignation, as to make them recoil upon the projectors with ruinous violence.
49. I am here speaking of the only sure reliance in an enlightened age. A people, that has nothing to lose by a change of domination, may defend itself with the most determined gallantry. The Mussulman will rush on certain destruction, in defence of a prince and a faith, that are neither of them worth defending. But political and religious prejudice will sooner or later fall to the ground; and leave mankind to seek for some more reasonable object of devotion.
50. Should the expected success attend the attempt to naturalise in Europe the flax of New Zealand, which is greatly superior to that of Europe in the length and delicacy of the fibre, as well as in the abundance of the crop, it is possible that fine linen may be produced at the rate now paid for the coarsest quality; which would greatly improve the cleanliness and health of the lower classes.
52. What was denominated an University, under the reign of Napoleon, was a still more mischievous institution; being, in fact, but a most expensive and vexatious contrivance, for depraving the intellectual faculties of the rising generation, by substituting, in the place of just and correct notions of things, opinions calculated to perpetuate the political slavery of their country.
53. ["It is chiefly," observes Dugald Stewart, "in judging of questions coming home to their business and bosoms, that casual associations lead mankind astray; and of such associations, how incalculable is the number arising from false systems of religion, oppressive forms of government, and absurd plans of education. The consequence is, that while the physical and mathematical discoveries of former ages present themselves to the hand of the historian, like masses of pure and native gold, the truths which we are here in quest of may be compared to iron, which although at once the most necessary and the most widely diffused of all the metals, commonly requires a discriminating eye to detect its existence, and a tedious as well as nice process, to extract it from the ore."
"To the same circumstance it is owing, that improvements in Moral and in Political Science do not strike the imagination with nearly so great force as the discoveries of the Mathematician or of the Chemist. When an inveterate prejudice is destroyed by extirpating the casual associations on which it was grafted, how powerful is the new impulse given to the intellectual faculties of man! Yet how slow and silent the process by which the effect is accomplished! Were it not, indeed, for a certain class of learned authors, who, from time to time, heave the log into the deep, we should hardly believe that the reason of the species is progressive. In this respect, the religious and academical establishments in some parts of Europe are not without their use to the historian of the human mind. Immovably moored to the same station by the strength of their cables, and the weight of their anchors, they enable him to measure the rapidity of the current by which the rest of the world are borne along."
Vide Preface to Stewart's Dissertations, p. 28, Boston edition.]
54. Under this head, I would include, the fundamental parts of knowledge in every department, and the familiar instruction adapted to each specific calling, respectively; such as would impart at a cheap rate to the hatter, the metal-founder, the potter, the dyer, &c., the general principles of their respective arts. Works of this kind keep up a constant channel of communication between the practical and theoretical branches, and enable them to profit mutually by each other's experience.
56. According to the new method, introduced by Lancaster, and perfected by subsequent teachers, a single master with very little aid of books, pens, or paper, can rapidly and effectually teach reading, writing, and vulgar arithmetic, to five or six hundred scholars at a time. This truly economical result is produced, by taking advantage of the slightest superiority of intelligence of one above another, and directing the motive of emulation, natural to the human breast, towards an useful object. A large school is commonly divided into forms, consisting each of eight children, as nearly equal in advancement as possible, and instructed by a child somewhat more advanced, called the Monitor. These forms again are divided into eight classes; of which the lowest learns to pronounce the letters of the alphabet, and to trace their figures rudely with the finger upon sand spread out upon a flat board; and the highest is able to write upon paper, and to practise the four rules of arithmetic. The children of each form are ranged according to their progress; and whoever cannot give the answer, is immediately superseded by a more apt scholar. As soon as a child is perfected in one class, he is transferred to the next in degree. The lessons are received, sometimes in a sitting posture, and sometimes upright, with slates affixed to the walls. The instruction is thus always accommodated to the age and faculties of the child; it necessarily arrests and rewards his attention; and involves that personal activity, essential to the infant frame. The whole is conducted in a single apartment, and usually under the superintendence of a single master or mistress. The general adoption of this method will probably be for some time opposed by custom and prejudice; but its utility and conformity to the order of nature will ensure its ultimate and universal prevalence.
57. I am strongly disposed to say the same of logic. Were nothing taught, but what is consistent with truth and good sense, logic would follow of itself as a matter of course: all the teaching in the world will never make a man a good reasoner, whose notions and ideas of things are unsound and erroneous; and, with the foundation of just notions, he will require no teaching to make him reason well. Just ideas of things are only to be acquired by attentive examination; by taking account of every particular concerning them, and of nothing but what concerns them; which is the object of all knowledge in general, and by no means of logic alone.
58. The bad example of a vicious prince is of the most fatal tendency; it is notorious to all the world, and protected and abetted by public authority; and it is sure to be reflected by the subservience of courtiers to the extreme point of imitative servility.
59. At Paris, the limitation of relief afforded by the Hospice des Incurables, and those of Petites Maisons, of St. Louis, of Charite, and many others, is of the former kind; the admissions to the Hotel-Dieu, Bicêtre, Saltpétrière, and Enfans-Trouvés, are subject to a limitation of the latter kind. As the number of applicants duly qualified for admission in the establishment first mentioned always exceeds their capacity, the choice must ultimately be decided by favour or interest.
60. Yet it is well worth consideration, whether it be not more to the advantage, both of the state and of its pensioners, to maintain them at their own homes upon a fixed income, or to board them out with individuals. The Abbé de St. Pierre, whose mind was ever actively at work for the public good, has estimated the charge of maintaining the invalids in their sumptuous establishment at Paris, to be three times as much as that of their maintenance at their respective homes Annales Polit. p. 209.
61. With all this waste of space in the great roads of France, there are in none of them either paved or gravelled foot-ways, passable at all seasons, or stone seats, for the travellers to rest upon, or places of temporary shelter from the weather, or cisterns to quench the thirst; all which might be added with a very trifling expense.
64. To say, that if the road were not in existence, the charge of transport could never be so enormous as here suggested, because the transport would never take place at all, and people would contrive to do without the objects of transport, would be a strange way of eluding the argument. Self-denial of this kind, enforced by the want of means to purchase, is an instance of poverty, not of wealth. The poverty of the consumer is extreme, in respect to every object he is thus made too poor to purchase; and he becomes richer in respect to it, in proportion as its price or value declines.
65. In lieu of canals, iron rail-roads from one town to another will probably be one day constructed. The saving in the cost of transport would probably exceed the interest of the very heavy expense in the outset. Besides the additional facility of movement, roads of this kind would remedy the violent jolting of passengers and goods. Undertakings of such magnitude can only be prosecuted in countries where capital is very abundant, and where the government inspires the adventurers with the firm assurance of reaping themselves the profit of the adventure.
Book III, Chapter VII
66. Our author seems in this passage to have become a convert to the opinion of Smith, in respect to the civil tribunals of a nation, from which he had expressed his dissent, in former editions. Though arbitration may be a very good mode of settling civil suits, where the parties are both anxious to come to a settlement, and indeed is frequently resorted to, and should always be encouraged; yet it is manifest, that there must be a compulsory tribunal for the obstinate, or refractory. And, since security of person and property is the main object of social institutions, it is but just, that invasion in a particular instance should be repelled and deterred at the public charge. In strict justice, the invader should be held to make good the whole damage; and so he is or ought to be, in the shape of costs, fine, damages, or otherwise. But it is not consistent with equity that the sufferer should be deterred from pursuing his claim, by superadding a proportion of the outlay upon the judicial establishments to the charge of witnesses and agents, which he must necessarily advance, and to the risk of inability in the delinquent, even in the event of ultimate success. Translator.
Book III, Chapter VIII
67. What avails it, for instance, that taxation is imposed by consent of the people or their representatives, if there exists in the state a power, that by its acts can leave the people no alternative but consent? De Lolme, in his Essay on the English Constitution, says that the right of the Crown to make war is nugatory, while the people have the right of refusing the supplies for carrying it on. May it not be said, with much more truth, that the right of the people to deny the supplies is nugatory, when the crown has involved them in a predicament that makes consent a matter of necessity? The liberties of Great Britain have no real security, except in the freedom of the press, which rests itself, rather upon the habits and opinions of the nation, than upon legal enactments or judicial decisions. A nation is free, when it is bent on freedom; and the most formidable obstacle to the establishment of civil liberty is the absence of the desire for it.
68. By the same reasoning it has been attempted to prove, that luxury and barren consumption operate as a stimulus to production. Yet they are less mischievous than taxation; inasmuch as they redound to the personal gratification of the party himself: whereas, to use the expedient of taxation as a stimulative to increased production, is to redouble the exertions of the community, for the sole purpose of multiplying its privations, rather than its enjoyments. For, if increased taxation be applied to the support of a complex, overgrown, and ostentatious internal administration, or of a superfluous and disproportionate military establishment, that may act as a drain of individual wealth, and of the flower of the national youth, and an aggressor upon the peace and happiness of domestic life, will not this be paying as dearly for a grievous public nuisance, as if it were a benefit of the first magnitude?
70. It is hardly necessary to controvert an opinion, entertained by sovereigns in times past, respecting the property of their subjects. We find Louis XIV. writing in these terms, professedly for the instruction of his son in matters of government: "Kings are absolute lords naturally possessing the entire and uncontrolled disposal of all property, whether belonging to the church or to the laity, to be exercised at all times with due regard to economy, and to the general interests of the state." Œuvres de Louis XIV., Mémoires Hist. A. D. 1666.
71. In France, before 1789, the average annual consumption of salt was estimated at 9 lbs. per head in the districts subject to the gabelle, and at 18 lbs. per head in those exempt from that impost. De Monthieu, Influence des divers Impots, p. 141. Thus, taxation in this form obstructed the production of ½ of this article in the districts subjected to it, and reduced to ½ the enjoyment it was capable of affording; to say nothing of the other mischiefs resulting from it; the injury to tillage, to the feeding of cattle, and to the preparation of salted goods; the popular animosity against the collectors of tax, the consequent increase of crime and conviction, and the consignment to the galleys of numerous individuals, whose industry and courage might have been made available to the increase of national opulence.
In 1804, the English government raised the duties on sugar 20 per cent. It might have been expected, that their average product to the public exchequer would have been advanced in the same ratio; i. e. from 2,778,000l. the former amount, to 3,330,000l.: instead of which the increased duties produced but 2,537,000l.; exhibiting an absolute deficit. Speech of Henry Brougham, Esq., M. P., March 13, 1817.
The people of Great Britain might consume French wines at a very little advance upon the prices of France, and have the enjoyment of an unadulterated, wholesome, and exhilarating beverage, costing perhaps a shilling a bottle. But the exorbitant duty upon this article has reduced its import and the product of the duty to a very trifle; and thus, the sole benefit resulting from the tax to the British nation is, the total privation of a cheap and wholesome object of consumption.
The two last examples are a sufficient answer to the objection taken by Ricardo to this passage of my text; on the ground that taxation is not injurious to production in the aggregate, inasmuch as the consumption of the state itself replaces that of individuals, which is annihilated by the tax. A tax, that robs the individual, without benefit to the exchequer, substitutes no public consumption whatever, in place of the private consumption it extinguishes.
72. Of this, a striking instance is given in a work entitled, Diverses Idées sur la Legislation et l'Administration, par M. C. St. Paul. One of the principal bankers of Paris having died in 1817, the duty on legacies and inheritance was levied upon the aggregate of his credit-account, and not upon the balance, after deducting the debits; and this by virtue of a proviso in the revenue laws, which charges the duty upon the gross estate of a defunct, and not upon the residue after the discharge of the outstanding claims. The danger of fraud upon the revenue in stating the account, is not sufficient to justify the exaction of more than is fairly due.
The same department is in the habit of giving no notice to the executors or other parties, of the payments falling due, until after the legal time has expired, in the hope of incurring the penalty of default. The revolution had abolished this official and fiscal severity; but it was revived by the imperial government, and has been acted upon ever since. A clerk or officer has no chance of promotion, unless he shows a disposition on all occasions to postpone the interests of the public to those of the exchequer.
75. This position is further confirmed by an instance mentioned in a letter, addressed in 1785, by the then Marquis of Lansdowne to the Abbé Morellet, stating, 'that in respect to the article of tea, the good effect of the reduction of duty had surpassed all expectation. The amount of sale had advanced from 5,000,000 lbs. to 12,000,000 lbs., in spite of many unfavourable circumstances, besides which, smuggling had been so much crippled, that the public revenue had been increased to a degree that astonished every body.'
76. This doctrine has been combated by Ricardo, in his Principles of Political Economy and Taxation. That writer maintains, that since the amount and the product of industry are always proportionate to the quantum of the capital engaged in it, the extinction of one branch by taxation must needs be compensated by the product of some other, towards which the industry and capital, thrown out of employ, will naturally be diverted. I answer, that whenever taxation diverts capital from one mode of employment to another, it annihilates the profits of all who are thrown out of employ by the change, and diminishes those of the rest of the community; for industry may be presumed to have chosen the most profitable channel. I will go further, and say, that a forcible diversion of the current of production annihilates many additional sources of profit to industry. Besides, it makes a vast difference to the public prosperity, whether the individual or the state be the consumer. A thriving and lucrative branch of industry promotes the creation and accumulation of new capital; whereas, under the pressure of taxation, and accumulation of new capital, it ceases to be lucrative; capital diminishes gradually instead of increasing; wealth and production decline in consequence, and prosperity vanishes, leaving behind the pressure of unremitting taxation. Ricardo has endeavoured to introduce the unbending maxims of geometrical demonstration; in the science of political economy, there is no method less worthy of reliance.
79. Under the system of Napoleon, which made civilization retrograde to this, as well as in most other particulars, the charges of collection in which must be included the charge of privation and the irrecoverable arrears, were much more considerable; but the full extent of the mischief he caused is not yet ascertained.
80. Necker reckons the corvée at four millions of dollars only; but probably he takes account of nothing, but the value the day-labour exacted; and does not notice the injury resulting from this method of supplying the public necessities.
81. Wealth of Nations, book v. c. 2. It has been objected, that a progressive scale of taxation presents the disadvantage of operating as a penalty to deter activity and frugality from the accumulation of capital. But it must be obvious, that taxation of all kinds subtracts a portion only, and generally a very moderate portion, of the addition made to the fortune of an individual; so that every one has a much stronger inducement to invite, than penalty to deter, accumulation. If a person had to pay 40 dollars more in taxes, upon every addition of 200 dollars to his revenue, still he would multiply his enjoyments in a larger ratio than his sacrifices. Vide what is said in Sect. 4. of the same Chapter, on the subject of the land-tax of England. Ibid.
82. This is the reason, why it has been found practicable to raise the duty on registration to its present high scale. Were it reduced, the product to the exchequer would probably be equally great; and the nation would enjoy the benefit of greater freedom of circulation, besides experiencing less encroachment upon its capital.
83. Taxes upon law proceedings are the most grievous and oppressive that have ever been resorted to, and since the appearance of Mr. Bentham's work on Law taxes, no one, who has read it, can doubt their impolicy. It is said in the Edinburgh Review (vol. 27, page 358.), "that one day Mr. Rose, in Mr. Pitt's presence, took Mr. Bentham aside, and informed him that they had read the pamphlet—that its reasoning was unanswerable—and that it was resolved there should be no more such taxes." "Yet Budget after Budget," remarks the reviewer, "has since been formed, in which those duties have made a part; and Mr. Pitt himself was found to patronize them upon his return to office in 1804." All the arguments ever brought forward in support of this objectionable impost, have been triumphantly refuted by Mr. Bentham, in this work, which it is said in the same Review, "for closeness of reasoning, has not perhaps been equalled, and for excellence of style, has certainly never been surpassed." American Editor.
84. In both England and France, premiums are given upon the importation of specific raw materials, with a view to encourage manufacture. This is an error on the opposite side. Upon this principle, instead of a tax on the product of land, a bounty should be given to all who would take the trouble to cultivate, for domestic agriculture furnishes the raw material of most manufactures; as grain in particular, which is transformed, through the mediation of human exertion, into value of various kinds, exceeding that consumed in the process. Customs or duties of import upon any article whatever are equally equitable with direct taxes upon land; both are positive evils; but the lighter the tax, the smaller the injury.
85. When it is absolutely necessary to lay a tax upon a particular kind of consumption or industry, which it is desirable not to extinguish altogether, the burthen must be light in the commencement, and increased gradually and cautiously. But if it be desired to repress or annihilate a mischievous class of consumption or industry, the full weight of the tax should be thrown upon it at once.
87. This species of tax is still more iniquitous, because it must fall either upon orphans, or upon parents, who are disposed to submit to personal privations, for the purpose of rearing valuable citizens; because it is heavier in proportion to the number of children, and the degree of privation of the parent; and because it is disproportionate to the means of the individual, poor and rich being taxed alike. A parent of moderate fortune, with one son only, pays as much to the university as all the rest of his taxes together: if he have more sons than one, he is still worse off. Thus was this institution converted by the usurper into an instrument of fiscal extortion, sufficient of itself to have insured the relapse into barbarism, even had it never been made the medium of instilling false ideas or habits of servility. The pretext, of making the profits of private establishments contribute to the expense of compulsory tuition, is by no means satisfactory. Supposing the tuition of the public Lycées to be, of all others, the best calculated to train up useful citizens; and, admitting the justice of compelling a father, or a teacher to his choice, to bring his pupil to the lectures of the authorized professors, still the parties, least in need of this instruction, are those already placed in private establishments of education, and entrusted to teachers of their own selection. It may be for the interest of the community at large, to dispense particular classes of learning gratuitously; but it is the greatest oppression to force learning upon individuals, and make them pay dear for it into the bargain. If any one class in particular ought to defray the charge of moderate gratuitous tuition, it is that, which has no children of its own, and is in the reception of all the benefits of social life, without being subject to all its burthens.
88. Lotteries and games of hazard, besides occupying capital unprofitably, involve the waste of a vast deal of time, that might be turned to useful account, and this item of expenditure can never redound to the profit of the exchequer. They have the further mischievous effect of accustoming mankind to look to chance alone for what their own talents or enterprise might attain; and to seek for personal gain, rather in the loss of others, than in the original sources of wealth. The reward of active energy appears paltry beside the bait of a capital prize. Moreover, lotteries are a sort of tax, that, however voluntarily incurred, falls almost wholly upon the necessitous; for nothing, but the pressure of want can drive mankind to adventure, with the chances manifestly against them. The sums thus embarked are, for the most part, the portion of misery; or, what is worse, the fruit of actual crime.
94. Not because they affect the tax-payer indirectly; for this circumstance is equally applicable to many items of direct taxation; as, for instance, to the license-tax (patentes,) part of which falls indirectly upon the consumer, who buys of the licensed dealer.
95. Vide Examination of B. Franklin, at the bar of the House of Commons, 1767. Memoirs, vol. i. Appendix 6.*
96. Garnier, Traduction de Smith, tom. iv. p. 438. According to Arthur Young, the stamp-duties in his time cost but 5,691l. in the collection, upon the receipt of 1,330,000l.; which is less than ½ per cent.
98. The position, that the interest of the capitalist and the rent of the landlord are thereby lowered, however paradoxical it may appear, is nevertheless quite true. It may be asked, why should the capitalist, who makes the advance to the manufacturer, or the landlord, whose land he occupies, lower their demands, in consequence of a portion of the product being subtracted by taxation? But is no allowance to be made for consequent delay of payment, claims of allowances, failures, and legal expenses? All, or at least a portion, of which must fall upon the landlord and capitalist: and often without any suspicion on their part, that they are thus made to participate in the burthen. In a complex social organization the pressure of taxation is often imperceptible.
This shows the danger of adherence to invariable principle; and of abandoning the experimental method of Smith, and constructing a system of theoretical deduction, as some recent English writers have done, in imitation of the economists of the last century.
99. Vide Suprà, Book I. chap. 4. for the explanation of the mode, in which the land-holder concurs in production by the advance of his land; and must, therefore, be included amongst the productive classes.
100. The cultivation need never be abandoned altogether, until taxation takes more than the whole surplus product applicable to the payment of rent; it is then worth nobody's while to cultivate at all; for not only could the proprietor receive nothing, the whole being appropriated by the state; but the farmer would be compelled to pay to the state a higher rent, than he could afford.
101. There is this peculiarity attending the products of agricultural industry, viz. that their average price is not raised by growing scarcity, because population is sure to decline co-extensively with the declining supply of human aliment; so that the demand necessarily diminishes equally with the supply. Thus it is not found, that wheat is dearer in those countries where great part of the land is thrown out of tillage, than where it is all in a high state of cultivation. In Spain, wheat is not now dearer, than in the time of Ferdinand and Isabella, though it is there produced in much less abundance; for the number of mouths to be fed is also much less. On the contrary, the lands of both England and France were less cultivated in the middle ages than at the present day; and their product of grain less abundant; yet it does not appear, from a comparison of other values, that it was then much dearer than at present. The product and the population were both greatly inferior; and the slackness of demand counter-balanced the slackness of supply.
102. It is a mistake to suppose, that the tax must bear equally upon the proprietor and the farmer, who finds the requisite capital and industry; for taxation can have no effect, either in reducing the quantity of land capable of cultivation, or in multiplying the number of farmers, able and willing to undertake it; and, if neither supply nor demand in this branch be varied, the ratio of the rent must needs remain unaltered likewise.
103. The economists were quite correct in their position, that a land or territorial tax falls wholly upon the net product, and consequently, upon the proprietors; but they were wrong in extending the doctrine so far as to assert, that all other taxes were defrayed out of the same fund.
105. The duty on the import of cotton into France was, in 1812, as high as 200 dollars per bale, one bale with another. There were several manufactories averaging a consumption of two bales per day; and as the amount of duty was a dead outlay, during the whole interval between the purchase of the raw material and the realization of the manufactured product, which may be taken at twelve months, they must each have required an additional capital of 120,000 dollars more than would have been requisite but for the tax; the interest of which they must have charged to the consumer, or have paid out of their own profits. The whole of it was so much addition of price to the French consumer, and aggravation of the pressure of taxation, unproductive of a single additional dollar to the public revenue. The heaviest of the national burthens of that period were those that made the least figure in the annual budget of the ministry: the people suffered, in very many instances, without knowing the nature of the grievance, as in the example, just cited.
108. This ground of apprehension is certainly just. It has been doubted by many political theorists, whether the total remission of taxation would operate to improve the condition of the inferior productive classes: inasmuch, as all that is now paid into the public exchequer, would quickly be appropriated by the classes, who should happen to be in possession of those sources and means of production, which are capable of exclusive appropriation; and the owners of mere personal agency would nowise benefit. But it should be observed, that private persons have an immediate personal interest in making the most of their property; and will, on their own account, so conduct themselves, as to promote their own advantage, which is the advantage of the public also, where equality of personal right prevails. Wherefore, the strongest impulse of private cupidity can never operate to retard the advance of productive power and national wealth, or to make them retrograde; but just the contrary. Thus, although the present condition of the mere labourer might not be improved, his means of bettering his condition would be enlarged, by the growing increase of wealth, and by greater freedom of personal agency. The extortion of private cupidity, unaided by authority, must, for its own sake, regulate itself by the ability of the object of it: but that of public authority is inexorable, and is restrained by no consideration of immediate personal interest. Besides, personal suffering, occasioned by the hard-heartedness of primate task-masters, is not so strong an incentive of odium against public authority, as where that authority is itself the ostensible task-master. Translator.
Book III, Chapter IX
112. Vide App. A.
115. The transferable nature of these securities does not invest them with the properties of money, since they do not act in that capacity. But the use of convertible paper, as money, operates to create a positive addition to the total national capital; because, but for their agency in the transfer of value in general it must be executed by specie, or some equally substantial item of capital. Government debentures of stock require money to circulate them, instead of acting themselves as money.
116. In a note, here subjoined, the author stated the amount of the British national debt, in the year 1815, on the authority of a speech made in parliament in February, of that year, by the chancellor of the exchequer, Mr. Vansittart. We now have it in our power, in place of the note in question, to furnish the reader with an exact statement of the British national debt, from its commencement, at the revolution of 1688, to the 5th of January, 1832. The abstract we give is extracted from the Tables to Part II. of "Pebrer on the Taxation, Debt, Capital, Resources, &c. of the whole British Empire," a work which we before had occasion to refer to, and of the highest statistical authority.
119. Colquhoun, Wealth, Power, and Resources of the British Empire, 4to. London, 1814. Stokes, Revenue and Expenditure of Great Britain, London, 1815. Should a continuance of peace enable her to square her income with her annual expenditure, inclusive of the interest of her debt, it would still afford no relief, but merely arrest the further progress of the evil.
120. Economy in the national expenditure is the only thing that can mitigate the pressure of taxation upon the British nation; yet were economy enforced, how is that system of corruption to be upheld, through which the interest of the minister of the day regularly prevails over that of the nation?
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